China’s automobile sector finds itself engulfed in another wave of chaotic price wars, with industry leaders warning that this profit-destroying competition benefits no one in the long run. On May 30, the China Association of Automobile Manufacturers (CAAM) issued a formal appeal for fair competition practices across the industry.
Regulators and Industry Bodies Take Stand
The CAAM’s initiative urges companies to:
- Comply with fair competition principles
- Avoid monopolistic practices that squeeze out competitors
- Refrain from below-cost pricing that harms industry and consumer interests
Ministry of Industry and Information Technology officials have publicly endorsed CAAM’s position, pledging stronger measures against harmful market practices. The intervention comes as industry profitability continues deteriorating – auto manufacturing margins fell to 3.9% in Q1 2025, significantly below the 5.4% average for industrial enterprises.
The Hidden Costs of Price Wars
Industry analysts highlight multiple negative consequences:
- Erosion of R&D investment capabilities
- Compromised product quality and safety standards
- Strained supplier and dealer relationships
- Degraded customer service quality
“What appears as consumer gains through lower prices often masks reduced product quality and service standards,” noted one industry observer. “The entire value chain suffers.”
Industry Leaders Unite Against Destructive Competition
Prominent figures have voiced strong opposition:
- Fu Yu-wu, Honorary Chairman of SAE China: “We cannot afford these price wars that threaten our hard-won industry progress”
- Zhang Jinhua, SAE China Chairman: Called for industry self-discipline amid smart EV transformation
- Dong Yang, Battery Innovation Alliance Chair: Emphasized need for sustainable development
Automakers Take Collective Stand
Major manufacturers have joined the anti-price war movement:
- Changan Auto: Advocates competing on technology and user experience
- Chery: Emphasizes technological innovation over price cuts
- GAC Group: Commits to “value competition” over price wars
- NIO and XPeng: Urge focus on service and technology
Path Forward: From Price Wars to Value Competition
Industry consensus emphasizes:
- Distinguishing healthy price competition from destructive practices
- Maintaining focus on quality and innovation
- Protecting the entire automotive ecosystem
- Supporting China’s transition to premium global auto brand status
As the industry moves toward new energy and smart vehicle development, maintaining sustainable competition practices becomes crucial for China’s automotive ambitions on the global stage.
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