MIIT and China Association of Automobile Manufacturers Warn Against Disruptive "Price Wars" in Auto Sector

On May 31, the China Association of Automobile Manufacturers (CAAM) issued the Proposal on Maintaining Fair Competition Order and Promoting Healthy Development of the Industry in response to a renewed wave of price cuts within the automotive sector. The Ministry of Industry and Information Technology (MIIT) voiced its support for the proposal, noting that intensified price competition among carmakers is disrupting regular operations and threatening the sector's long-term health.

An official from MIIT emphasized that the Ministry will enhance regulatory oversight of "involution-type" competition, push for structural optimization, and increase consistency spot checks on auto products. The Ministry also pledged to coordinate with other departments to enforce laws against unfair practices, safeguard consumer rights, and foster high-quality industry development.

CAAM highlighted that the automotive industry's profitability has declined notably, attributing the slump in part to irrational "price wars." Such competition, which often leads to unsustainable price slashing, damages regular operations, endangers the supply chain, and risks creating a vicious development cycle. The association criticized the recent surge in price reductions triggered by one automaker on May 23, which caused several others to follow, sparking market panic.

According to CAAM, these disruptive price wars reduce profit margins, compromise product quality and service, harm consumer rights, and increase safety risks. The association urged companies to strictly follow fair competition principles, refrain from market monopolization, avoid below-cost pricing and misleading promotions, and align with national laws to ensure orderly market behavior.

While the proposal did not identify specific automakers, several major firms have launched price reduction campaigns. On May 23, BYD Company (01211.HK) cut prices on 22 models, including the Seal 07 DM-i Smart Driving Edition, which saw a price reduction of RMB 53,000 to RMB 102,800. Geely Auto (00175.HK) reduced prices across various models, such as the Star Wish, now available from RMB 59,800—a RMB 9,000 discount from the guide price. Buick, under SAIC General, introduced fixed-price promotions for its Envision and LaCrosse models, while Chery implemented temporary price cuts for over 30 models under its four core brands, with some falling below RMB 50,000.

GWMotor (02333.HK) Chairman Wei Jianjun condemned the trend, warning that it undermines both company profits and consumer confidence in "Made in China" vehicles. He cited issues including aggressive supplier price cuts, delayed payments, and declining product quality. “Some vehicles have dropped from RMB 220,000 to RMB 120,000—what industrial product can lose RMB 100,000 and still ensure quality? That’s impossible,” Wei said.

Wei added that such practices risk pushing companies into financial distress and eroding post-sale services. His views were echoed by Chongqing Changan Automobile (000625.SZ) Chairman Zhu Huarong and XPENG-W (09868.HK) Chairman He Xiaopeng. Zhu predicted a market correction toward value-based competition within two years, while He emphasized the need for technology-led innovation and global expansion.

Amid speculation of systemic risk in the auto industry, BYD’s Brand and PR Manager Li Yunfei rejected claims of a brewing "automotive industry Evergrande." In a May 30 article, he stated that criticisms undermining China’s new energy vehicle (NEV) industry are baseless. Citing that Chinese automakers have led global auto exports for two consecutive years, he pointed to strong overseas performance by Chery, SAIC, and BYD itself.

The MIIT representative reiterated that technological and managerial innovation—not undercutting prices—is the path to offering consumers better value. The Ministry warned that internal price wars threaten sustainable R&D investment, product safety, and long-term industry vitality. “There are no winners in a price war, and certainly no future,” the official stated.

He concluded by urging companies to uphold innovation, integrity, and quality, fulfill their social responsibilities, and foster strong brand reputations through improved technology and service excellence.