China’s Automotive Price Wars: Industry Challenges and Strategic Responses

Recent large-scale price reductions initiated by some automakers have raised concerns within the automotive industry about a new round of price wars, prompting frequent discussions on how to curb excessive competition.

China has maintained its position as the world’s largest market for new energy vehicle (NEV) production and sales for ten consecutive years, boasting globally leading core technologies. However, the industry's profitability remains under pressure. In 2024, the profit margin of China’s automotive sector was merely 4.3%, dropping further to 3.9% in the first quarter of 2025—below the manufacturing industry’s average.

“The intensifying competition within the intelligent and connected NEV sector has led some leading enterprises to initiate large-scale price cuts to accelerate market penetration. This has triggered a chain reaction, with other companies following suit, fueling an increasingly aggressive price war,” stated Zhang Jinhua, President of the China Society of Automotive Engineers. He warned that continued price wars could create risks by prioritizing short-term sales at the expense of product quality.

On May 23, BYD launched a major limited-time promotional campaign involving 22 intelligent driving models, with discounts reaching up to 53,000 yuan. Within a week, nearly ten automotive brands—including Geely Galaxy, Chery, SAIC Roewe, Leapmotor, IM Motors, SAIC-GM, and GAC Aion—announced price reductions.

The stock market reacted swiftly. The day after BYD’s announcement, all major automotive stocks in Hong Kong fell, with BYD shares dropping by 8%. Morgan Stanley remarked that BYD’s formal price reduction signals immense pressure in the terminal market, raising concerns among investors who anticipate stock prices aligning with fundamental valuations.

Following widespread price cuts, industry associations moved to counteract the trend.

On May 31, the China Association of Automobile Manufacturers (CAAM) issued a proposal advocating for fair competition and opposing disorderly price wars. The Ministry of Industry and Information Technology (MIIT) also emphasized that price wars offer no real winners and pledged to strengthen industry oversight to curb excessive competition.

In a recent government meeting, MIIT outlined three key areas for focused regulation, including comprehensive measures to address excessive competition in the NEV sector.

Industry leaders echoed these concerns. At the 2025 China Automotive Chongqing Forum, executives from major automakers—including Zhang Xinghai of Seres Group, Yin Tongyue of Chery Holdings, and Zhu Huarong of Changan Automobile—criticized price wars, emphasizing their negative impact on supply chain stability and industrial resilience. Li Shufu, Chairman of Geely Holding Group, and Yang Xueliang, Senior Vice President, also voiced concerns over inappropriate competition strategies. Meanwhile, Li Yunfei, General Manager of BYD’s Branding and Public Relations, advocated for a competitive approach based on technological advancements rather than pricing battles.

An Tiecheng, Chairman of China Automotive Technology & Research Center (CATARC), highlighted several root causes of excessive competition: supply-demand imbalances, insufficient structural maturity, lack of innovation, and declining supply chain costs.

The China Automobile Dealers Association’s 2024 survey revealed alarming figures: only 39.3% of dealerships reported profitability, while 41.7% faced losses. New vehicle sales contributed negatively to profitability (-17.7%), with 84.4% of dealerships experiencing price discrepancies, and 60.4% reporting a price gap exceeding 15%. The average passenger vehicle transaction price dropped to 177,000 yuan, marking a 6,000-yuan decline compared to the previous year.

Given these challenges, industry leaders are advocating for a shift toward sustainable business strategies.

“To resolve excessive competition, we must implement top-down reforms, encouraging fair competition and innovation while tightening oversight on regulatory compliance,” stated An Tiecheng. He emphasized the need for strict measures against misconduct, enhanced product quality monitoring, and the establishment of real-time risk assessments.

Transparency in supply chain management and corporate accountability are crucial. Automakers must move beyond short-term profitability models and integrate social responsibility into their development strategies.

According to the 2024 China NEV Customer Satisfaction Index (NEV-CACSI) released by the China Quality Association, the industry’s satisfaction rating fell to 79 points (out of 100), continuing a two-year downward trend.

An Tiecheng urged automakers to emphasize quality and customer experience while fostering consumer awareness through positive messaging and public engagement in quality oversight. He advocated for transparent investigations into high-complaint vehicles and timely disclosures of resolutions.

Dong Yang, former Executive Vice President of CAAM and Chairman of the China Power Battery Industry Alliance, stressed that China’s NEV sector must balance rapid development with long-term industry stability and global market integration. He cautioned industry players against assuming that previously unregulated practices would remain unchecked.

Moving forward, the government may introduce administrative measures to regulate competition, including stricter penalties for corporate violations, shorter payment cycles, industry-wide self-regulation guidelines, and crackdowns on malicious public relations tactics.

On June 9, MIIT’s Equipment Industry Department issued a notice announcing enhanced oversight of automotive production compliance, with an emphasis on safety inspections for widely scrutinized vehicle models. Key assessment areas include vehicle structural parameters, frontal crash tests, battery safety standards, and braking system performance.

Despite ongoing challenges, China’s automotive sector continues to display remarkable progress.

According to CAAM, vehicle production and sales exceeded 10 million units in the first four months of 2025—marking a historic milestone—with year-over-year growth of 12.9% and 10.8%, respectively. NEV exports reached 642,000 units, reflecting a 52.6% increase.

The success of China’s auto industry is built on sustained technological innovation and synchronized industrial advancements rather than short-term pricing strategies. The synergy between R&D, manufacturing, and market demand has fostered a self-sustaining growth cycle.

Strategic global expansion by Chinese automakers is also breaking down traditional market barriers, reinforcing China’s position as a rising leader in the global automotive industry.

With the transition from electrification to intelligent mobility, the Chinese automotive sector has already identified new pathways for growth, paving the way for a promising future.