China has moved from verbal warnings to concrete actions in reining in the heated price war in the automotive industry, signaling a decisive stance to safeguard the healthy development of the auto manufacturing sector and the real economy.
The price war has led to a series of negative phenomena: new car prices continuing to hit record lows, potential compromises on the quality and pricing of unseen auto parts due to relentless cost-cutting demands from manufacturers, and industry hidden rules such as fixed-price sales and inflated orders aimed at creating an illusion of booming sales.
Against this backdrop, China's State Administration for Market Regulation (SAMR) officially released the "Guidelines on Price Conduct Compliance in the Automotive Industry (Draft for Public Comment)" on December 12. Comprising 5 chapters and 28 articles, the draft aims to regulate pricing and sales practices, prohibit automakers from selling vehicles at excessively low prices, and thereby mitigate deflationary pressures driven by cutthroat competition.
Insiders revealed that relevant responsible persons of certain listed auto groups have been summoned for interviews by authorities, indicating that the industry's price war has reached an intolerable level.
According to the draft guidelines, auto sales must adopt clearly marked prices, and it is prohibited to promote sales under false labels such as "market price" or "clearance price". More importantly, the draft explicitly states that automakers selling products below production costs with the intention of eliminating competitors or monopolizing the market will "face significant legal risks" – a phrase mentioned six times in the document, underscoring the unprecedented deterrent effect compared to previous regulatory measures. Violators could face legal sanctions if they cross the red line set by the state.
SAMR pointed out that the auto production and sales sector has in recent years been plagued by issues such as irregular price marking, price fraud, price collusion, and irrational competition. These problems have seriously disrupted market order and infringed upon the legitimate rights and interests of both consumers and operators.
Following the release of the draft guidelines, several major listed auto groups, including BYD, BAIC Group, Xpeng Motors, Leapmotor, Seres Group, and JAC Motors, have successively expressed their support. They stated that they will strengthen compliance management and strictly avoid price fraud and unfair competition.
An analysis of Q3 financial reports by Automotive K Line shows that the performance of major listed Chinese auto groups remained sluggish in the third quarter, with worrying profitability that has spread to the upstream and downstream industrial chains. Data from the China Passenger Car Association (CPCA) indicates that the profit margin of the auto industry is only about 4.4%, significantly lower than the 6% average profit margin of the industrial sector.
Given the particularity of the auto industry and the large number of jobs it supports, the state has been compelled to intervene to regulate the price war and irrational competition.
In Q3 this year, among pure electric vehicle startups, only Leapmotor barely achieved quarterly profitability. Li Auto swung from profit to loss, while NIO and Xpeng Motors continued to incur losses. Even among new energy brands under established automakers, only Geely Galaxy was profitable. Brands such as Changan Avatr, Dongfeng Voyah, SAIC IM, and GAC Aion, which operate as independent entities, reported severe losses. All of these loss-making brands are seeking independent listings on the capital market, but the optimal window of opportunity has passed.
Currently, China's auto industry is grappling with dual pressures of overcapacity and weak demand. Listed auto groups have been forced into a zero-sum game in the stock market to survive. Against this backdrop, the shift from warnings to concrete measures to curb the price war is of great significance for the long-term development of China's auto industry.
Over the past decade, the number of new energy vehicle brands selling in China has plummeted from approximately 500 to around 110. It is expected that by 2030, only about a dozen brands will possess sustainable financial capabilities.
The draft guidelines put forward price compliance requirements for the production, pricing strategies, and sales behaviors of both complete vehicles and auto parts. It is now open to public comment until December 22.
Industry insiders anticipate that with the stabilization of auto prices, the financial conditions of listed automakers will improve. This, in turn, will enable them to allocate more funds to research and development as well as improving the quality of raw materials, ultimately benefiting both Chinese consumers and the country's auto industry.