China Advocates for Cessation of Disputatious Pricing Contests in Auto Sector
SHANGHAI — China's auto industry faced an escalating competition issue on Saturday as a series of price wars showed no signs of abating, leading to a public call for a truce by both the government and the China Association of Auto Manufacturers (CAAM).
The intensified rivalry among top players in the world's largest auto market has spilled over into the open, with large discounts offered to buyers causing alarm among industry leaders and government officials. Recently, electric vehicle giant BYD announced fresh incentives for more than 20 models, prompting industry rivals such as Geely and Chery to follow suit.
This new round of price war started in early 2023, despite concerns about its impact on profitability and efficiency. In response, the industry ministry vowed to step up efforts to correct excessive competition, as the official news agency Xinhua reported on Saturday.
"There are no winners in a 'price war', let alone a future," a ministry official said, without revealing their identity.
The CAAM also called for a halt to the price wars, raising concerns about their long-term consequences. The association reported a new wave of discounts offered on May 23 by an unnamed automaker, triggering a fresh round of "price war 'panic'."
To address the issue, the CAAM proposed several remedies, including auto companies adhering to the principle of fair competition, and larger players refraining from market monopolies. They also emphasized that industries should not sell goods at prices below cost, in accordance with the law.
As China's auto market recovers, with domestic brands like BYD and Geely significantly expanding their market share, the government has shown a focus on maintaining a stable and orderly market environment. While tariff matters primarily concern international trade, the government appears more interested in preventing anti-competitive practices and regulating the secondary market more effectively[1][4].
In response to the prolonged price wars, China's Ministry of Commerce has been organizing meetings with industry bodies, such as CAAM, to discuss regulatory approaches for the sales of 'zero-mileage used cars' - vehicles that are registered but never driven[2]. These vehicles distort market pricing and dent consumer trust. The aim is to curb the effects of price wars and provide a more effective regulatory framework for the secondary market.
Finance and business sectors are heavily impacted as China's auto industry continues its price war, with the Ministry of Commerce exploring regulatory strategies to control the sale of 'zero-mileage used cars' in an attempt to stabilize the market, prevent distortions, and ensure consumer trust.
The China Association of Auto Manufacturers (CAAM) suggests that companies must abide by the principle of fair competition in business practices and refrain from exploitative tactics, such as selling goods at prices below cost, to maintain a stable and orderly market environment.
