As some car companies launched a large-scale price reduction campaign, the automotive industry has once again raised concerns about a new round of “price wars”, and “anti-involution” has become a high-frequency keyword for the industry and companies to speak out recently.
“In 2025, two aspects of things are most sensitive to the industry. One is the industry involution with price wars as the main manifestation, and the other is the reshaping of the industrial structure brought about by mergers and reorganizations… In May, more than 100 models were reduced in price, with the highest reduction exceeding 50,000 yuan. Unlimited price wars and blind technological crazes will squeeze corporate profit margins and affect product and service quality.” At the 2025 China Auto Chongqing Forum held on June 6-7, Wang Xia, Chairman of the Automotive Industry Committee of the China Council for the Promotion of International Trade and Chairman of the Automotive Industry Chamber of the China Chamber of International Commerce, emphasized the current “chaos” of competition in the automotive industry at the beginning.
1. Hidden worries under prosperity
my country’s new energy vehicle production and sales scale has ranked first in the world for 10 consecutive years, and key core technologies are leading the world. However, in 2024, the profit margin of China’s automotive industry will be only 4.3%, and it will further decline to 3.9% in the first quarter of 2025, which is lower than the average level of the manufacturing industry.
“With the vigorous development of intelligent networked new energy vehicles, the competition in the industry market is becoming increasingly fierce. Some leading companies have launched large-scale price reduction activities from time to time in order to accelerate the seizure of the blue ocean market of electrification and intelligence, which has triggered peers to follow suit, resulting in the intensification of “involutionary” vicious competition with “price war” as the main form.” Zhang Jinhua, chairman of the China Society of Automotive Engineers, believes that “the continued escalation of the “price war” objectively breeds the potential risk of car companies sacrificing quality to “trade price for volume.” On May 23, BYD announced the launch of a heavy-duty limited-time promotion, with 22 intelligent driving models participating, and the highest discount can reach 53,000 yuan. In the following short week, nearly ten car brands announced price cuts, including Geely Galaxy, Chery, SAIC Roewe, Leapmotor, Zhiji, SAIC GM, GAC Aion, etc. The price war has also had a significant impact on the capital market. On the second trading day after BYD announced the price cut, Hong Kong-listed auto stocks fell across the board, and BYD shares fell 8%. Morgan Stanley said that BYD officially announced price discounts for its mass-market models. Although some discounts have been implemented since April, this official announcement sends a strong signal of huge pressure on the terminal market. The intensification of price wars may make investors more pessimistic because they expect stock prices to eventually return to fundamentals.
After many car companies participated in price cuts, the industry association “took action” to clearly oppose it.
On May 31, the China Association of Automobile Manufacturers issued the “Initiative on Maintaining Fair Competition Order and Promoting the Healthy Development of the Industry”, which clearly opposed the disorderly “price war” between car companies. The Ministry of Industry and Information Technology also made it clear that there are no winners in the “price war”, let alone a future, and will increase the rectification of the “involutionary” competition in the automobile industry.
In addition, the Ministry of Industry and Information Technology recently held a party group meeting and proposed to solidly promote three centralized rectifications, including “comprehensive rectification of the ‘involution’ problem in the new energy vehicle industry”.
Wang Xia believes that moderate price cuts and orderly competition are normal phenomena in the market economy and are also a necessary stage for the industry to move from immaturity to maturity. However, price wars without bottom lines and blind technological crazes will inevitably squeeze the reasonable profit space of enterprises, and then affect the quality of products and services, which will be detrimental to both enterprises and consumers in the long run.
Following the statements of industry associations and regulatory authorities, heads of many leading auto companies have also voiced their resistance to price wars.
During the China Auto Chongqing Forum, car company leaders such as Zhang Xinghai, Chairman of Seres Group, Yin Tongyue, Chairman of Chery Holding Group, and Zhu Huarong, Chairman of Changan Automobile, all criticized the harm of “involutionary” competition, believing that it endangers the stability of the supply chain and weakens the resilience and endogenous driving force of the industry. Li Shufu, Chairman of Geely Holding Group, and Yang Xueliang, Senior Vice President, bluntly stated that some companies’ competition methods were inappropriate, and criticized “involutionary” competition for possibly destroying the good ecology of the automotive industry. Li Yunfei, General Manager of BYD Group’s Brand and Public Relations Department, proposed that technology should be used to establish brands to counter “involution”, compete in technology and products, and refuse unfair competition. Murong, Chief Technology Officer of Continental Automotive Group China, also pointed out that price wars will only harm the interests of the industry in the long run.
In response to the “involutionary” competition, the People’s Daily published an article commenting that in the long run, there is no way out and no future for “price wars”. When the reasonable profit space of enterprises is compressed by the “price war” without bottom line, the funds invested in technology research and development and improving customer experience will inevitably decrease. How can the automotive industry develop healthily and sustainably when the foundations of survival such as quality and service are eroded? How to maintain advantages in the fierce global competition? Everyone expects good cars with high quality and low prices, but if the “quality” is lost, “low price” will be meaningless.
CCTV News also called for the “brake” of the “price war” in the automotive industry.
2. Combining dredging and blocking to build a new ecology
In the view of An Tiecheng, Secretary of the Party Committee and Chairman of the China Automotive Technology and Research Center, the root causes of the problem of “involutionary” competition are the imbalance of supply and demand at a certain stage, the industrial structure has not yet reached the ideal form, the lack of innovation power has led to the intensification of homogeneous competition, and the electrification and intelligence have driven the reduction of supply chain costs. According to the “2024 National Automobile Dealer Survival Status Survey Report” previously released by the China Automobile Dealers Association, the profit ratio of automobile dealers in 2024 was only 39.3%, the flat ratio was 19%, and the loss ratio was 41.7%. In the gross profit composition of dealers, the gross profit contribution of new car sales last year was -17.7%; 84.4% of automobile dealers had price inversions to varying degrees, and 60.4% of automobile dealers had price inversions of more than 15%; the average transaction price of passenger cars was 177,000 yuan, a year-on-year decrease of 6,000 yuan.
The All-China Federation of Industry and Commerce Automobile Dealers Chamber of Commerce recently issued an initiative to oppose “involution” competition and pointed out that under the influence of the current industry market situation, the automobile distribution industry has also been severely affected and impacted, facing a series of problems such as increased operating pressure, reduced profitability, high vehicle inventory, and tight working capital, which have a serious impact on the industry’s continued and healthy development. Especially since the second quarter of this year, under the influence of a new round of “price wars”, the situation faced by the majority of automobile dealers has become more severe.
3. How can the new energy vehicle industry break the “volume”?
An Tiecheng believes that it is necessary to strengthen top-level design, “combine loosening and blocking”, guide enterprises to turn to healthy competition and innovative competition, strictly block industry violations, crack down on unfair competition, strengthen requirements for enterprise and product production access, strengthen quality supervision in the circulation link, monitor quality data in real time, and realize risk warning.
“Enterprises need to jump out of homogeneous competition and explore differentiated development paths. Automakers should abandon short-term profit-seeking thinking, integrate social responsibility into development strategies, and establish a transparent supply chain management system to avoid excessive cost pressure from upstream and downstream.” An Tiecheng said.
In addition, according to the evaluation results of the “2024 China New Energy Vehicle Industry User Satisfaction Index (NEV-CACSI)” released by the China Quality Association, the 2024 China New Energy Vehicle Industry User Satisfaction Index is 79 points (out of 100 points), down 1 point from the previous year, and has been on a downward trend for two consecutive years.
An Tiecheng said that it is necessary to promote the participation of all members of society in supervision, strengthen positive publicity, guide consumer awareness upgrades, pay attention to product quality, and encourage reporting of quality problems. Special investigations on high-frequency complaint models will be launched and the results of the handling will be disclosed to the public in a timely manner.
“my country’s new energy vehicles have entered the ranks of the world’s advanced countries. The management of the new energy vehicle industry is no longer just about pursuing development speed, but should also take into account the stability and long-term development order of the industry, as well as the coordinated development of China’s new energy vehicles and the world’s automobile industry.” Dong Yang, former executive vice president and secretary general of the Automobile Industry Association and chairman of the China Power Battery Industry Alliance, said, “Government departments are also actively exploring management innovations for my country’s new energy vehicle industry, so the industry should not think that the government will not take measures in the future if it has not taken them before.”
Dong Yang said that the government may take more administrative measures to govern “involutionary” competition in the next step. For example, strengthen the punishment of corporate violations; implement the requirements for shortening the account period within a time limit; support and guide the Automobile Industry Association or hire third-party professional organizations to implement industry self-discipline; and propose clear control measures for black public relations and black water army issues.
It can be seen that on June 9, the Equipment Industry Department of the Ministry of Industry and Information Technology issued a notice on organizing the supervision and inspection of road motor vehicle manufacturers and product production consistency in 2025, which mentioned that it is necessary to increase the intensity of spot checks on models with high public attention and major quality and safety hazards, and focus on vehicle structural parameter verification, vehicle frontal collision, electric vehicle safety requirements, electric vehicle power battery pack or system safety requirements, braking system and other inspection and testing projects.
4. The dawn of a breakthrough in the transition period
The People’s Daily’s commentary pointed out that in recent years, China’s automobile industry, especially new energy vehicles, has gone from following, running side by side to leading, relying on the persistent efforts of enterprises to strengthen technology and build brands, and relying on the tireless struggle of industry workers. Advantages such as industry, technology, and market are the basis for the rapid development of China’s automobile industry. The road ahead will not be smooth, but as long as we get the right direction and move forward, the future of the automobile industry is promising.
Data released by the China Association of Automobile Manufacturers show that in the first four months of this year, my country’s automobile production and sales both exceeded 10 million vehicles for the first time in history, up 12.9% and 10.8% year-on-year respectively. Among them, 642,000 new energy vehicles were exported, a year-on-year increase of 52.6%.
Behind these impressive data, there is no reliance on simple price competition strategies. The leapfrog development of China’s automobile industry is due to continuous investment in technological innovation and the coordinated upgrading of the industrial system.
After technological innovations such as power batteries and assisted driving took the lead in promoting the transformation of the automobile industry, the continuous expansion of the market scale further drove the acceleration of iteration and upgrading of related technologies, and built a virtuous cycle system of mutual promotion and integration between “technology research and development-production and manufacturing-market demand”.
Behind the above-mentioned impressive data, the strategic layout of Chinese auto companies in the global market is constantly deepening, and Chinese cars are breaking the market barriers of traditional automobile powers.
From electrification to intelligence, from China to the world, the Chinese automobile industry, which is in a period of transformation, has actually found new growth space.
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