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English
Since late May, the automotive industry has launched a new round of price cuts, and the low price competition in the automotive industry has once again sparked heated discussions. Recently, the China Association of Automobile Manufacturers released the "Initiative on Maintaining Fair Competition Order and Promoting Healthy Development of the Industry" (hereinafter referred to as the "Initiative"), proposing four points: all enterprises must strictly abide by the principle of fair competition and carry out business activities in accordance with laws and regulations; Advantageous enterprises do not monopolize the market, squeeze the living space of other entities, and harm the legitimate rights and interests of other operators; Enterprises shall not dump goods at prices lower than cost, engage in false advertising that induces consumers, disrupt market order, or harm the fundamental interests of the industry and consumers, in addition to lawfully lowering prices for goods; All enterprises should conduct self-examination and rectification in accordance with relevant national laws and regulations.
Dong Yang, former Executive Vice President and Secretary General of the China Association of Automobile Manufacturers and Chairman of the China Power Battery Industry Alliance, stated that China's new energy vehicles have entered the world's advanced ranks. The management of the new energy vehicle industry should not only pursue development speed, but 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 automotive industry. The government regulatory authorities are also actively exploring management innovation for China's new energy vehicle industry.
Internal competition affects the stability of the automotive industry chain and market environment
In recent years, China's new energy vehicle industry has developed rapidly, with new energy vehicle sales accounting for over 40%. The overall operation of the industry has shown a stable and positive trend, and market vitality continues to be released. However, while developing rapidly, the continuous decline in industry profit margins is a real problem that must be faced. According to data from the China Automobile Dealers Association, the profit margin of the Chinese automotive industry was only 4.3% in 2024, and further declined to 3.9% in the first quarter of 2025, which is lower than the average level of the manufacturing industry.
The "price war" represented by "internal competition" not only further compresses the profit margin of enterprises, but also leads to frequent fluctuations in car prices and accelerated iteration speed of updated models. Many consumers have complained about the negative impact on the stability of the automotive industry chain and market environment, such as "being stabbed by price cuts after buying a car" and "the new model becoming an old model shortly after it hit the road".
Dong Yang stated that since the fourth quarter of last year, the Central Political Bureau meetings and multiple industry regulatory departments have proposed comprehensive governance of "internal competition", and the industry generally hopes that this year's "internal competition" can be eased. However, contrary to expectations, some leading companies have recently implemented large-scale and significant price reductions, causing many companies to follow suit and causing widespread panic in the industry. This initiative has raised the opposition to engaging in a "price war" to a high level that concerns the healthy development of the industry, consumer rights, and the potential for traffic safety hazards.
With the booming rise of new energy vehicles, market competition is becoming increasingly fierce. Some leading companies, in order to accelerate their capture of the blue ocean market for electrification and intelligence, occasionally launch significant price reduction activities, triggering industry peers to follow suit, leading to the intensification of vicious competition in the form of "price wars". This not only leads to a decline in the operational efficiency of the automotive industry, but also poses risks to product quality and after-sales service.
An Tiecheng, Secretary of the Party Committee and Director of China Automotive Technology Research Center Co., Ltd., analyzed that the continuous decline in component procurement prices caused by "internal competition" has led to a 10% -15% decline in upstream operations, making it difficult to avoid suppliers lowering quality requirements in certain aspects. The deterioration or even partial bankruptcy of downstream distributors has led to a decrease in the timeliness, convenience, and reliability of after-sales service. The intelligent functions of current new energy vehicle products rely more on continuous and high-quality after-sales maintenance from enterprises or related suppliers. After a company goes bankrupt and exits, its suppliers often do not assume related after-sales service responsibilities. The probability of interruption in intelligent function maintenance and updates greatly increases, and the product will face the risk of being unable to be used normally at any time.
An Tiecheng stated that the automotive upstream and downstream industry chain is long, technology intensive, and has high fixed investment. The "price war" based "internal competition" has led to a decline in the efficiency of the industry's upstream and downstream, and in the long run, it will also weaken the R&D investment capacity and cause product quality hazards. This is not in line with the long-term development interests of the industry and is not conducive to maintaining a healthy market economic order.
Cracking the 'involution style' competition requires a 'combination of easing and blocking'
The 'involution style' competition is the result of multiple intertwined factors. The Chinese automotive industry is currently in a stage of transformation from a 'big automotive country' to a 'strong automotive country', and will inevitably experience a certain degree of intensified competition, survival of the fittest, and a period of transition pains.
An Tiecheng believes that cracking the "involution style" competition requires a "combination of easing and blocking", unblocking the innovation channels of enterprises, guiding them to shift towards healthy competition, guiding them from low price competition to innovative competition, strictly blocking industry violations, and rectifying the market environment.
In terms of "blocking", An Tiecheng suggests studying and introducing a feasible regulatory system for the "internal competition" in the automotive industry, resolutely safeguarding industry fairness, and cracking down on unfair competition behavior; Strengthen the requirements for automobile enterprises and product production access, and enhance the overall industry capability and product quality from the source; Strengthen the quality supervision of circulation links, monitor quality data in real time, and achieve risk warning.
In addition to market competition giving rise to "involution" competition, insufficient innovation drive is also one of the reasons for the intensification of product homogenization competition among car companies. Due to the unsmooth industrialization process and inaccurate estimation of the cycle of innovative technology products, it is easy to form a combination of capital costs and opportunity costs. The weak willingness of automobile companies to innovate has led to the embarrassing situation of "one car for a thousand" where different brands or different models of the same brand are highly similar in appearance design and functional configuration, making it difficult to distinguish. Consumers are unable to distinguish brand value through products, leading to a decrease in brand loyalty and being more susceptible to price factors when making purchases.
Zhang Jinhua, president of the Chinese Society of Automotive Engineering, said that automobile enterprises should take technological progress as the core driving force to foster competitive advantage. We must persistently promote technological innovation in electrification and intelligence, focus on energy and power, intelligent chassis, intelligent networking, and other aspects, strengthen forward-looking and leading layouts in basic cutting-edge fields and cross fusion fields, focus on tackling key technologies in the entire chain of all solid state batteries, distributed electric drive systems, and autonomous driving models, break through bottlenecks and shortcomings such as automotive grade chips, automotive operating systems, and specialized tool software, comprehensively improve the technological level of new energy vehicles, and create core competitive advantages in the market.
Zhang Jinhua said, "We need to shift the focus of the development of new energy vehicle products from stacking configurations to improving quality, strengthen quality management throughout the entire process of research and development design, production and manufacturing, procurement and supply, marketing services, etc. We will continue to promote quality improvement in core areas such as power battery consistency and basic software stability. We will rely on intelligent technology to establish and improve a rapid response mechanism for user feedback, strive to win user trust with superior quality, and consolidate the foundation of development
(Source: Securities Daily)
