China Acts to Halt Auto Price War as PV Sales Plunge 20%
On Thursday, China took steps to rein in an intense price war among automakers, which has led to significant losses for the industry. This action follows a nearly 20 percent decline in passenger car sales in January compared to the previous year, marking the steepest drop in almost two years. The State Administration for Market Regulation has issued guidelines for manufacturers, dealers, and parts suppliers to avert a detrimental price war characterized by a race to the bottom. They prohibit automakers from establishing prices below the cost of production to “squeeze out competitors or monopolise the market.” The regulator cautioned that violators could encounter “significant legal risks.” The regulations additionally focus on misleading pricing tactics and collusion on prices among parts suppliers and automobile manufacturers.
According to the reports, passenger car sales in China experienced a decline of 19.5 per cent in January compared to the same month last year. The decline marked the largest percentage decrease since February 2024. According to reoprts, the 1.4 million passenger cars sold in January stands in contrast to the 2.2 million units sold in December. The decline in demand indicates a hesitance among financially constrained consumers to make significant expenditures. According to auto analysts, sales have also been impacted by a reduction in tax exemptions for EV purchases, along with uncertainties regarding the continuation of trade-in subsidies for EV purchases after certain regions have phased them out. According to Li Yanwei, “The aggressive price war in China’s auto sector has caused an estimated loss of 471 billion yuan (USD 68 billion) in output value across the whole industry in the past three years.” Analysts anticipate a decline in domestic demand this year. S&P has projected that sales of light vehicles, encompassing passenger cars, in China are expected to decline by as much as 3 percent in 2026.
However, Chinese automakers are making significant strides in global markets. China’s exports of passenger cars surged 49 percent year-on-year to reach 589,000 in January. “We don’t foresee a loss in momentum for the Chinese auto industry this year,” said Claire Yuan. Chinese automakers such as BYD – which has surpassed Tesla as the leading electric vehicle manufacturer globally – are setting their sights on markets in Europe and Latin America as they face fierce competition in terms of pricing and product offerings domestically due to oversupply. Analysts expect China’s car exports could jump 19 per cent this year driven by exports of electric vehicles and plug-in hybrids.
Last month, Canada made the decision to reduce its substantial 100 per cent tariff on China-made EV imports, a development that has been positively received by Chinese carmakers. China has recently finalized an agreement with the European Union that may facilitate the entry of more of its electric vehicles into the European market. BYD, China’s largest carmaker, aims for approximately 1.3 million overseas car sales by 2026, an increase from the 1.05 million recorded last year. Other prominent Chinese automakers have established ambitious sales targets, emphasizing exports.
