Is the car price war over?
The large-scale automotive price war, which began with discounts of up to 90,000 yuan, has persisted for nearly two and a half years and has recently shown signs of gradually cooling down.
Data released by the China Passenger Car Association (CPCA) in August indicates that, based on official manufacturer price cuts or new models substantially breaking below the lowest guidance prices of the past two years, 17 models saw price reductions in July this year. This figure represents relative market stability compared to 23 models in the same period last year and 17 models in the same period of 2023.
From January to July 2020-2022, only around 50 models saw price cuts; this number surged to 113 during the same period in 2023. From January to July 2024, the number of discounted models further increased to 147. This year, from January to July, 106 new models have been discounted.
Comparing the number of models with price cuts during the same period, the price war has visibly eased since the start of this year, with promotional discounts significantly reduced. Particularly after April, the number of discounted models has dropped sharply. Although the market hasn't fully returned to pre-price-war levels, the intensity appears to be fading.
The China Passenger Car Association (CPCA) analysis indicates that by 2025, promotional activities and price reductions in the passenger vehicle sector will return to rational levels, with market order showing marked improvement.
On one hand, the national “trade-in” policy has yielded notable results, driving market sales growth and significantly reducing the phenomenon of price competition. This has alleviated operational pressures within the industry, with the automotive sector's profit margin reaching a high of 6.9% in June—a positive reflection of both industry scale expansion and stabilizing price promotions. On the other hand, executives from automakers, industry associations, and regulatory bodies such as the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the State Administration for Market Regulation have repeatedly called for and emphasized the need to regulate industrial competition, continuously “putting a stop” to price wars.
Given the current market landscape where competition continues to intensify, will the price war finally come to an end?
Gradually Easing
In early March 2023, Hubei Province ignited a fierce automotive price war: news that Dongfeng Motor Group slashed prices by up to 90,000 yuan across multiple brands spread rapidly, setting off a chain reaction. Within days, numerous local governments, major automakers, and dealerships joined the fray.
At the time, a representative from the China Association of Automobile Manufacturers (CAAM) publicly stated in an industry media interview: “Relying solely on price competition is not a sustainable strategy. This wave of promotions has, to some extent, created consumer misconceptions about vehicle pricing. Therefore, we must pay close attention to the negative impact this phenomenon has on industry development. In the long run, short-term irrational promotions will inevitably deplete future market sales, undermining the healthy and sustainable development of the entire industry.”
However, the wave of price cuts had already swept across the nation. The short-term surge in sales and inventory clearance effects had deeply entrenched automakers, dealers, and consumers in this cycle.
As Li Xiang, CEO of Li Auto, remarked, “Price cuts may not boost sales, but they can strike at competitors.” When a major rival announced an “official price reduction,” other automotive brands had little recourse but to follow suit.
Although the industry widely believed this price war would be short-lived with limited impact, many automakers lamented its consequences: After this round of frenzied price cuts, the automotive pricing structure faced the risk of collapse.
What no one anticipated was that this price war not only persists to this day with only gradual signs of easing, but also subjected both new and used car pricing systems to multiple rounds of severe blows. Price inversion, declining gross margins, plummeting net profits, drastic cuts in R&D investment, and cost-cutting layoffs have become defining keywords for the auto industry over the past two-plus years.
According to statistics from the China Automobile Dealers Association, the price war intensified in 2024, with new energy vehicles seeing average price cuts of 18,000 yuan, representing a 9.2% reduction. The price war has also brought more severe developmental challenges to the automotive industry: in 2024, the industry's profit margin stood at a mere 4.3%, below the average profit margin of downstream industrial enterprises.
Subsequently, automakers grappling with intense competition voiced their concerns. Zhu Huarong, Chairman of China Changan Automobile Group, stated unequivocally, “Changan Automobile firmly opposes vicious competition that disregards ethical and legal boundaries.” Zeng Qinghong, Chairman of GAC Group, emphasized, “Without profitability, enterprises cannot survive, which would adversely impact taxation, employment, and upstream/downstream industries.” Li Shufu, Chairman of Geely Group, contends that endless internal competition and crude price wars inevitably lead to cutting corners, counterfeiting, and non-compliant disorderly competition. He Xiaopeng, Chairman and CEO of XPeng Motors, asserts, “In the current competitive landscape, we should not compete on price but on technology, and we should expand beyond China to the global market.”
Following these statements from multiple automaker executives, not only has the number of discounted models gradually decreased this year, but since July, some automakers have suspended “limited-time fixed-price” promotions and introduced new purchasing policies. Additionally, several brands—including leading domestic brands, joint ventures, and traditional luxury brands—have raised vehicle prices.
Thus, the price war that has persisted for nearly two and a half years appears to be winding down.
Tightening Regulatory Oversight
Over the past two years, the relentless spread of price wars has further accelerated the shakeout in the automotive industry, with several new entrant brands and relatively weaker traditional brands fading from public view.
In previous market competitions, despite equally fierce battles, a relatively stable pricing structure allowed brands room for trial and error. Often, a single hit model could lead to a remarkable comeback. However, under the relentless pressure of price wars, no brand could remain unaffected. They were forced to follow the trend despite mounting losses, ultimately facing swift elimination when their capital chains broke.
This scenario has repeatedly unfolded over the past two years, plunging the entire industry into a predicament where increased sales fail to translate into increased revenue. Many automakers and their upstream and downstream partners have consequently resorted to salary cuts, layoffs, factory shutdowns, and even reduced R&D spending, severely hindering the industry's healthy development. As the drawbacks of price wars became increasingly evident, repeated calls emerged within the industry, prompting relevant national authorities to step in with more direct intervention.
On May 30, the China Association of Automobile Manufacturers released the “Initiative on Maintaining Fair Competition Order and Promoting Healthy Industry Development,” which received positive responses from the industry. The Ministry of Industry and Information Technology expressed its endorsement and support for the initiative, pledging to intensify efforts to address “involutionary” competition within the automotive sector. This includes strengthening random inspections for product consistency, collaborating with relevant departments on anti-unfair competition enforcement, and implementing necessary regulatory measures to resolutely uphold a fair and orderly market environment.
On June 3, the China Automobile Dealers Association under the All-China Federation of Industry and Commerce also spoke out, pointing out that price wars have severely impacted dealers' operations. It called on the entire industry to resist “involutionary” competition, uphold a fair and healthy market environment, and promote high-quality development in the automotive sector.
On July 16, the State Council executive meeting emphasized the need to focus on promoting high-quality development in the new energy vehicle industry. Addressing various irrational competitive practices emerging in this sector, the meeting called for a balanced approach combining short-term and long-term measures to effectively regulate competition within the industry. Efforts should be strengthened in cost investigations and price monitoring, with enhanced supervision of product consistency. Key automakers must be urged to fulfill their commitments regarding payment terms. Efforts should focus on establishing long-term mechanisms for standardized competition, enhancing industry self-regulation, and better leveraging standards to guide industrial upgrading. Enterprises should be guided to enhance competitiveness through technological innovation and quality improvement.
In the view of several automotive executives, China's automotive industry has entered the latter half of its electrification and intelligent transformation wave. The strategy of sacrificing profits for market share is unsustainable. The future path to market success lies in competing on technology, user experience, service quality, brand value, and comprehensive systems.