China’s Ministry of Industry, Information Technology (MIIT) has issued warnings to automakers involved in an aggressive price war. The ministry has vowed to crack down on what it describes as a “export style” competition that threatens the country’s rapidly growing electric vehicles (EVs) and the automotive sector.
The statement issued on Saturday comes shortly after the Chinese Association of Automobile Manufacturers (CAAM) launched an industry-wide initiative that encourages auto companies to maintain fair competition and avoid practices that could destabilise the market.
MIIT said it will strengthen regulatory oversight and restore orders to the market if necessary.
Escalates concerns over China’s EV price war
At the heart of MIIT’s warning is a frenzy of cleaned, escalating discounts China’s EV landscape. Over the past year, automakers have significantly reduced the prices of dozens of models, from EV leader BYD to traditional players like Geely and Chery, to keep or grow market share.
bydFor example, it will cut prices for more than 20 models in late May, causing a new wave of markdowns across the industry.
MIIT intervention It is a departure from the standard in the way China manages its production sector. The regulatory approach to the automotive market appears to have been made by fostering growth at all costs to ensure long-term sustainability and quality across strategic industries, including new energy vehicles (NEVs), which currently account for more than 40% of new car sales in the country.
CAAM reflected the Ministry’s concerns in a statement last week. Although we acknowledged the impressive growth of the NEV sector, the association said its profitability has been reduced due to the increased disruptive pricing tactics. Competitive pricing is legal and expected, but the group warned that it should not be at the expense of industry fundamentals.
Tu Le, managing director of Sino Auto Insights, has provided insight into the ongoing price war, saying that current pricing strategies could lead to “Bloodbath” later this year, and could affect weak players, particularly Neta and Polestar.
Industry analysts say MIIT’s intervention is timely, but they say the effectiveness of the new regulatory push is yet to be seen. Without enforceable penalties and overhauls of pricing policies, businesses fear that they will continue to prioritize value and quantity.
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