At an auto show, visitors view the newly launched models on display. (Photo/Ju Huanzong)

Chongqing - At the 32nd China-SAE Congress & Exhibition on Oct. 22, Zhu Huarong, Chairman of China Changan Automobile Group, called on Chinese automakers to avoid destructive price wars, a message he has repeatedly emphasized in public.

China’s auto industry is locked in an intense price war that began in 2023 and continues to reshape the market. Nearly all major players are cutting prices to stay competitive — from new energy vehicles (NEV) leaders like BYD to traditional giants such as SAIC and GAC, and rising challengers like Leapmotor and XPeng.

The price war has squeezed industry profits. According to Cui Dongshu, Secretary-General of the China Passenger Car Association, the automotive sector earned 303.5 billion yuan (about 42.68 U.S. dollars) in total profit from January to August 2025, a 0.3% drop year on year.

The industry’s profit margin is just 4.5%, well below the 6% average in other downstream sectors. Margins have steadily fallen from 6.1% in 2021 to 4.3% in 2024, marking a sharp decline from historical levels.

The price war has put serious pressure on the industry’s healthy development, prompting louder opposition. By late May and early June 2025, Chinese government agencies and automotive associations issued statements denouncing the disorderly price war as vicious competition and calling for a firm stand against it.

The situation began to improve this year. Cui reported that between January and September 2025, promotions and price reductions in the passenger vehicle sector became more rational, with the market order showing clear signs of improvement. The reduction in new car prices has also become more controlled, with only 148 new models undergoing price cuts, a moderate figure compared to previous years.

The current price war mainly centers on new model launches that undercut existing price thresholds. Automakers are adding more features while lowering prices, offering higher configurations at reduced costs to gain a competitive edge. For example, NIO's September launch of the updated ES8 saw its starting price drop by more than 90,000 yuan compared to the previous model.

With China’s NEV exports accelerating, concerns are growing that the price war could spill over to global markets. Zhu stressed that the negative impacts of domestic price competition should not be exported, warning it could damage Chinese brands’ reputation and hinder their overseas expansion.

In response to these challenges, the Chinese government has tightened rules on pure electric vehicle exports. Starting January 2026, a licensing system will take effect, requiring companies to obtain an export license. Firms without overseas service networks will no longer be allowed to handle exports independently.

Price wars often lead to problems such as exaggerated and false advertising by automakers. In response, the government has stepped in to address the growing wave of misleading promotions in the industry.

In early September 2025, six departments, including the Ministry of Industry and Information Technology, initiated a nationwide three-month crackdown on chaotic advertising in the automotive industry. This initiative focuses on addressing illegal profiteering, exaggerated and misleading promotions, and malicious attacks on competitors.

The 32nd China-SAE Congress & Exhibition brought together more than 2,500 participants from government, industry, academia, and research. It featured 140 academic sessions and an innovation exhibition, attracting over 10,000 automotive professionals worldwide.