"Maintaining an Orderly Market Environment"
The Chinese government has begun cracking down on cutthroat competition in the domestic automotive industry, amid concerns that it could follow in the footsteps of the real estate sector, which has been mired in a prolonged slump since the bankruptcy of real estate developer Evergrande in 2021.
On May 31, an official from China’s Ministry of Industry and Information Technology stated, “We will strengthen our ability to address involution-style competition in the automotive industry and firmly maintain a fair and orderly market environment,” according to a report by China Central Television (CCTV).
This statement expressed support for the “Proposal on Maintaining Fair Competition Order and Promoting the Healthy Development of the Industry” previously announced by the China Association of Automobile Manufacturers.
The association’s proposal came after BYD, the world’s leading electric vehicle manufacturer, announced a promotional discount of up to 34% on 22 of its electric and plug-in hybrid models through the end of next month. In response, Geely and Chery Automobile also joined the discount competition.
Currently, the price war that began in early 2023 in China continues despite concerns from both the government and the industry. In response, Wei Jianjun, chairman of Great Wall Motors, remarked, “There is already an ‘Evergrande’ in the automotive industry, but the crisis just hasn’t erupted yet.”
In reality, to boost sales figures, it is common practice among electric vehicle companies in China to sell “0 km used cars”?vehicles that have been registered as new and processed for delivery, but have not actually been driven.
The Ministry of Industry and Information Technology official stated, “Cutthroat competition not only affects product quality, performance, and service levels, but also undermines consumer rights and threatens the health and sustainable development of the industry. There are no winners or a future in a price war.”
The official added, “We will encourage companies to reduce production costs through technological and managerial innovation, continuously improve product quality, enhance service quality, build a strong brand image, and promote high-quality development in the automotive industry.”
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