The Chinese Automobile Manufacturers Association (CAAM) has strongly rebuked car manufacturers for instigating a “price war,” following widespread discounts announced by companies like BYD. The association’s statement, issued on Saturday, expresses concerns that this intense competition could undermine profits and destabilize the market.

According to the CAAM, “As May 23, a car manufacturing company has launched a major discounts campaign … which has sparked fears again of a price war.” The association cautioned that such competition, “dominated by chaos,” could lead to “the spread of harmful competition” and erode profitability across the sector.

While the statement, dated May 30, did not explicitly name any company, it followed BYD’s announcement on May 23 of substantial discounts, reaching up to 34% on over twenty of its car models. Such as, the SEAGULL Smart Driving Step, BYD’s most affordable model, saw its price reduced from 69,800 yuan to a starting price of 55,800 yuan (approximately $7,800) when trading in an older vehicle.

Shortly after, Leapmotor, backed by Stelantis, announced similar discounts on new models, valid until June 8. Geely Auto also joined the fray, announcing a limited-time discount on ten models, including the X3 Pro, launched at a base price of 44,900 yuan.

Growing Criticism of “Sterile Competition”

“As May 23, a car manufacturing company has launched a major discounts campaign … which has sparked fears again of a price war.”

However, this aggressive pricing strategy has drawn increasing criticism. Some industry observers are labeling it “sterile competition.” Wei Jiangon, CEO of Great Wall Motor, whose annual revenue is about a quarter of BYD’s, drew parallels between the current situation and the beginning of the Chinese housing market’s long recession, triggered by the Evergrande crisis in 2021.

In an interview with Sina Finance this month, Wei Jiangon stated, “The auto sector is already suffering from a crisis similar to the Efarrend crisis.I hope not all these years of hard work” are undone by the current price wars.

The Chinese government has invested heavily in the electric vehicle sector to support the development and production of lower-emission vehicles. However, the CAAM’s statement also cautioned major companies against monopolistic practices, stating, “The leading companies should not monopolize the market.With the exception of legal discounts, companies should not sell their products of less than their cost, or engage in misleading ads.”

The association warned that such practices could distort the market and harm both consumers and the industry. The Global Times quoted an unnamed official from the Chinese ministry of Industry and Data Technology, who described the price wars as “sterile and not profitable.”