Chinese automakers have been engaged in a race to the bottom with pricing, even selling vehicles below production costs. By Stewart Burnett
China’s market regulator has released draft guidelines aimed at preventing automakers from pricing vehicles too cheaply, marking the country’s most assertive effort yet to curb intense price warring that has fuelled deflationary pressure. The State Administration for Market Regulation warned on 12 December that companies selling below the actual cost of producing a vehicle to push out competitors face “significant legal risks”.
The new rules cover price compliance requirements across vehicle and parts production, pricing strategy and sales practices. The regulator cited problems including irregular price displays, fraud, collusion and irrational competition that have “disrupted the market and harmed consumers and businesses”.
The campaign addresses severe overcapacity and weak consumer sentiment that has seen the number of battery-powered and plug-in hybrid brands fall from 500 to approximately 129 (to be sure still quite a large number). As it stands, consultancy AlixPartners expects only around a dozen to remain financially viable by the end of the decade.
Manufacturing overcapacity and falling prices have created what Chinese officials call ‘neijuan’ or involution—that is, hyper-competition with diminishing returns. The phenomenon has heightened trade tensions as Chinese producers seek to export more and more low-cost goods. Various overseas markets have retaliated by slapping duties as high as 100% on Chinese-made cars, the most recent being Mexico earlier in December with its 50% tariffs.
Xpeng and BYD—the latter arguably responsible for instigating the most intense price warring in 2025—have both voiced their support for the draft rules, pledging to strengthen compliance and avoid price fraud or unfair competition. The regulator is seeking public responses to the measures until 22 December.