In response to the recent wave of price wars initiated by automakers, the China Association of Automobile Manufacturers (CAAM) issued the ‘Initiative on Maintaining Fair Competition Order and Promoting Healthy Industry Development,’ explicitly expressing opposition. The Ministry of Industry and Information Technology (MIIT) also voiced support for the initiative, emphasizing that ‘there are no winners in a price war, nor does it have a future.
‘ The clear signal and resolute attitude have timely applied brakes to the disorderly price war, preventing the distortion of business logic driven by capital and the pursuit of short-term market capitalization and stock prices through price cuts. Otherwise, once capital cashes out and exits, the industry would be left with an empty shell of ‘losing money to make noise,’ and the process of going global would be delayed. In recent years, some automakers have publicly opposed ‘involution-style’ competition while repeatedly triggering price wars, severely impacting the industry ecosystem and market order, and undermining the security of the industrial and supply chains. Data shows that the profit margin of the automotive industry in 2024 was only 4.3%, lower than the overall downstream industrial profit margin and the level in 2023. In the first quarter of this year, the profit margin further dropped to 3.9%. On one hand, production and sales volumes have repeatedly hit record highs with a strong reputation, but on the other hand, the industry faces the dilemma of ‘losing money with increased production’ and ‘increased revenue without increased profits.’ Such a divergence indicates that the industry is in a sub-healthy state and cannot sustain itself in the long run. The smoke of price wars is thick, with deep-seated hidden dangers. The profit margins and accounts receivable of suppliers, the compensation of production workers, product quality and safety, and the legitimate rights and interests of consumers in after-sales service are the ultimate victims. Low-price, low-quality products will also significantly deplete the hard-earned international image and reputation of ‘Made in China.’ The lessons of the past are not far away. In the late 1990s, domestic motorcycles were popular in Southeast Asian markets due to their affordability and quality. However, the good times did not last long, as price wars eventually led to a decline in product strength, resulting not only in lost market share but also a sharp drop in the reputation of Chinese manufacturing. Today, we must not allow the ‘Waterloo’ of domestic motorcycles to repeat itself in the new energy vehicle industry. The reason why Chinese manufacturing has been able to transition from following to leading in many fields is not primarily due to low prices but innovation. Once, domestic fuel cars priced under 100,000 yuan were ignored; today, domestic new energy vehicles priced over 200,000 yuan are ‘hard to come by.’ Behind this transformation lies the support of technological innovations such as intelligent driving, advanced batteries, and smart cockpits.Today’s Chinese manufacturing is at a critical stage of transitioning from ‘price orientation’ to ‘value orientation’. Currently, the new energy vehicle industry is developing rapidly, with automakers worldwide increasing investments in R&D for new technologies and products. Although Chinese automakers have significant advantages, they are far from achieving a substantial lead or a comfortable position.
Automakers must adhere to a long-term development philosophy, reducing production costs through technological and management innovations to provide consumers with higher-quality and more cost-effective products. They should not distort business logic under the influence of capital, resorting solely to price wars to pursue short-term market capitalization and stock prices. Otherwise, once capital cashes out and exits, the industry will be left with an empty shell of ‘losing money to make noise,’ and the process of going global will be delayed. From a governance perspective, addressing disorderly ‘price wars’ urgently requires new ideas and measures. How to define ‘unreasonably low prices’? How to distinguish effective competition from ‘involution-style’ competition? By acting decisively yet prudently and inclusively, we can undoubtedly step on the accelerator for high-quality development of domestic automobiles and open up broader development space for Chinese manufacturing. Source: People’s Daily Comment, original title: ‘Jindouyun: New Energy Vehicles Must Not Use Price Wars as Stimulants’. Risk Warning and Disclaimer: The market carries risks, and investment requires caution. This article does not constitute personal investment advice nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investments made based on this article are at the investor’s own risk.
