(Feb 12): China has banned carmakers from pricing vehicles below cost, intensifying its crackdown on a persistent price war that’s engulfed the world’s largest auto market.
In a final set of guidelines released Thursday, the State Administration for Market Regulation effectively banned automakers from selling vehicles below their total cost of production. That includes not just a company’s factory-floor expenses, but administrative, financial and sales overheads.
By using a broad definition of production cost, China’s top market regulator is closing a loophole that helped companies’ aggressive sales expansion but has drawn concerns from officials about an industrywide race to the bottom. It’s also outlawed price-fixing between automakers and suppliers, and prohibited brands from forcing dealerships into money-losing sales through punitive rebate programmes.
The years-long price war has transformed China’s auto industry, fuelling the rise of industry giants like BYD Co and Tesla Inc while pushing smaller manufacturers — pressured to implement price cuts to keep up — to the brink. The cutthroat competition has rippled through the entire supply chain, with automakers asking for discounts from upstream manufacturers and extending payment times — a practice that regulators have also sought to stamp out.
The regulator also refined some guidelines from the consultation draft released late last year. That includes classifying digital car-buying platforms as real-time market monitors, which will be encouraged to issue “dual-risk alerts” to both consumers and regulators when a merchant lists a car for an abnormally low price.
Regulations around software-defined vehicles were also tightened to mandate that carmakers notify customers when their free software trials are about to expire. Features not explicitly disclosed at the time of purchase are also barred from being turned into paid subscriptions later.
See also: ByteDance, Zhipu jolt AI model race ahead of Chinese New Year
Despite Beijing’s efforts to stamp out aggressive discounting, including a recent warning that automakers face “severe penalties” for continuing the practice, the new year has brought a new round of price cuts.
Uploaded by Magessan Varatharaja
