China's automotive sector is sounding the alarm over cutthroat competition in the rapidly expanding new energy vehicle (NEV) market. The China Association of Automobile Manufacturers (CAAM) has launched a coordinated effort to curb what it calls 'involution-style' practices, where aggressive price slashing threatens long-term industry stability.
NEVs now represent over 40% of new car sales in the Chinese mainland, but profitability has dipped sharply in recent months. CAAM attributes this decline to a May 23 price reduction campaign led by a major automaker, which triggered a domino effect across the industry. 'Disorderly competition squeezes margins, weakens innovation, and risks supply chain disruptions,' the association stated.
Analysts warn the price wars could backfire on consumers. 'While short-term discounts attract buyers, prolonged undercutting may compromise service quality and even vehicle safety standards,' said Li Wei, an automotive researcher at Shanghai Jiao Tong University. The CAAM has urged companies to avoid selling below cost and to conduct compliance self-checks.
Business leaders see the initiative as crucial for maintaining China's global NEV leadership. 'Sustainable growth requires balancing market share battles with R&D investments in battery tech and smart features,' noted CAAM Secretary-General Fu Bingfeng. The association is pushing for industry-wide cooperation to develop standardized pricing frameworks.
