Efforts intensify to boost fair practices among automakers

In a bid to foster a healthier competitive landscape, Chinese regulators have called for intensified efforts from players in the automotive sector to combat destructive pricing practices and aim for long-term value.

To address the challenges posed by rampant "cutthroat competition" in the automotive industry, the Ministry of Industry and Information Technology pledged on Saturday to intensify efforts to curb harmful competition and safeguard a fair, orderly market environment, in order to protect consumer rights.

"Cutthroat competition is a form of homogenized competition characterized by low levels of efficiency and effectiveness, " said Luo Zhiheng, chief economist at Yuekai Securities, adding that the phenomenon primarily stems from factors such as supply-demand imbalances and excessive marketing.

If not addressed in a timely manner, cutthroat competition may undermine the industrial ecosystem and potentially diminish the innovation capacity, development momentum and growth potential of "made in China" products, Luo said.

In this regard, the ministry urged automakers to focus on innovations in technology and management to reduce costs, improve product quality and services, fulfill social responsibilities, and cultivate strong brand reputation, which are key drivers for high-quality development in the automotive industry.

"By adopting differentiated development strategies, companies can strengthen their brand image and market position, thereby bolstering their long-term competitive edge," said Zhang Hong, an expert in the new energy sector at China Automobile Dealers Association.

Zhang added that addressing the challenges of involution is crucial for businesses striving for sustainable development. "By doing so, industry players can prevent resource waste and market disruptions that frequently accompany excessive competition," he said.

The ministry's remarks came after the China Association of Automobile Manufacturers launched an initiative calling for automakers to avoid chaotic "price wars" and uphold fair competition.

The initiative, which was released earlier on Saturday, highlighted that the declining profitability in the industry has been exacerbated by cutthroat competition, particularly through disorderly price-cutting moves, which have significantly eroded corporate earnings.

Yin Tongyue, chairman of domestic automaker Chery Automobile, said at an auto industry conference on Saturday that he believed price wars are not the right path, adding that being forced to follow price-cutting strategies is an "extremely painful" experience.

Yin said that China's domestic market is vast and the global market even bigger. In the face of the limitless market potential, automakers should aim for higher and broader horizons where all players can achieve coordinated and joint growth.

In the initiative, the automakers' association specifically warned against the ripple effects of aggressive discounting, stressing that such practices not only disrupt normal business operations but also could trigger systemic risks across the supply chain and ultimately harm consumers' long-term interests.

"If all companies in the automotive industry are unable to achieve healthy profits, it will definitely impact product quality, causing potential safety hazards for public transportation," said Li Fenggang, executive vice-president of FAW Audi Sales.