CHINESE regulators summoned executives from major new-energy vehicle (NEV) makers this week, demanding an end to excessive competition just as a fresh round of price cuts was set to define the start of 2026.
The government’s move – an effort to curb so-called “involution”, a term in China for self-defeating internal competition, underscores Beijing’s challenge in promoting high-quality industrial growth as automakers struggle to stay afloat in a cooling market with dwindling subsidies.
The Ministry of Industry and Information Technology (MIIT), along with the National Development and Reform Commission and the State Administration for Market Regulation, held a closed-door meeting on Wednesday (Jan 14), according to an MIIT statement. The agencies said that they will tighten cost investigations and price supervision and warned of “severe penalties” for violations as they seek to restore order in a chaotic marketplace.
The meeting came as the China Association of Automobile Manufacturers released a sobering forecast for the year. The group expects total auto sales to edge up just 1 per cent in 2026 to 34.75 million units. It also warned that the impact of stimulus measures is weakening, and the purchase tax break for NEVs will be halved this year.
“Carmakers will likely continue prioritising market share over profits,” said Ying Chongxi, an analyst at Nomura. Ying told Caixin that while the authorities are pushing companies to compete through technology rather than pricing, such a shift raises production costs, further squeezing margins.
Another industry analyst noted that years of cutthroat discounting have conditioned consumers to expect ever-lower prices, making it hard for automakers to change course. The analyst added that another year of price-led competition is “inevitable”, and early signs are already visible.
Despite the regulatory warning, a new price war has broken out.
BMW slashed prices across more than 30 models in China in early January. Major Chinese automakers, including Saic Motor, GAC Group, Chery Automobile and Leapmotor Technology, have launched subsidies, interest-free loans and other incentives. Changan Automobile’s Deepal brand recently joined in with its own promotions.
Others are tweaking their offerings to avoid outright discounts. BYD, for example, upgraded several plug-in hybrid models without raising sticker prices, effectively delivering more value for the same cost. Tesla extended its zero-interest financing plans to five years and introduced a seven-year low-interest option.
Geely Automobile Holdings and Dongfeng Motor’s Venucia brand have also joined the fray with direct discounts and trade-in deals. By mid-January, nearly all of China’s top 10 carmakers by 2025 sales had rolled out early-year promotions, intensifying discounts to shore up market share. CAIXIN GLOBAL
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