China’s pledge to end the car industry’s brutal price war appears to be paying dividends as fewer models were discounted last month, though the push is hurting sales.
In July, 17 models had price cuts, the Passenger Car Association said in a statement Friday.
That’s down from 23 the same time last year and in line with July 2023.
Overall retail car sales fell to 1.8 million units in July, down 12% from June. Sales grew 6.3% year-on-year, slowing from the roughly 15% pace seen each month between March and June, the PCA said.
Summer is typically a quieter period for vehicle purchases.
“Anti-involution is a huge benefit to the industry,” Secretary General Cui Dongshu said in a briefing, referring to a destructive state of intense competition sparked by excess capacity.
The move will improve the entire supply chain, particularly upstream enterprises that “can instead focus on improving quality, satisfy customer demands and not compete on low pricing,” he said.
China has intensified scrutiny of its auto sector on concerns the extended price war that’s plagued the industry is unsustainable and risks sending weaker firms into bankruptcy.
Officials summoned the heads of major electric vehicle makers, including BYD, to Beijing in early June, where they were told to self-regulate and instructed to not offer unreasonable discounts.
Beyond the carmakers, authorities have also cracked down on commissions for dealers who get customers to sign up to auto loans offered by a partnering bank — a tactic that exacerbated the price war as dealers often used part of the kick-back to cut prices.
That change also contributed to the slowdown in sales in July, the association said.
Cui maintained that vehicle sales for 2025 will grow despite carmakers pulling back on price cuts and promotions.
There may be a rush from consumers looking to buy cars before a 10% exemption on vehicle purchasing tax is scaled back to 5% starting from next year.
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