China has rolled out its first nationwide price compliance rules for the auto sector, drawing clear legal red lines across the entire auto industry chain to prevent price wars. The State Administration for Market Regulation (SAMR) launched an automotive industry pricing conduct compliance guideline, which includes 28 articles that further refine compliance requirements for manufacturers and set clear pricing obligations for dealers and sales enterprises. Wu Peng, an official with the SAMR, said that in recent years, auto production and dealerships have engaged in non-standard price labeling, price fraud, price collusion and cutthroat competition. “The new guideline aims to correct behaviors that disrupt market order. It will protect the legitimate rights and interests of consumers and businesses and, in the long run, drive the industry’s high-quality development,” Wu said. Under the new guideline, automakers are explicitly prohibited from selling complete vehicles or parts below production cost with the intent of stifling market competition.
Except for the legally sanctioned clearance of overstocked goods, other selling practices, including excessive discounts, subsidies, barter arrangements, bulk rebates or artificially lowered sticker prices, will be categorized as “significant legal risks”. The guideline addresses emerging practices such as paid subscriptions to unlock features – a business model increasingly used in connected and electric vehicles – and promotional giveaways, aiming to prevent hidden charges and misleading pricing structures. It also requires automakers to adopt pricing strategies based on production costs and market supply and demand, and to strengthen full-chain price management covering vehicle sales, parts and financial services. The regulator said that companies should ensure transparent and “traceable” pricing.
China’s auto market – the world’s largest – has been locked in an extended price war, particularly in the EV segment, with aggressive discounting, subsidies and bundled promotions squeezing margins across the supply chain. Liang Yunxi, Senior Auto Industry Analyst at Fareast Credit Rating Co, said that years of cutthroat competition – chasing volume through deep discounts – have eroded profits and weakened incentives for innovation, the China Daily reports.
The South China Morning Post reported that China has banned carmakers from selling new vehicles for less than it costs to make them, including through discounts and subsidies. Manufacturers are banned from selling upgraded models at the same price as lower-grade models and are not allowed to offer any discounts or subsidies that effectively bring net prices below cost. “The new guidelines will dampen consumers’ buying interest in cars this year with falling deliveries due to the phase-out of the sales-tax break,” said Zhao Zhen, Sales Director at Shanghai dealer Wan Zhuo Auto. “The government is urging carmakers not to blindly pursue sales volume at the expense of profitability.” EV buyers, who were exempt from a 10% purchase tax last year, are now subject to a 5% tax as the tax incentive is gradually phased out. In 2028, the purchase tax will return to the normal 10%. Would-be car buyers were expecting major auto brands to offer steep discounts in 2026 to offset the declining government support, Zhao said. But many of them could cancel their buying plans or choose cheaper models now that the regulator was stepping up policing of price competition, she added.
