China is stepping in to cool a brutal price war in its auto industry after passenger car sales fell sharply in January.
The State Administration for Market Regulation has issued new rules banning carmakers from selling vehicles below their total cost, including production, financing, administrative and sales expenses. The guidelines also prohibit price-fixing and forcing dealers into loss-making sales, warning that violators could face serious legal consequences.
The move comes after passenger car sales dropped 19.5% year on year in January, the steepest decline in nearly two years, according to industry data. Sales fell to about 1.4 million units, down from 2.2 million in December.
Analysts say weak domestic demand, reduced EV tax incentives and uncertainty around trade-in subsidies have pressured buyers. At the same time, aggressive discounting has led to an estimated 471 billion yuan, or about $68 billion, in industry losses over the past three years.
Despite softer demand at home, Chinese automakers are expanding overseas. Passenger car exports jumped 49% in January from a year earlier, and major players like BYD are targeting strong growth in Europe and Latin America.
Regulators now appear determined to prevent a race to the bottom in pricing, while manufacturers look abroad to sustain growth.
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