In May this year, some automobile companies reduced the price of new energy vehicles, signaling a new round of price war, spreading panic in the auto industry. The China Association of Automobile Manufacturers (CAAM) has urged the related enterprises in the auto industry to achieve consensus, strengthen self-discipline and break the “involution” or excessive competition, promote the healthy and sustainable development of the industry chain with scientific and technological innovation, and maintain a fair and orderly market situation with practical actions.
The relevant person in charge of the Ministry of Industry and Information Technology (MIIT) has endorsed and supported the initiative put forward by the CAAM as the disorderly price war among automakers is a typical manifestation of “involutional” competition, which not only affects product quality, performance and service levels, but also harms the rights and interests of consumers, endangering the industry's health and sustainable development.
In 2023 and 2024, along with the rapid development of new energy vehicles and the rise of new car-making enterprises, China’s auto output reached record highs, exceeding 30 million units, and its auto output is expected to continue to grow in 2025. However, according to the data issued by the National Bureau of Statistics (NBS), China’s auto industry’s profitability declined from 7.3 percent in 2018 to 4.3 percent in 2024, while decreasing to 3.9 percent in the first three months this year. Due to the frequent occurrence of price wars, in 2024 the overall retail losses incurred in the new car market amounted to nearly RMB 200 billion ($28 billion).
According to the China Iron and Steel Association (CISA), the auto industry is the major user in the steel industry. In 2024, the output of steel plate used in the auto industry reached 40 million mt, including 29 million of cold rolled steel plate (CRC and HDG).
The automakers’ price war also exerted a negative impact on steelmakers. According to some steelmakers, in recent years automakers have carried out extreme cost reduction policies, and constantly require steel mills to reduce the price of steel plate used in the auto industry. Since last year, some automakers required steel mills to reduce the price of steel plate used in the auto industry by more than 10 percent, far beyond what can be acceptable to steel mills. Some automakers continuously lengthened payment periods for suppliers, increasing the pressure on steel mills.
In this context, the CISA has also urged steelmakers and automakers to strengthen self-discipline and break the “involution”, and to maintain a fair and orderly market together.