The ongoing price war in the Chinese auto industry might cool down after 16 automakers and the China Association of Automobile Manufacturers (CAAM) signed a pledge today to maintain a fair market structure at the 2023 China Auto Forum in Jiandang, Shanghai.
Tesla triggered an EV price war globally, after slashing prices of its models on multiple occasions this year. The move caused turmoil in the Chinese automotive market on many fronts: customers who bought Teslas just before the price cuts were furious, while some 30 carmakers were compelled to reduce prices to maintain competitiveness.
There were fears that smaller players who cannot sustain price cuts might be forced to shut shop, partner up or consolidate.
To ease the tensions caused by the price war, all major automakers in China have signed a commitment to safeguard the market framework. The list includes Dongfeng Motor, China FAW, SAIC, BAIC, Changan Automobile, GAC, Chery, JAC, Geely, China National Heavy Duty Truck, Great Wall Motor, BYD, Nio, Li Auto, Xpeng, and Tesla, according to Cnevpost.
Although, note that the letter signed by executives of the aforementioned brands is not legally binding and is self-regulatory. Here’s an excerpt:
First, we will abide by the rules and regulations of the industry, regulate marketing activities, maintain a fair competition order, and not disrupt the fair competition order of the market with abnormal prices.
Second, we will pay attention to marketing methods, will not exaggerate or conduct false marketing, and not to mislead consumers to attract attention and increase customer acquisition.
Third, we will put quality first, and use quality-oriented, high-quality products and services to meet people’s needs for a better life.
Fourth, we will actively fulfill our social responsibility, and take an active role in helping to stabilize economic growth, increase confidence and prevent risks, and work together to make a contribution to national economic growth.”
For the biggest players in the new energy vehicle (NEV) space, Tesla and BYD, the price war seems to have delivered huge dividends, possibly at the expense of some of their smaller rivals. Sales hit a record high in the second quarter of 2023 for both brands.
Tesla reportedly holds only 7 percent of the market share in China, whereas it has 60 percent of the BEV market share in the US. The signed letter does not guarantee price stabilization, and carmakers might continue to fluctuate prices depending on a myriad of economic factors. Although, it might be an early sign of automakers moving forward in good faith.
Do you think automakers should vouch for a similar truce regarding prices in the US as well? Leave your thoughts in the comments.
