The China Association of Automobile Manufacturers (CAAM) issued a formal initiative urging domestic new energy vehicle (NEV) manufacturers to uphold fair competitive practices and to refrain from market monopolization and product dumping.

This initiative, released on Saturday through the association's official WeChat account, highlights the importance of ensuring healthy growth within the rapidly expanding NEV sector, which has become a critical component of China's automotive landscape.

CAAM emphasizes the necessity for all companies to adhere to fair competition principles while complying with applicable laws and regulations.

The association specifically cautions market leaders against practices that might stifle competition or infringe upon the legitimate rights of other businesses, which could lead to monopolistic behavior.

The statement delineates acceptable pricing practices, suggesting that while it is permissible for companies to legally lower prices to clear inventory, they should avoid selling products below cost or employing deceptive advertising.

Such actions could disrupt market order and ultimately harm the interests of both the industry and consumers.

The NEV industry in China has seen considerable growth, with sales of these vehicles currently accounting for over 40 percent of new car sales.

This surge indicates sustained market vitality.

However, CAAM has identified declining profitability within the sector, primarily due to intense inter-company competition characterized by what it refers to as 'price wars.'

CAAM warns that these relentless pricing strategies disrupt normal business operations, threaten supply chain stability, and may lead the industry into a detrimental cycle.

The association noted that significant price reductions initiated by a prominent automotive company since May 23 have triggered similar actions from other manufacturers, raising concerns about a potential escalation in price-related competition.

The risks associated with such disordered competition extend to consumer rights and product safety.

CAAM's statement underscores that a rampant price war could squeeze corporate profit margins and undermine quality and after-sales services, placing both the industry's health and consumer safety at risk.

In parallel, a representative from the Ministry of Industry and Information Technology (MIIT) expressed support for CAAM's initiative, acknowledging that the ongoing 'price war' has severely disrupted typical business operations and posed threats to the sustainable development of the automotive sector.

The MIIT official encouraged manufacturers to seek cost reductions through technological innovations and improved management practices, thus enabling them to offer higher-quality products at competitive prices.

The MIIT characterized the current price competition phenomenon as irrational, identifying it as a 'rat-race' that undermines long-term investment in research and development, and consequently affects the standards of product quality, performance, and service delivery.

As a proactive measure, MIIT plans to intensify efforts to address the issues associated with rat-race competition impacting the automotive sector.

This includes promoting structural optimization, enhancing product consistency inspections, and collaborating with relevant authorities to enforce anti-unfair competition regulations.

Through targeted regulatory actions, MIIT aims to maintain a fair and orderly marketplace, safeguard consumer interests, and drive the high-quality evolution of the automotive industry.

In its statement, CAAM urged the entire sector to cooperate in fostering a fair competitive environment to ensure sustainable growth in the automotive market.