China's auto industry association warns against destructive 'involution' in NEV market

The China Association of Automobile Manufacturers (CAAM) has announced an industry-wide initiative urging automakers to avoid disorderly competition in the country's booming new energy vehicle (NEV) market.

The statement emphasized that while China's NEV industry has seen rapid growth, with new energy vehicles accounting for over 40 percent of new car sales, the industry has experienced declining profitability recently, largely due to the rise of "involution-style" competition marked by disorderly price wars.

Continuous investment is essential to ensure product support and drive innovation, yet disorderly price wars are severely disrupting business operations, threatening the stability of industrial and supply chains, and dragging the sector into a vicious cycle, the CAAM said.

The CAAM noted that recent sharp price cuts, initiated by a major carmaker on May 23 and subsequently followed by others, have sparked market panic.

Such price wars, the association warned, are squeezing profit margins, undermining service quality, and putting the industry's development at risk. They also endanger consumer rights and could lead to broader safety issues.

All companies should strictly adhere to the principles of fair competition, while leading enterprises should not seek to squeeze the space of other players for the purpose of gaining monopoly, the CAAM continued.

Apart from lawful price adjustments, firms must not sell their products below cost, engage in deceptive marketing practices, or disrupt market order in ways that harm the fundamental interests of the industry and consumers, according to the CAAM.

Companies are also encouraged to conduct self-inspections in line with relevant national laws and regulations, it added.