Auto sector set for healthier growth with new pricing rules

China's auto industry is set to move toward more rules-based high-quality development, as a new regulatory guidance seeks to rein in pricing practices, stabilize distribution channels and better protect consumers, industry experts said.

"The release of the pricing compliance guide marks a new phase of more standardized and refined regulation in the auto industry, and is a key step in shifting the sector from scale-driven expansion to high-quality development," said Wang Du, vice-president of the China Automobile Dealers Association (CADA).

The remarks came after the country's top market regulator recently released a draft guide on pricing behavior in the automotive sector. Grounded in existing laws and regulations, the document provides full-chain guidance covering vehicle production, sales and related services, clearly defining regulatory "red lines" and compliance boundaries for companies.

"One major highlight of the draft is its focus on regulating the production-sales relationship between automakers and dealers," Wang said. Dealers, as the core link in vehicle distribution, have long faced operational pressure from inventory backlogs driven by production-oriented sales models, as well as complex and delayed rebate policies, Wang added.

In this regard, the guide emphasizes that automakers should respect dealers' independent pricing rights, clarify rebate arrangements through contracts, and refrain from forced inventory buildup or unreasonable sales assessments. It also prohibits price discrimination among dealers and traders under the same trading conditions.

"These measures will help straighten out production and sales relationships at the source, ease dealers' burdens and allow more channel resources to be directed toward improving customer service and user experience," Wang said.

Intensified market competition in recent years has pushed both manufacturers and dealers to cut prices in exchange for sales volume, further eroding dealers' profitability. CADA data showed that in the first half of 2025, 52.6 percent of dealers were operating at a loss, while 74.4 percent faced varying degrees of price inversion, where selling prices fell below costs.

Against this backdrop, the guide explicitly bans unfair competition practices such as selling below cost and price collusion. It warns that a series of pricing behaviors — including setting ex-factory prices for vehicles or parts below production costs, or selling higher-specification products under the guise of lower-grade ones to undercut prices — carry "significant legal risks" when aimed at squeezing out competitors or monopolizing the market.

"These provisions are intended to steer competition away from low-level price wars and back toward technology, service and value-based competition, fundamentally repairing the industry's ecosystem," Wang said.

To date, a slew of major automakers — including BYD, BAIC Group, Chery Automobile, Xpeng and Leapmotor — have responded by pledging to actively implement the guide's requirements.

Under intensified efforts, the price competition has already begun to cool down. From January to November, 173 passenger car models saw price cuts, 45 fewer than a year earlier. In November alone, 19 models were discounted, down seven year-on-year, according to data from the China Passenger Car Association.

"Promotional activities and price adjustments in the passenger car market have largely returned to rational levels this year, with market order improving noticeably," said Cui Dongshu, secretary-general of the association.

As vehicles see an increased level of intelligent development, the draft guide also brings emerging business models under regulatory oversight. New charging practices, such as feature subscriptions and paid software unlocks, require sellers to clearly disclose key information, including free trial periods and pricing standards, strengthening consumers' rights to information and choice.

In response to the growing role of online sales and platform-based operations, the guide also clarifies platform operators' responsibilities, requiring them to respect merchants' independent pricing rights and issue risk alerts for abnormally low prices to prevent new forms of price disorder.

"By incorporating new business models into regulation and clarifying platform responsibilities and transparency requirements, it protects consumers' rights while setting clear compliance boundaries for innovation," Wang noted. "This helps build a long-term regulatory framework that can adapt to the industry's ongoing transformation."