This report analyzes the problem of excessive competition called "internal competition" in China's automotive industry and industry efforts to resolve it.
The China Association of Automobile Manufacturers (CAAM) announced a "Proposal to Maintain Fair Competition Order and Promote Healthy Industry Development" on May 31, 2025. This proposal consists of four items requiring companies to comply with fair competition principles, prohibit sales below cost, and prohibit abuse of dominant positions by advantaged companies. The Ministry of Industry and Information Technology also endorsed this proposal and stated it would take necessary supervisory measures against unfair and improper competition.
"Internal competition" is an internet buzzword referring to falling into wars of attrition due to excessive internal competition. In China's automotive industry, BYD implemented significant price cuts for 22 models starting May 23, followed by Geely Auto and others, creating a new price war. CAAM pointed out that this disorderly price competition is an important factor in the industry's profit level decline, causing enterprise profit compression, adverse effects on product quality and after-sales service, consumer interest damage, and safety hazards.
According to National Bureau of Statistics data, equipment utilization rates for automotive manufacturing enterprises above designated size dropped significantly from 76.9% in Q4 2023 to 64.9% in Q1 2024, and remained at 71.9% in Q1 2025, below the healthy level of 75%. Profit margins also declined from 7.3% in 2018 to 4.3% in 2024, below the 5.4% average for all industrial enterprises above designated size. Meanwhile, the number of companies increased from 15,263 in 2018 to 18,899 in 2023, confirming active enterprise entry due to market expansion.
At the China Automotive Chongqing Forum on June 6-7, industry stakeholders pointed out the adverse effects of "internal competition" and discussed solutions through mergers and consolidations. Wang Xia, Chairman of the China Council for the Promotion of International Trade, stated that mergers and restructuring are important means of "internal competition" management, presenting four restructuring patterns. Additionally, Chinese manufacturers were warned to avoid excessive competition in overseas markets and prioritize quality and safety.
The article concludes that China's automotive industry "internal competition" problem has caused declines in equipment utilization and profit rates, making the transition from price competition to quality and technology competition and industry restructuring essential for healthy industry development and improved international competitiveness.