Gasgoo Munich-"Down 24% year-on-year."
That is the scorecard for the national passenger car retail market from October 1 to 11. Retail sales hit 459,000 units—a drop of nearly 150,000 from the same period last year. New energy passenger vehicle retail sales stood at 281,000 units, down 13% year-on-year.
"Golden September, Silver Ten" used to be the auto industry's most critical sales season. In previous years, automakers and dealers would ramp up promotions come September to sprint toward annual sales targets. This year, however, the market failed to see the expected recovery in September, and October opened on a cold note. Data from the China Automobile Dealers Association's Passenger Car Branch shows year-to-date retail sales reached 13.79 million units, down 22% from last year. The entire industry is grappling with an unprecedented contraction in demand.
Even as demand slips, the price war shows no sign of stopping.
The Price War's Prisoner's Dilemma
Under pressure from domestic new-energy models, foreign luxury brands are swallowing their pride and trading margins for volume. Tesla China announced limited-time price cuts at the end of September, knocking 5,000 yuan off the final payment for all Model 3 versions and 7,000 yuan for select Model Y trims. The Mercedes-Benz electric GLC and SAIC Audi's E7X have slipped into the sub-300,000 yuan market.
Automakers are well aware of the dangers. Continued price cuts compress profit margins, erode brand value, and condition consumers to wait for better deals. Yet under the pressure of sliding sales, no player dares to be the first to stop cutting prices.
It is a classic prisoner's dilemma. If every automaker stopped discounting, industry profits would be protected, and consumers would return to a normal buying rhythm. But as long as one player moves first to grab share with a price cut, the others are forced to follow. The result is an industry-wide slide in prices without a corresponding rise in sales—only a steady erosion of profits.
Image Source: Doubao
Data disclosed by Cui Dongshu, deputy secretary-general of the CPCA, shows that in April, the average price of discounted conventional internal combustion engine vehicles was 131,000 yuan, with an average discount of 23,000 yuan per unit—an overall drop of 17.2%. From January to April, the average price for new conventional fuel vehicles stood at 236,000 yuan, with a cumulative average discount of 34,000 yuan per unit, a decline of 14.6%.
Price cuts have not driven sales growth. Market demand remains sluggish, particularly in the second half of the year. Automakers are trapped in a vicious cycle: the more they cut prices, the less they sell; and the less they sell, the more they cut prices.
The outlook for the new energy market is equally grim. For years, this sector maintained high-speed growth, serving as the core pillar of the auto market. Now, with new energy vehicles also seeing year-on-year declines, it is clear that the demand contraction has spread from internal combustion engines to the electric sector.
Regulators Step In, Industry Pivots
The dangers of the price war have drawn the attention of regulators. On October 15, the Ministry of Industry and Information Technology's Department of Equipment Industry, the Ministry of Public Security's Traffic Management Bureau, the Ministry of Ecology and Environment's Department of Atmospheric Environment, and the State Administration for Market Regulation's Department of Certification and Supervision jointly held a symposium with key automakers. The meeting called for a firm resistance to irrational competition and urged stronger management of automotive product innovation, design, and R&D testing verification to hold the line on product safety.
Labeling the competition as "irrational" signals that regulators recognize the sustained price war is not only hurting corporate profits but potentially compromising product quality and safety. When automakers slash R&D spending and quality control to cut costs, it is the consumer who ultimately pays the price.
The four departments also emphasized the need to strengthen innovation design and R&D testing verification. This sends a clear signal: the focus of industry competition should shift from price wars to technological innovation and product quality. The model of grabbing market share through discounts has reached its end; only companies with genuine core technology and product strength will prevail in the next round of competition.
Image Source: BYD
The root of the price war lies in a structural supply-demand imbalance and the entry of domestic terminal demand into a saturation phase. Room for growth in the domestic auto market is narrowing as vehicle supply continues to release, compounded by the iteration of old and new production capacities, amplifying competitive pressure. As the scramble for market share intensifies, many automakers have chosen to slash prices to secure orders, triggering a chain reaction of cutthroat competition. The China Association of Automobile Manufacturers has also warned that disorderly price competition erodes profitability, drags down R&D investment, and destabilizes the supply chain.
However, whether regulatory posturing can truly curb the price war remains to be seen. The symposium by the four departments serves largely as guidance and a warning; the real transition requires automakers to make their own choices. For carmakers, stopping price cuts means short-term sales may slide further, but continued discounting erodes profits and damages the brand. It is a difficult balancing act.
With October's cold open, the pressure to hit year-end sales targets will only mount. Automakers face a tough choice: continue cutting prices to sprint for volume, or hold the price line and funnel resources into product R&D. The answer to that choice will determine the future competitive landscape of China's auto industry.
The endgame of the price war will likely be an industry shakeout. When profits are compressed to the point where they can no longer cover R&D and operating costs, the tail-end automakers lacking core technology and scale advantages will be the first to exit the market.
Over the past two years, several new automakers have fallen into production halts or bankruptcy liquidation, while some traditional brands have seen sales continue to shrink. Rising industry concentration is an inevitable trend. The survivors will be those with technological moats, scale advantages, or a differentiated niche.
For consumers, the price war has brought tangible benefits. The same budget now buys vehicles with higher specifications and better performance. Yet consumers must remain rational: excessively low prices may signal that automakers are cutting back on R&D, quality control, and after-sales service. Purchasing decisions should not be based on price alone; product quality, after-sales service, and the brand's long-term viability are equally critical.
