Racing to the Starting Line

FAW-Volkswagen is offering discounts of up to 60%, Cadillac follows suit with 60% off, and BMW is slashing prices by as much as 300,000 yuan... Xiaomi Automobile, Seres, Firefly, Tesla, Volvo, and other brands have also rolled out unprecedented preferential policies.

According to incomplete statistics, within just one week at the beginning of the year, 14 major automakers launched the first wave of price wars, with preferential policies introduced for over 70 models. Among these, 24 models experienced price reductions exceeding 10%, and five models saw price cuts of over 20%.

Despite many automakers explicitly stating their commitment to regulatory policies aimed at halting 'selling cars at a loss,' their enthusiasm for 'price wars' remains undiminished due to various strategic considerations.

Industry insiders generally believe that automakers are increasing discounts at the beginning of the year primarily to mitigate the impact of the increased purchase tax on new energy vehicles. Starting from January 1, 2026, the domestic purchase tax policy for new energy vehicles will officially undergo a 'rollback,' shifting from full exemption to a 50% reduction, with a maximum tax exemption limit of 15,000 yuan.

The China Automobile Dealers Association predicts that the automobile market will experience a 'strong start' in January 2026. The suppressed demand for trade-in purchases at the end of 2025 due to depleted local subsidies, combined with the natural demand for car purchases before the 2026 Spring Festival, will jointly drive up market activity in January 2026.

On one hand, relevant departments are enforcing corrections, while on the other, automakers continue to strive for 'volume through price cuts.' Does the so-called 'selling cars at a loss' by automakers truly exist? How long will 'price wars' persist in the industry's development?

All-Out Melee

Unlike previous years when new energy or joint venture brands initiated 'price wars,' this time it is the luxury brand BMW that kicks off the fray, followed by rapid responses from joint venture and Chinese brands, sparking an imminent all-out melee.

On the second day of the year, BMW China reduced the official guidance prices (MSRP) of 31 models, with the highest reduction reaching 301,000 yuan. Joint venture brands followed suit, with FAW-Volkswagen's Magotan seeing its price drop below 130,000 yuan, FAW-Toyota's all-electric sedan bZ3 having its starting price halved from 169,800 yuan to 93,800 yuan, and GAC Honda's newly launched Fit seeing a direct price cut of 20,000 yuan, setting a new low at 66,800 yuan. Buick Envision L7 also offered a Car Purchase Gift Pack (car purchase package) worth up to 25,000 yuan.

Among the new forces, Tesla did not adjust the official guidance prices (MSRP) of models like the Model Y but instead introduced a '7-year ultra-low-interest' financing plan, which was quickly followed by similar policies from Xiaomi Automobile and Li Auto.

Chinese brands, on the other hand, introduced a combination of cash subsidies, financial incentives, configuration upgrades, and targeted benefits. For example, GAC Trumpchi offered government and enterprise subsidies of up to 70,000 yuan across its entire model lineup. Geely's 4th-generation Emgrand Champion started at 48,800 yuan, while the BinYue Super Champion started at 58,800 yuan. Additionally, customers could enjoy four-tier purchase benefits: Champion Financial Gift, Champion Trade-In Gift, Champion Warranty Gift, and Champion Delivery Gift. BYD's Qin/Qin L DM-i series models added configurations and lowered their starting prices by 3,000 yuan.

Changan's Qiyuan brand not only provided direct cash subsidies from the manufacturer for its main sedan models A06 and A07 but also innovatively added complimentary compulsory traffic insurance. Zeekr offered '5,000 yuan insurance subsidy + 8,000 yuan purchase tax subsidy' for several of its core models, with the maximum subsidy amount reaching 17,000 yuan.

Cui Dongshu, Secretary-General of the China Passenger Car Association, stated that in terms of prices, the average retail price of domestic passenger vehicles has steadily increased from 151,000 yuan in 2019 to 184,000 yuan in 2024. Entering 2025, despite monthly fluctuations, the average price in December 2025 rebounded to 184,000 yuan, demonstrating the resilience of the consumption structure. Meanwhile, the number of industry-wide price-cut models in 2025 was only 177, a decrease of 42 from 2024, and is expected to further contract in 2026, indicating that market strategies relying solely on price cuts are losing effectiveness. Over 30% of consumers have set their budget for their next vehicle at over 300,000 yuan, confirming the market's increased sensitivity to 'value' rather than 'low prices.'

Cui Dongshu believes that the core characteristics of the automobile market in 2026 can be summarized as follows: the effectiveness of 'price wars' is diminishing, and 'value wars' have become the main focus. The key to competition among automakers has shifted from 'who is cheaper' to 'who can provide more solid technology, more superior configurations, and more sustained experiences in the mainstream price range.'

Policy Corrections

In the current context of 'anti-inner roll,' achieving quality and efficiency improvements has become a new challenge for automakers.

Over the past few years, the Chinese automotive industry has been trapped in a paradox of scale growth and declining profits. The industry's profit margin was only 4.3%, with 58.6% of fuel vehicle dealers incurring losses, and R&D investment growth continuing to slow down.

Therefore, at the end of last year, the State Administration for Market Regulation issued the Compliance Guidelines for Pricing Practices in the Automotive Industry (Draft for Comments) (hereinafter referred to as the 'Guidelines'), explicitly stating that automobile manufacturers who aim to squeeze out competitors or dominate the market by using subsidies, discounts, or other means to set actual factory prices below production costs (excluding price reductions for legally handling overstocked inventory) will face significant legal risks.

The Guidelines are seen as an important measure by regulatory authorities to set compliance boundaries for the automotive industry's long-standing 'price wars' and quickly gained widespread support from industry associations and automakers after their release.

On January 14, the No.1 Department of Equipment Industry of the Ministry of Industry and Information Technology, the Department of Industrial Development of the National Development and Reform Commission, and the Price Supervision, Inspection, and Anti-Unfair Competition Bureau of the State Administration for Market Regulation (hereinafter collectively referred to as the 'three departments') jointly held a symposium with enterprises in the new energy vehicle industry to deploy work related to regulating the competitive order of the new energy vehicle industry.

The symposium called for resolutely resisting disorderly 'price wars' and promoting the establishment of a market order featuring high quality and fair competition. It was reported that the three departments would further strengthen work coordination, increase regulatory and enforcement efforts, and seriously handle non-compliant enterprises in accordance with the law.

Behind the halt of 'price wars' lies the continuous decline in profits in the automotive industry. Data shows that from January to October 2025, the automotive industry's sales profit margin was only 4.4%. Although this represents a slight recovery from the same period in 2024, it remains at a five-year low and is significantly lower than the average level of 6% for downstream industrial enterprises. Meanwhile, long-term losses have also constrained automakers in terms of R&D and costs, forcing them into a 'low-level inner roll' and even severely squeezing the survival space of suppliers and dealers.

Industry insiders point out that while this wave of policy adjustments may seem to eliminate opportunities for consumers to 'snag a bargain,' it actually establishes a 'safety line' for both the automotive industry and consumers.

Cui Dongshu also stated that with the adjustment of preferential policies for new energy vehicle purchase taxes officially taking effect in 2026, combined with the guidance of policies such as 'trade-in for new purchases' towards consumption upgrades, the direction of competition in the Chinese automobile market has shifted. Policy incentives have transitioned from 'universal subsidies' to 'encouraging technological upgrades and quality consumption,' prompting consumers to upgrade their purchases to maximize subsidies and guiding the Chinese automobile market to shift from 'price competition' to 'value competition' in 2026.

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