China vows to tackle 'involution-style' competition in auto sector

China's Ministry of Industry and Information Technology (MIIT) said Saturday it will intensify efforts to tackle "involution-style" competition in the country's auto industry, vowing to strengthen oversight and safeguard a fair and orderly market environment.

The announcement came after the China Association of Automobile Manufacturers (CAAM) launched an initiative calling on companies to maintain fair competition and foster healthy industry growth.

In response, the MIIT voiced support for the proposal and warned that recent disorderly price wars have significantly disrupted normal business operations and posed a threat to the industry's healthy and sustainable development, according to an official with the ministry.

Noting that while the ministry encourages enterprises to reduce production costs through technological and managerial innovation and deliver higher-quality and cost-effective products to consumers, the official stressed that disorderly price cuts undermine research and development investment, erode product and service quality, and may even lead to safety issues that harm consumer rights.

Such competition is a classic case of involution, the official said, adding that it will only weaken the momentum for industry development over time. "There are no winners in a price war, nor is there any future," the official warned.

To address the issue, the MIIT will ramp up efforts to rein in involution-style competition in the auto sector. Measures include promoting industrial structure upgrades, strengthening random inspections for product consistency, cooperating with relevant authorities in combating unfair competition, and adopting necessary regulatory actions.

The official also called on companies to enhance their innovation, improve their product quality and service, and fulfill their social responsibilities.

The CAAM earlier announced an industry-wide initiative urging automakers to safeguard fair and orderly 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 NEVs accounting for over 40 percent of new car sales, the industry has seen declining profitability recently, largely due to the rise of involution-style competition marked by disorderly price wars.

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.

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, it said.

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.