China Ministry retracts pricing pledge for local automakers, citing anti-monopoly law

Mere days after gathering over a dozen automakers building EVs in China to commit to a non-binding pledge to avoid further price wars, China’s Association of Automobile Manufacturers, at the advisement of the country’s Ministry of Industry and Information Technology, has retracted the pledge after quickly catching flack promoting potential monopolization.

Less than a week ago, the China Association of Automobile Manufacturers (CAAM), encouraged by local government, proposed a non-binding pledge signed by 16 automakers who vowed to uphold fair market order in the industry. Big names like Tesla, BYD, NIO, and XPeng all signed the pledge to avoid abnormal pricing tactics with hopes to avoid further price wars overseas.

Tesla in particular has been responsible for much of the abnormal pricing in China, slashing MSRPs earlier this year that sent a shockwave throughout the highly competitive EV market in Asia. Local automakers like BYD and XPeng scrambled to lower their prices to compete, while others like NIO stood its ground.

This not only led to price wars, but Chinese automakers began taking shots at one another in their marketing to consumers. This led CAAM to inevitably step in and propose a market-wide deceleration of price cuts four months also. Last week, CAAM and China’s Ministry of Industry and Information Technology (CMIIT) proposed the pricing pledge during the 2023 China Auto Forum in Shanghai.

Now, a mere five days later, both organizations have retracted and denounced the pricing pledge, which, although non-binding, still tiptoes on the brink of encouraging price fixing.

China’s EV pricing pledge backfires

Per Digitimes Asia, the China Association of Automobile Manufacturers removed statements from its signed price pledge a mere two days after it was originally introduced, following quick and strong discussions across the country and auto industry.

CAAM’s July 8 statement said the pledge’s price-related phrasing did not appropriately express the original intention of the strategy to prevent abnormal EV pricing tactics and was inconsistent with anti-monopoly laws in China.

CAAM has since retracted that verbiage from the pledge altogether, and is now advising automakers to review China’s anti-monopoly law and other local regulations when setting their respective prices, in order to and maintain fair competition.

Researchers in China who perused the original pledge said the language was likely too vague to encourage an EV pricing monopoly (it was non-binding and self regulatory after all). However, China’s Ministry of Industry and Information Technology and CAAM are taking no chances of sparking a monopoly or encouraging price fixing.

In the past few days alone, we’ve already seen American automakers lower their EV prices in China, creating “healthier” competition in a market that is very difficult to stand out in.