China’s Car Market Sees Another Price War: Over 80% of Dealerships Selling at a Loss

In the beginning of 2025, the “price war” in the Chinese new energy vehicle market has reignited, with major car companies launching price reductions and other measures to capture a limited market share. Currently, most Chinese car brands are experiencing intensified price competition, with the situation of tight liquidity among dealers spreading from high-end brands to mid-range brands.

According to reports from Caijing.com, incomplete statistics show that since January of this year, more than 30 car companies have taken various forms of price reduction measures. This price war not only involves new energy vehicle companies but also affects traditional fuel vehicle companies and joint venture companies.

A recent statistic released by the China Automobile Dealers Association Passenger Car Market Information Joint Committee (referred to as the Passenger Association) shows that from January to February this year, the average price reduction of new passenger cars in the overall market reached 30,000 yuan (RMB), with over 20 new energy vehicle models initiating “aggressive price reductions”. Among them, the average price reduction for newly listed pure electric models was 39,000 yuan, representing a 17% decrease.

A Guangzhou-based GAC Honda dealer admitted to the Economic Daily, saying, “If we don’t reduce prices by 30,000 or 50,000 yuan, it will be seen as insincere and will not attract potential buyers to visit.”

In addition to pure electric vehicles, plug-in hybrid vehicles have seen even higher promotional discounts. Taking the BYD Qin L DM-i as an example, in addition to maintaining financial plans such as zero down payment and zero interest for 24 months, the vehicle has increased its replacement subsidy to a maximum of 25,000 yuan this month, while the subsidy in February was only 5,000 yuan.

As the competition in the automotive market intensifies, the strategy adopted by car companies and dealers to boost sales through “volume for price” tactics has led to situations where dealers face challenges such as “increasing sales without increasing revenue, and increasing revenue without increasing profit”.

A recent report released by the China Automobile Dealers Association, the “2024 National Automobile Dealers’ Survival Status Survey Report,” revealed that in the past year, a majority of car brands experienced intensified price competition (purchase prices higher than sale prices), and the tight liquidity situation among dealers spread from high-end brands to mid-range brands.

According to the report, in 2024, 84.4% of dealers experienced varying degrees of intensified price competition, with 60.4% of dealers experiencing a price competition rate above 15%. Severe price competition has drained dealers’ working capital, with tight liquidity becoming the biggest challenge and risk for dealers.

The China Automobile Dealers Association believes that due to intense price competition, the number of models with price reductions and the extent of price reductions have significantly increased, leading to compressed profit margins in new vehicle sales. As per statistics, the total retail sales of passenger cars by dealers in 2024 reached 4.8 trillion yuan, a growth of 2.1% compared to the previous year. However, considering the level of new car sales discounts in 2023, the price war in 2024 resulted in a loss of 195.6 billion yuan in the retail market for passenger cars.