China's government measure seeks to avoid trade war in which brands sell cars below cost price just to steal customers from competitors
China has banned automakers from selling vehicles below actual production costs, in a drastic move to stem the price war hurting the world’s largest auto market. The new guidelines, released on Feb. 12 by the State Administration for Market Regulation, mark Beijing’s most assertive intervention to correct distortions in the sector.
The regulation closes in on “creative accounting” by adopting an expanded definition of cost. From now on, the calculation must include industrial, administrative, financial and marketing expenses, eliminating loopholes used to make up predatory practices. The text also vetoes price collusion between manufacturers and prohibits automakers from forcing dealerships to operate in the red through punitive systems of targets.
SEE ALSO:
The regulatory movement responds to a corporate war. The unbridled competition for market share, although it boosted BYD, led to the bankruptcy of emerging brands such as WM Motor, HiPhi and Evergrande Auto. The side effect even reached the giants: BYD saw its sales plummet 30% in January 2026 year-on-year, after closing 2025 with a retraction in quarterly profits.
Financial asphyxiation has gone down the production chain, generating a liquidity crisis among suppliers who faced billionaire defaults. State intervention has had some effect: since mid-2025, the average payment period to suppliers has fallen to 54 days, according to data from the China Association of Automobile Manufacturers.
In addition to the price list, the new rule targets technology. Online platforms will act as real-time monitors and there will be greater rigor on software-defined vehicles, prohibiting, for example, that features tested for free are converted into paid subscriptions without prior clarity.
