Automotive sector sales fell in July

Following efforts to end the fierce price competition in the automotive sector, China saw a decline in sales in July, despite fewer models being discounted. According to data from the China Passenger Car Association (PCA), price cuts occurred on only 17 models in July. This resulted in total retail automobile sales falling to 1.8 million units, a 12 percent decrease compared to June.

On an annual basis, sales increased by 6.3 percent, but this growth lagged behind the 15 percent growth rate seen in the March-June period. It is noted that the summer months are generally quieter.

The Chinese government has set ending price wars as a priority goal amidst trade issues. Concerned that excessive competition in the sector is unsustainable and leaves weaker firms at risk of bankruptcy, authorities have increased oversight. In June, executives from major electric vehicle manufacturers such as BYD Co. were summoned to Beijing and asked to avoid excessive discounting.

PCA Secretary-General Cui Dongshu stated that preventing the destructive competition caused by overcapacity is a major gain for the sector. He expressed that this step would allow companies higher up the supply chain to focus on improving quality rather than competing with low prices.

Furthermore, authorities have placed limits on the commissions dealers receive for finding customers for vehicle loans offered through banks. The use of these commissions for price discounts was fueling the price war. The PCA noted that this regulation also contributed to the slowdown in sales in July.

Cui predicts that despite manufacturers reducing price cuts and promotions, vehicle sales will continue to increase in 2025. He also suggested that consumers might rush to make purchases before the 10 percent exemption on the vehicle purchase tax is reduced to 5 percent.