During the “May Day” holiday, a new round of price wars has erupted in the Chinese automobile market, highlighting the current situation of shrinking domestic demand and intensifying industry competition under economic downward pressure. Major car companies are using various tactics such as “fixed prices,” zero-interest loans, and gift benefits to stimulate sales, leading to an escalation of competition within the automotive industry.
Throughout the “May Day” period, several car manufacturers introduced substantial discount policies in an attempt to seize market share during the short holiday. For example, under the NIO brand, the Lekedao L60 offers comprehensive benefits totaling 44,000 yuan, including a 5-year free NOA navigation assistance, a 52L in-car refrigerator, a 4,000 yuan subsidy, and a 5-year zero-interest loan.
Tesla has introduced a full range of “5-year zero-interest” policy for the first time, making the down payment for the renewed Model Y as low as 79,900 yuan, with a monthly installment as low as 3,060 yuan. The smart brand under Mercedes-Benz offers a limited-time “fixed price” starting at 149,900 yuan, discounted by 14,000 yuan, attracting consumers.
Additionally, the Haval brand under Great Wall Motors offers discounts of up to 40,000 yuan across all models, with the Haval second-generation Big Dog PHEV starting at a limited-time “fixed price” of 122,800 yuan. The Geely brand offers the highest comprehensive subsidy of up to 53,000 yuan.
From April 29 to May 31, the BYD Qin L EV offers a maximum manufacturer subsidy of up to 10,000 yuan, while Changan Automobile’s Avita 07 Pro+ provides a cash discount of 25,000 yuan and a 3-year interest-free plan.
According to incomplete statistics, as of May 5, at least 11 car brands have introduced limited-time purchase incentives during the “May Day” period.
Meanwhile, local government departments of the Chinese Communist Party are also implementing policies to boost sales. The Shenzhen Municipal Bureau of Commerce has introduced subsidies for exchanging old cars for new ones, with a maximum subsidy of 20,000 yuan for scrapping and renewing, further stimulating consumption.
Despite the unprecedented promotional efforts of car companies, the stimulating effect of price wars on sales is diminishing.
A recent report released by global management consulting firm McKinsey shows that the price wars in the Chinese automotive market are escalating, but consumer response is lukewarm. Compared to the huge costs incurred, the stimulating effect of price wars on sales is minimal, with the “net stimulating effect” of price wars at only 3.6%. Consumers’ response to price reductions is far below expectations. Industry insiders point out that the economic downturn has led to insufficient consumer confidence and continued contraction of domestic demand, intensifying the contradiction of oversupply in the automotive market.
An Qingham, Director of the China Automobile Industry Consultation Committee, noted in a article that the industry’s profit margin has significantly declined due to the internal chaos in the Chinese automotive industry in 2024, with a profit margin of only 4.4%. Li Yanwei, a member of the Expert Committee of the China Automobile Dealers Association, revealed earlier that based on last January’s market discounts and new car transaction prices as benchmarks, the overall retail market losses in the automotive industry for the first 11 months of 2024 amounted to 177.6 billion yuan.
According to financial data disclosed by listed companies, in the first half of 2024, the combined net profit of 18 listed Chinese car companies was 48.8 billion yuan, representing only about 39% of Toyota’s net profit (125.3 billion yuan) for the same period, and lower than profits of the Volkswagen Group (79.5 billion yuan) and General Motors (42.1 billion yuan).
Since the beginning of 2025, there seems to be a cooling trend in the price wars from the perspective of car manufacturers. From a market perspective, the continuous price reductions and other promotional activities in the automotive market are finding it increasingly difficult to appeal to consumers. According to McKinsey’s research data, the stimulating effect of technological warfare on new car sales is three times that of price wars. Consumers are more willing to pay for leading innovative technologies rather than be swayed by pure price competition.
Although new force brands such as Xiaomi Motors have continued to see rising sales, inventory pressures are also mounting. According to statistics from the China Automobile Dealers Association Passenger Car Market Information Joint Committee, as of March 2025, the national passenger car inventory reached 3.35 million vehicles, with the inventory of new energy vehicles increasing from 200,000 vehicles in early 2023 to 800,000 vehicles in March 2025, leading to a significant rise in dealer inventory pressures.
Signs of saturation are quickly emerging. The China Association of Automobile Manufacturers has issued a warning that this year, China’s car exports may witness the first decline in five years. Faced with weak domestic demand and hindered exports, Chinese car companies are under pressure to restructure.
In fact, the Chinese Communist Party has long subsidized the domestic manufacturing industry and has relatively lenient environmental and labor regulations, coupled with restrictions on foreign investment, allowing domestic enterprises to dominate domestic demand and expand overseas. These non-market measures have caused an imbalance in competition with European and American companies and become one of the main reasons for the US policy countermeasures.