Chinese regulators have announced new rules banning the sale of cars for less than full cost price, a regulatory move aimed at ending years of fierce price competition that has affected the stability of the world’s largest car market.
The decision comes as many car companies have adopted aggressive pricing strategies, sometimes selling vehicles below the cost of production, with the aim of increasing market share and accelerating business expansion, even at the expense of financial losses.
The China Market Regulation Authority explained that the concept of “full cost” includes marketing and distribution costs, as well as manufacturing costs, administrative costs, and financial costs, which can fill the gap where companies were able to achieve rapid growth by selling at a loss.
In addition to restricting practices that exclude smaller competitors from the market, the decision also included prohibitions on price fixing between manufacturers and suppliers and forced discount programs that force distributors to sell without profit.
Observers believe the move could reset competition within the Chinese market and force companies to reevaluate their pricing policies in the next step.
Chinese regulators have announced new rules banning the sale of cars below list price, part of regulations aimed at ending years of fierce price competition that has affected the stability of the world’s largest car market.
The decision came after several car companies relied on aggressive pricing strategies, sometimes selling vehicles below the cost of production, to increase market share and accelerate business expansion even at the expense of financial losses.
China’s market regulator has clarified that the concept of “full cost” includes manufacturing costs, administrative costs, finance costs, and marketing and distribution costs, closing a loophole that allowed companies to grow rapidly by selling at a loss.
In addition to restricting practices that exclude smaller competitors from the market, the decision also included prohibitions on price fixing between manufacturers and suppliers and forced discount programs that force dealers to sell at a loss.
Observers believe the move could recalibrate competition within the Chinese market and force companies to reevaluate their pricing policies in the next step.
