Why Regulate Automotive Export Competition Behavior? Can't Price Wars Be Fought in Overseas Markets?

The Ministry of Commerce, the Ministry of Industry and Information Technology, and the State Administration for Market Regulation recently jointly issued the "Guidelines on Overseas Competition Behavior and Compliance Construction for the Automotive Industry", which is the first overseas compliance guidance document targeting a specific industry domestically; it aims to guide automotive enterprises to standardize overseas competition behavior, strengthen compliance construction, and improve cross-border operation capabilities and international influence.

Export sales from January to July 2026 reached 6.14 million vehicles, with a year-on-year increase of up to 66.8%; however, the decline in domestic car market sales is significant, so more and more car companies regard overseas markets as the core driving force for growth.

But price wars can be fought in the domestic market, why can't they be fought in overseas markets?

With the continuous growth of export scale, Chinese car companies face the risk of disorderly competition in overseas markets, which is a common view in the industry; the core is that price competition may become disorderly. Taking the Thai market as a reference, some Chinese car companies engaged in price competition in Thailand, which not only caused dissatisfaction among existing car buyers but also led Thai public agencies to launch investigations into this behavior. This is a warning from past experiences; most overseas markets will not allow unrestrained price wars. There are three main reasons for this.

Continuous price competition for products will create market wait-and-see sentiment; if prices drop by 10,000 today, they might drop by 20,000 next year; consumers are willing to wait, thus causing price competition to continue plunging into the abyss. When car products have reached the point where they cannot be lowered further, the market may not perceive it this way, resulting in an unpredictable decline in sales, thereby creating a general negative market expectation, dragging the car market into a long-term downturn.

Disorderly price competition will hide many hazards, with the reduction in after-sales and service levels being the most prominent, followed by a continuous decline in product quality. When corporate revenue continues to drop, after-sales service levels will inevitably decline in sync; because the enterprise needs reasonable profits to maintain operations despite reduced revenue, costs must be compressed. The first step to compress is labor costs. The second step is vehicle raw material and parts costs. At this level, systematic fraud may occur in vehicles of any car series; this will bring a series of problems. If these car companies walk away carelessly in the future, the local market will ultimately have to pay for the subsequent issues of these cars.

What is consumed is obviously not just the reputation of one or a few car companies, but also the credibility of these countries and governments.

A more important factor is to protect the local automotive industry and avoid bad money driving out good.

Regardless of the basis on which price wars are fought, if the selling price of same-class products is significantly lower than that of products created by local car companies in the export market, the market will only choose those low-priced cars. Many developed countries in the automotive industry have no excessive labor and material costs to compress; excessive compression will only bring the problems mentioned in the first section. If these problems appear on the products of local brands, it would be almost a disaster for their local automotive industry.

Therefore, cars in many countries and regions cannot afford to fight price wars.

At this time, if facing some imported cars daring to fight price wars, the result can only be waiting to be eliminated.

Conversely, no country will allow its local automotive industry to be crushed by dumping. So if some local car manufacturers fight price wars overseas; the foreseeable result is that these enterprises being truly expelled is just a matter of time, of course this is the worst-case scenario. If this level is not reached, what to face is nothing more than raising import car tariffs, unless building factories in their own land and operating in a joint venture mode, subject to the constraints of local regulatory agencies, is it possible to truly take root in the corresponding overseas markets.

Competition follows rules; some local enterprises in the local market are like unruly crabs that do not follow rules, and indeed need some constraints. Otherwise, the damage is not only to the image of a single enterprise but also to the collective image of Chinese car brands, and it is inevitable to block the channels for going global.