The era of cheap electric vehicles has ended as Chinese authorities tighten regulations to forbid automakers from selling EVs below cost, fearing further destruction of the industry.
On 12 Feb 2026 GMT+7 Reported by the Associated Press and Bloomberg News China’s State Administration for Market Regulation (SAMR) has issued an order to electric vehicle manufacturers, dealers, and parts suppliers prohibiting the sale of cars below the total production cost. This includes not only manufacturing costs but also administrative, financial, and marketing expenses.
SAMR aims to prevent a price war where competitors continuously slash prices to the lowest point, a destructive competition that is severely impacting the EV market.
The SAMR directive forbids EV makers from pricing vehicles below production costs to eliminate rivals or monopolize the market, warning that violators face strict legal consequences.
The new rules also ban price-fixing among manufacturers and suppliers, as well as prohibiting brands from forcing dealers to sell at a loss through rebate programs or punitive bonuses.
This move follows a report from the China Association of Automobile Manufacturers stating that passenger car sales in China fell 19.5% in January compared to the same period last year, marking the largest percentage drop since February 2024.
Additionally, the association’s data showed that passenger car sales in January were 1.4 million units, down from 2.2 million units in December.
Weak demand reflects consumers' financial strain and hesitation to make major purchases. Sales were also affected by reduced tax exemptions for EV purchases and uncertainty over whether subsidies for trading in old cars for new ones would continue.
The EV price war in China has caused export value losses exceeding US$68 billion over the past three years, according to Li Yanwei, a member of the China Automobile Dealers Association.
Analysts predict domestic demand will decline this year, while Chinese automakers continue to expand globally. Passenger car exports reached 589,000 units in January, a 49% increase year-on-year.
Analysts note that the prolonged price war has transformed China’s auto industry, fueling growth for major players like BYD and Tesla, while many smaller manufacturers face severe pressure nearing bankruptcy.
The fierce competition also affects the supply chain, with automakers demanding discounts from parts producers and extending payment terms, practices regulators are trying to control.
The extended price war has reshaped China’s auto industry, supporting major players’ growth. The latest regulatory guidelines require online car sales platforms to monitor the market in real time and alert consumers and authorities to abnormal low pricing.
For software-defined vehicles, the new rules require manufacturers to notify customers when free trial periods for software expire and prohibit turning unannounced features into paid services afterward.
Despite government efforts to curb aggressive price cuts and warnings of severe penalties for violations, the Chinese car market has faced another wave of intense price slashing early this year.