Is the automotive price war coming to an end?

In the past three years of the automotive price war, a strong inertial expectation has been shaped among consumers: cars are accelerating towards becoming "electronic products" and will eventually turn into affordable consumer goods that continuously depreciate through economies of scale.

However, this expectation is now being overturned. After three years of intense price war, the industry has witnessed a price increase wave for the first time. According to incomplete statistics, since April, more than a dozen mainstream automakers have intensively issued announcements of price increases or tightened benefits.

On the surface, this is a cost crisis triggered by the upstream supply chain.

Core commodities such as lithium, copper, aluminum, and semiconductors have all shown an upward curve. Among them, since September 2025, the cumulative price increases of automotive-grade DDR4 and DDR5 memory have reached 150% and 300% respectively. Li Bin defined this cost pressure as an "out-of-control state".

However, behind the cyclical cost pressure, a more far-reaching signal is that it may be difficult for automakers to justify the accounts of launching price wars.

Three years ago, automakers were willing to sacrifice profits to drive prices down to the bottom, aiming at the "dividends" during the transition period between the old and new tracks. In the incremental stage with low penetration rate, low price was the most effective weapon to seize the ecological niche. At the same time, as a typical heavy industrial product, the essence of automobile competition is the Matthew effect of scale and cost. Automakers hoped to use early profits to build an absolute scale moat.

However, in 2026, the logic has changed. From January to April this year, the sales volume of new energy vehicles in China was 4.304 million, a slight year-on-year increase of 0.1%. The overall growth rate has peaked. Coupled with the fact that the players on the table now have reached a certain scale and volume, it is neither easy to win nor easy to lose. This determines that the cost of automakers launching price wars is getting higher and higher, while the return is getting lower and lower.

The deeper logic is that only when Chinese automakers bid farewell to the inefficient low-price involution can the advantages of the domestic automotive industry upgrade truly be priced in the asset market.

01

After three consecutive years of price war, a price increase wave appears for the first time

In 2023, the peaceful appearance maintained by the new energy vehicle industry through collectively expanding the market cake came to an abrupt end.

That year, Tesla significantly lowered the prices of Model 3 and Model Y, firing the "first shot" of the new energy vehicle price war. Then BYD quickly followed suit, shouting the slogan of "same price for gasoline and electric vehicles". Since then, the entire industry has been forced to be involved in a profit-consuming war.

In this battle, automakers were almost using their own "income statements" to subsidize consumers' purchasing power.

During the three consecutive years of price war, the profit of the automotive industry decreased from nearly 6% in 2022 to 2.9% in the first two months of this year, and the gross profit per vehicle decreased from 20,000 yuan to 11,000 yuan, almost halved. This fierce price war trend even made many consumers believe that car prices would only become cheaper and eventually become affordable consumer goods for most people.

However, recently, this trend seems to have started to change.

According to incomplete statistics, since April, more than a dozen automakers have intensively issued price adjustment announcements. BYD raised the price of its intelligent driving option package from 9,900 yuan to 12,000 yuan. Changan Qiyuan officially announced a price increase of 3,000 yuan. Chery Exeed raised the price by 5,000 yuan. Xiaomi's new SU7 series increased the price by 4,000 - 8,000 yuan across the board. At the same time, more brands have indirectly raised prices by reducing comprehensive terminal discounts and canceling interest-free policies.

The direct reason for automakers to raise prices is that the cost side has been besieged by the upstream industrial chain.

At the beginning of 2026, the automotive manufacturing industry was besieged by the costs of commodities and core components. The price of battery-grade lithium carbonate soared from the low level in the second half of 2025 and re - reached the mark of 200,000 yuan per ton. In the field of storage chips, the core of intelligent driving, since September 2025, the cumulative price increases of automotive-grade DDR4 and DDR5 memory have exceeded 150% and 300% respectively.

Against the industrial background where the production capacities of global storage giants such as Samsung and SK Hynix are constant and high - price production capacities are preferentially locked by AI computing power, it is difficult to see an end to the price increase wave caused by the structural shortage of automotive - grade chips in the short term.

How much damage can the inflation of the entire industrial chain cost cause to automakers? Li Bin once calculated an account: "All chips, semiconductors, and batteries together account for more than 50% of the cost of intelligent electric vehicles. For an automotive product that relies on precise and lean manufacturing, having more than half of the cost in an uncontrollable state is extremely destructive."

A more intuitive data is that the fluctuation of lithium carbonate alone is enough to increase the battery cost per vehicle by 3,000 - 5,000 yuan. At this time, the average gross profit per vehicle in the entire industry is only 11,000 yuan.

Under the cost pressure, raising prices has become a helpless choice for automakers to preserve cash flow. Behind this cost pain, the switch of the industry's competitive driving force is also an observation perspective that cannot be ignored.

02

The return from the price war has decreased

On the financial statements, the price war is manifested as the loss of profit margins; but at the strategic level, the price war was once an efficient lever for automakers to build an absolute monopoly barrier.

In the stage of extremely dispersed market share, the price war can achieve high concentration at the fastest speed. At the same time, as a typical industrial product, the competitiveness of automobiles depends on how much supply - chain cost advantage the "scale lever" can leverage. This means that spending money to gain market share can not only lock in short - term sales elasticity but also be transformed into a long - term cost moat.

Against the background of "either out - compete peers or be starved by peers", the price - war strategy was the correct solution for automakers' development three years ago.

Specifically, the explosion of new energy vehicles has broken the stable market pattern of the past fuel - vehicle era. From 2013 to 2023, the concentration of the top five domestic automakers was diluted from 72% to 55%.

In 2023, the penetration rate of new energy vehicles just passed the critical point of 30%, and the year - on - year growth rate of sales volume in the previous two years was maintained at around 100%. The combination of "low penetration rate + high growth potential" means that whoever can use low prices to clean up the market during this window period can get the largest share in the reshuffled industry pattern.

During this cycle, BYD, with its extreme vertical integration and cost - control capabilities, became the biggest winner. Before the explosion of new energy vehicles, BYD couldn't even make it into the top ten in traditional sales; but after starting the price war, BYD surpassed SAIC and Geely for two consecutive years and crowned the domestic automobile sales champion. The sales volume in 2025 reached 2.47 times that in 2022.

From the perspective of financial indicators, although BYD's economies of scale couldn't fully offset the negative impact of the price war, its gross profit per vehicle decreased by 21% during the price war, but this performance is obviously much better than the average decline of nearly 50% in the entire industry.

However, the industrial cycle has its own objective laws, and it cannot support the consumption war of "sacrificing profits for market share" indefinitely. As the penetration rate of new energy vehicles crosses the absolute critical point, the return from the price war begins to deteriorate.

In 2026, the penetration rate of domestic new energy vehicles officially exceeded 60%. On the other side of the high penetration rate is the stall of the industry's overall growth rate. From January to April this year, the sales volume of new energy vehicles in China only increased by 0.1% year - on - year, which sends a clear signal: simply relying on price compression can no longer stimulate the new incremental market.

From the development history of industrial consumer goods, a penetration rate of over 60% is often the turning point for the end of a vicious price war. Just like the Chinese air - conditioning industry from 1999 to 2004, major manufacturers halved the average price from 4,878 yuan per unit to 1,600 yuan per unit through a fierce price war, completing the full - network popularization and the elimination of mid - tier players. After 2005, as the penetration rate of air conditioners in urban households exceeded 70%, the industry concentrated on the two giants, Midea and Gree, and the bloody price war came to an end.

Now, whether the new energy vehicle price war will continue has reached a critical point.

03

The meaning of industrial upgrading needs to be interpreted

The market share of leading automakers is a reference indicator to observe whether the price war is over.

In 2025, the market share of the top five domestic automakers was 55%. It seems that there is no obvious change compared with three years ago. Compared with the historical high (over 70%) of market share, automakers still have room to increase the leading share through price wars.

So up to now, many automakers still haven't given up on price wars. Currently, automakers that are reducing prices for promotion include both established fuel - vehicle brands that are gradually losing their "luxury attributes" and new energy brands that are still developing rapidly. Even in the face of rising costs, some automakers say they will bear all the costs themselves and will not pass them on to consumers.

But in fact, after the price - war competition in the past few years, a group of once mid - tier new energy brands such as WM Motor and HiPhi have been eliminated from the market. The remaining automakers either have obvious scale advantages or have strong backers, bearing the industrial development and employment of a certain region. To continue to increase market share through price wars, they will surely have to pay a greater price than before.

More importantly, the "visible hand" is also promoting the automotive industry to bid farewell to involution. For example, at the end of 2025, the "Compliance Guidelines for Price Behaviors in the Automotive Industry (Draft for Comments)" issued by the State Administration for Market Regulation was regarded as the "core measure" to contain price wars, which clearly prohibits "selling cars at a loss": Automobile production enterprises shall not set the actual ex - factory price below the production cost for the purpose of excluding competitors or monopolizing the market.

After the release of the "Guidelines", automakers such as BYD, BAIC, XPeng, Chery, Dongfeng, Great Wall, Jianghuai, Leapmotor, and Changan, which had engaged in fierce price wars, also actively stated that they would strictly abide by the principle of marked - price sales and eliminate unfair competition. This also means that even if automakers still want to compete on price, the intensity will be much smaller than before.

From a more macroscopic industrial narrative, new energy vehicles carry the strategic aspiration of China's automotive industry to overtake on the curve. They are a benchmark industry for Chinese manufacturing to move towards high - end and get rid of the label of low - end assembly.

If we have achieved the world's first in the core technology, supply chain, and sales volume of new energy vehicles, but the underlying narrative of the entire industry still remains in the low - dimensional competition of bloody involution and meager profits for all, what is the meaning of industrial upgrading?

This article is from the WeChat official account "Read Finance", author: Yang Yang. Republished by 36Kr with authorization.