China’s State Administration for Market Regulation (SAMR) officially prohibited automakers from selling new vehicles below production cost to end a prolonged industry price war. These guidelines took effect immediately following their publication on February 12. The regulation forbids discounts or subsidies that result in a net price lower than manufacturing costs.
The regulatory shift is expected to dampen short-term consumer demand as buyers previously anticipated further price cuts through 2026. Hong Kong-listed electric vehicle manufacturers saw broad share declines on February 13 following the announcement. Li Auto stock dropped 2.2% as investors weighed the impact on sales volumes and profitability.