On 17 July 2026, the Ministry of Industry and Information Technology (MIIT) held a special symposium for major domestic automakers to address industry chaos, including vicious price competition, declining product quality, misleading intelligent driving promotion, and data security vulnerabilities. It issued strict regulatory requirements covering market competition, vehicle quality, and intelligent connected vehicle security to strengthen compliance oversight over the rapidly developing automotive industry.

While the domestic auto market appeared to boom in 2026, the industry’s profitability was severely hampered. CUI Dongshu, Secretary-General of the China Passenger Car Association (CPCA), pointed out that the automotive industry’s profit margin was only 3.4% from January to April 2026, showing increased revenue but decreased profits. Revenue rose slightly by 1.1%, while costs increased by 2%, resulting in an overall profit decline of 17% year-on-year, with per-vehicle gross profit continuing to shrink.

Automakers are squeezed between upstream and downstream industrial chains. Upstream industries like mining and non-ferrous metals have profit margins exceeding 20%, and rising prices of raw materials and components such as nickel, lithium carbonate, and memory chips have significantly increased vehicle manufacturing costs. Power batteries account for 30%-40% of the total vehicle cost, and domestic battery procurement prices remain high, leaving automakers without self-developed battery capabilities with weak bargaining power. Coupled with endless price wars across the industry and high investment in intelligent technologies, most automakers are relying on price reductions to boost sales, forcing them to cut costs on parts and safety testing, thus creating potential quality issues. This has exacerbated the profit disparity within the industry, with only a few leading automakers achieving stable profitability.

This symposium explicitly required the entire industry to abandon the widespread, low-price competition model and conduct a comprehensive investigation of safety hazards across the entire supply chain. Many consumers believe that the low-price competition model by automakers is a good thing, but this model may lead to cost-cutting in unseen areas, such as downgrading braking systems, reducing the strength of body steel, and hastily completing durability tests.

MIIT clarified three core regulatory requirements for automakers to curb irrational competition and strictly uphold production consistency, quality, and safety. First, a comprehensive investigation of potential risks in the vehicle and component supply chain will be conducted, addressing issues related to production reliability, durability, and new technology verification, and strengthening full-chain control. Second, automakers must conduct thorough safety testing before installing new technologies in vehicles, strictly adhere to national standards, avoid exaggerated or false advertising of vehicle performance, and truthfully inform consumers of product capability limitations. Third, a comprehensive safety assessment of intelligent driving systems will be conducted, covering functional, network, data, and OTA (Over-the-Air) upgrade security, and a safety incident monitoring and handling mechanism will be established.

MIIT will jointly launch special rectification campaigns with relevant authorities, strengthen supervision over automakers and testing institutions, and impose severe penalties for quality defects, false promotion, and inadequate supply chain management.

This symposium released a clear industry direction: the focus of the automotive industry will shift from simply competing on price and intelligent gimmicks to healthy competition based on quality, safety, and technology. In the short term, automakers’ compliance and quality control costs will increase, accelerating the industry’s weeding out of weaker players. In the long term, stringent regulation will force companies to increase investment in core technology research and development, eliminate low-quality and low-price production capacity, promote high-quality upgrading of the domestic automotive industry, and build a solid safety guarantee for consumers.

By Felicity Jin, Researcher