China has rolled out its first nationwide price compliance rules for the auto sector, drawing clear legal red lines across the entire auto industry chain to prevent price wars in the world's largest vehicle market.

The State Administration for Market Regulation launched on Thursday an automotive industry pricing conduct compliance guideline, which includes 28 articles that further refine compliance requirements for manufacturers and set clear pricing obligations for dealers and sales enterprises.

Wu Peng, an official with the SAMR, said that in recent years, auto production and dealerships have engaged in nonstandard price labeling, price fraud, price collusion and cutthroat competition.

"The new guideline aims to correct behaviors that disrupt market order. It will protect the legitimate rights and interests of consumers and businesses and, in the long run, drive the industry's high-quality development," Wu said.

Under the new guideline, automakers are explicitly prohibited from selling complete vehicles or parts below production cost with the intent of stifling market competition. Except for the legally sanctioned clearance of overstocked goods, other selling behaviors — including excessive discounts, subsidies, barter arrangements, bulk rebates or artificially lowered sticker prices — will be categorized as "significant legal risks".

The guideline addresses emerging practices such as paid subscriptions to unlock features — a business model increasingly used in connected and electric vehicles — and promotional giveaways, aiming to prevent hidden charges and misleading pricing structures.

It also requires automakers to adopt pricing strategies based on production costs and market supply and demand, and to strengthen full-chain price management covering vehicle sales, parts and financial services. The regulator said that companies should ensure transparent and "traceable" pricing behaviors.

Xiaomi Corp, a fast-growing player in China's smart EV segment, said that it firmly supports and will actively respond to the new guidelines.

The company said it would strengthen internal price management systems, strictly implement clear price labeling and eliminate fraudulent or unfair pricing practices, while working with supply chain partners to uphold fair competition.

China's auto market — the world's largest — has been locked in an extended price war, particularly in the EV segment, with aggressive discounting, subsidies and bundled promotions squeezing margins across the supply chain.

Liang Yunxi, a senior auto industry analyst at Fareast Credit Rating Co, said that years of cutthroat competition — chasing volume through deep discounts — have eroded profits and weakened incentives for innovation.

"The release of the guidelines marked a key institutional step toward restoring order in auto price competition. Clearer rules could help the industry transition from price competition to value competition," Liang said.