Automotive Industry Policy

Automotive industry policy refers to the collective framework of laws, regulations, strategic roadmaps, and administrative measures enacted by the government to steer industrial transformation, regulate market competition, and stimulate automotive sales. The year 2026 marks a crucial turning point as China's automotive sector transitions from being a "major auto manufacturing nation" to a "global automotive powerhouse", with industrial policy pivoting from pure volume expansion towards deep-level governance anchored on high-quality development, safety compliance, and green transformation.

Industry Governance: Curbing Cutthroat Competition

In the first half of 2026, clamping down on cutthroat price wars became a top priority for industry regulators. Several government bodies, including the Ministry of Industry and Information Technology (MIIT) and the State Administration for Market Regulation (SAMR), established an inter-agency mechanism to roll out measures targeting anti-monopoly, anti-unfair competition, and unregulated price wars, steering industry rivalry away from "race-to-the-bottom pricing" towards "value-driven competition".

On 17 July 2026, the MIIT’s First Equipment Industry Department held a symposium with major carmakers, firmly demanding an end to irrational market competition. Three key directives were outlined: first, to thoroughly audit internal operations and key component suppliers for issues related to production conformity, reliability, and durability; second, to enhance validation and testing in innovative product design, rigorously assess safety risks, and eliminate false or exaggerated marketing claims; and third, to step up safety evaluations for combined driving assistance and autonomous driving features, addressing vulnerabilities in functional safety, cybersecurity, and data protection.

Regarding supply chain management, three ministries led by the MIIT convened a dialogue with new energy vehicle (NEV) players in March 2026, urging OEMs to strictly adhere to the 60-day supplier payment term. Most major carmakers have since reduced their average payment turnaround to roughly 54 days—around 10 days faster compared to the same period last year. Additionally, the SAMR introduced the "Compliance Guidelines for Pricing Conduct in the Automotive Industry" in February 2026, clarifying legal boundaries on automotive pricing practices and reinforcing fair pricing discipline across everything from pricing strategies to showroom sales practices.

Stabilising Growth and Driving Demand

In September 2025, eight government agencies, including the MIIT, jointly rolled out the "Work Plan for Stabilising Automotive Industry Growth (2025–2026)", tackling both supply and demand to ensure sustainable industry growth. To boost domestic consumption, the blueprint outlined measures including expanding full-electrification pilot zones for public sector fleets, rolling out the nationwide NEV rural adoption campaign, and supporting vehicle trade-in incentives as well as green public bus fleet upgrades.

On 20 July 2026, MIIT Chief Engineer Wang Weiming announced during a State Council Information Office briefing that the government will continue executing the growth stabilisation roadmap, oversee the rollout of the "15th Five-Year Plan for Intelligent Connected and New Energy Vehicles", and aggressively expand quality supply while unlocking active demand. Official figures revealed that the equipment manufacturing sector’s value-added output grew by 6.4% year-on-year in the first half of 2026, with completely built-up (CBU) vehicle exports reaching 5.096 million units—a 65.3% jump year-on-year—underlining an industry performance characterised by "strong fundamentals, diverse highlights, and robust export demand".

Carbon Peaking and Green Transition

In June 2026, the State Council released the "15th Five-Year Action Plan for Carbon Peaking", explicitly citing the automotive sector three times as a pivotal driver for transport decarbonisation. The plan laid out three core decarbonisation strategies: Industrial upgrading paired with diversified powertrains—scaling up battery electric vehicle (BEV) and hybrid segments alongside alternative zero-carbon fuels such as hydrogen, ammonia, and methanol; Circular economy and resource recovery—standardising the recycling and second-life utilisation of retired traction batteries and end-of-life vehicles; and Low-carbon fleet transitions—steadily raising the NEV market share to target 30% of total vehicle parc by 2030, with electrified commercial vehicles accounting for 25%.

Safety Standards: Shifting from Basic Compliance to Systemic Reliability

2026 has witnessed a major wave of safety standard overhauls across the automotive industry. Between January and July, several mandatory national standards were introduced or enforced, spanning flush door handles, high-voltage traction batteries, driver assistance systems, side-impact crash protection, cybersecurity, and software updates. The updated "Electric Vehicle Traction Battery Safety Requirements" (GB 38031-2025) took effect on 1 July, upgrading the thermal runaway requirement from giving a "5-minute pre-fire/explosion warning" to "zero fire and zero explosion", while introducing mandatory underbody strike tests and safety checks following high-rate fast-charging cycles. Meanwhile, the "Safety Technical Requirements for Motor Vehicle Door Handles" (GB 48001-2026) outlawed fully flush pop-out door handles to guarantee manual emergency access after a power failure or severe crash.

Regulatory oversight is now pivoting from standalone product checks to comprehensive, whole-lifecycle governance covering supply chains and emerging technologies. The MIIT emphasised that its regulatory oversight extends directly from vehicle manufacturers down to component suppliers, asserting that software security is just as critical as hardware reliability. Industry analysts note that tightening safety regulations will expedite the elimination of obsolete production capacity, driving carmakers away from hasty "rapid-fire model launch" cycles towards robust, long-term forward engineering.

Market Access and Tax Incentive Alignment

On 21 January 2026, the MIIT issued the revised "Rules on the Production Enterprise and Product Admission for Road Motor Vehicles", slated to take effect on 1 January 2027. For the first time, cybersecurity, data privacy, software update mechanisms, combined driving assistance, and autonomous driving capabilities have been formally integrated into mandatory enterprise licensing criteria. On the fiscal front, NEV purchase tax incentives are moving through a transitional phase from "full exemption" to "half-rate reduction": full purchase tax exemption applied from 2024 to 2025 (capped at RM30,000), halving to a 50% waiver from 2026 to 2027 (capped at RM15,000), before all tax incentives are completely phased out from 2027 onwards.