China's top auto dealer association urged all automakers to stop cutthroat competition in a rare public announcement on Tuesday, saying the race to the bottom is threatening the survival of dealerships and undermining the broader push for high-quality growth in the automotive sector.

The China Auto Dealers Chamber of Commerce, which is under the All-China Federation of Industry and Commerce, said that China's car dealers, a crucial link between manufacturers and consumers, are grappling with mounting pressures, including weakening margins, rising inventory levels, tighter liquidity, and overall operational stress.

"The situation worsened notably since the second quarter as a fresh wave of discounts, led by major EV players, spread through the market," the chamber said. "Price wars may win headlines, but they are dragging the entire industry into a downward spiral."

In response, the chamber released a proposal urging industry reform, calling to reject reckless discounting and return to fair, rational competition to preserve industry health.

Automakers should also avoid frequent changes to pricing and policy that confuse consumers and strain dealer relations, it said.

Meanwhile, the chamber emphasized that production must align with actual demand, and manufacturers should not offload excess inventory onto dealers, and must resolve pricing distortions, speed up rebates and reduce pressure on working capital.

Evaluation targets should be realistic, and penalties must not be used as tools to force dealer compliance. Dealers should not be coerced into closing under the guise of "network optimization", and those exiting the business should be fairly compensated, it added.