In recent years, the new energy vehicle (NEV) sector has witnessed explosive growth, significantly eroding the once-dominant market position of fuel vehicles. Recently, discussions about the impending 'collapse' of the fuel vehicle pricing system have dominated social media discourse. What led to the cracks in the previously unassailable pricing logic of fuel vehicles? How should we interpret this evolving scenario?

01 Fuel Vehicle Pricing System Faces Severe Stress Test

According to a China Newsweek report, consumers can now purchase a Xuan Yi for 50,000 yuan, a Civic for 90,000 yuan, a Sagitar for 79,800 yuan, an Accord for 110,000 yuan, and even a Range Rover Evoque for 190,000 yuan. Over the past month, fuel vehicles have experienced unprecedented price slashes. These once-iconic 'legendary cars' have, without any prior coordination, ignited a price war of historic proportions.

In May 2026, the domestic passenger vehicle market achieved a significant milestone: not a single fuel vehicle model featured in the top ten list of retail sales for that month. Data from the China Passenger Car Association revealed that the retail penetration rate of NEVs reached an all-time high of 62.9% in May.

Fuel vehicle retail sales plummeted in May due to a confluence of factors, including rising fuel costs, with monthly sales reaching only 560,000 units, a staggering 39% year-on-year decline. Chinese brand fuel vehicles saw a 39% drop, mainstream joint venture brands fell by 41%, and luxury brand fuel vehicles declined by 31%.

In the May sales rankings for fuel vehicles, the Geely Boyue L led with 13,400 units sold. The Nissan Xuan Yi, a long-time sales champion, ranked third with 12,900 units sold. This classic model, which once set a monthly sales record exceeding 65,000 units, is now struggling to maintain its foothold amid the electrification wave.

In reality, these so-called 'price plunges' are often marketing ploys by dealers. The actual 'bottom-line prices' are achievable only through a combination of discounts, including trade-in subsidies, national and local subsidies, and loan purchase incentives. Few buyers qualify for the lowest advertised price during the actual purchase process. Nevertheless, this pricing disorder has persisted for years, becoming a stark reality for fuel vehicles.

02 Unraveling the Root Causes of Fuel Vehicle Pricing Issues

In the current automotive landscape, fuel vehicles find themselves in an unprecedented quandary, with their pricing system hanging by a thread. Continuous price reductions seem to be the only recourse for many fuel vehicle models. What led to the breakdown of this pricing system?

Eroding Economies of Scale

The foundation of economies of scale is crumbling, posing a fundamental challenge to fuel vehicles. Traditionally, car manufacturing has been a volume-driven game. Developing an engine or transmission required substantial investments, often in the billions of yuan. These costs were recouped through high production volumes, diluting research and development expenses and mold depreciation costs per unit, enabling automakers to turn a profit. This logic drove automakers to expand production aggressively and pursue global sales, adhering to the principle that 'high volume leads to favorable prices'—a hallmark of the industrial economy era.

However, the landscape has shifted dramatically. The emergence of NEVs as a disruptive force has not only captured market share but also upended the entire market dynamics. In recent years, domestic fuel vehicle sales have not merely declined; in some segments, they have nearly halved. This has created a critical issue: automakers' planned production capacities are now underutilized. Idle production lines, the need to support thousands of workers, and daily fixed asset depreciation costs have all contributed to a situation where cars simply are not selling.

Automakers now face a classic 'prisoner's dilemma': continue production and grapple with inventory backlogs and cash flow constraints; halt or reduce production and watch per-unit costs soar, leading to even greater losses. Price reductions, once a reliable demand stimulator, are now ineffective as NEVs have intercepted this demand. The result is a relentless downward pressure on prices, shattering the once-unbreakable price structure and reflecting a fundamental structural imbalance in the market.

Technological Paradigm Shift Alters Consumer Perceptions

The technological iteration paradigm shift has fundamentally altered consumer perceptions. The pricing mechanism for fuel vehicles was traditionally built on a 'mechanical paradigm,' characterized by slow technological advancements in the 'three major components'—internal combustion engine, transmission, and chassis. Minor updates occurred every three years, with major overhauls every five years. Many core technologies remained largely unchanged for decades, providing automakers with ample time to formulate stable pricing strategies based on mature technology, controllable costs, and relatively fixed value.

However, consumers have now been 'spoiled' by the rapid technological advancements of NEVs, which follow an electronic product iteration logic. Today's electric vehicles boast annual or even semi-annual upgrades in chip computing power, autonomous driving assistance, and intelligent cockpits, mirroring the evolution speed of smartphones. This Moore's Law-like pace has left fuel vehicles in the dust, with a dire consequence: the technological spillover effect of fuel vehicles is rapidly losing its luster.

A once-impressive 2.0T engine now pales in comparison to the instant torque and flashy intelligent features of NEVs. The technological value of fuel vehicles is rapidly depreciating in the eyes of consumers. It's not that fuel vehicles are inherently inferior; rather, they are perceived as 'outdated' and not worth their price tags. This technological dimensional attack has made it difficult for fuel vehicles to command high prices based on 'technological premium' as they once did; consumers simply are not buying into it.

Higher-Dimensional Attack on Cost-Effectiveness

The cost-effectiveness of fuel vehicles is under attack from a higher dimension. In the past, consumers may not have paid much heed to fuel consumption when purchasing a fuel vehicle, as fuel prices were relatively low, and there were few alternatives to compare against. However, times have changed. High fuel prices have become the norm, and when combined with escalating parking fees and maintenance costs, the total lifecycle cost of fuel vehicles is rising at an alarming rate.

What's even more damaging is the experience gap. Today's consumers are increasingly discerning, measuring cars against 'consumer electronics' standards. The convenient experience offered by NEVs—quick acceleration, low noise levels, and the ability to charge at home—has magnified the shortcomings of fuel vehicles. Consider this: for the same price of 200,000 yuan, consumers can choose between a fuel vehicle that requires constant worry about fuel prices, vibrates upon startup, and jerks during gear shifts, or an electric vehicle that is quiet, smooth, and can even park itself. This stark contrast in experience directly undermines consumers' perception of the value proposition of fuel vehicles.

Consumers have a mental scale, weighing the pros and cons of their purchases. Given that fuel vehicles are comprehensively lagging behind in terms of intelligence and economy, why should they still command such high prices? This shift in psychological expectations is the most direct driving force behind the need for fuel vehicles to lower their prices.

Anchoring Effect Leads to Vicious Cycle of Price Chasing

The anchoring effect has led to a vicious cycle of chasing price increases and fleeing price decreases. The stability of a pricing system relies heavily on consumer psychological anchoring. In the past, fuel vehicle prices had clear anchor points, and consumers had stable price perceptions for models in the 200,000 yuan and 300,000 yuan ranges. This anchoring supported the smooth functioning of the pricing system. However, once the pricing system was breached, this psychological anchoring was shattered, replaced by a vicious cycle of price chasing.

Nowadays, when a fuel vehicle originally priced at 200,000 yuan is reduced to 150,000 yuan, consumers do not necessarily perceive it as a good deal; instead, they anticipate further price drops and choose to wait. To clear inventory, automakers are compelled to reduce prices further, intensifying consumers' expectations of even lower prices. This creates a dead cycle where the more prices drop, the fewer people buy, and the fewer people buy, the more prices drop.

This state of price chasing has completely stripped fuel vehicles of their foundation for price stability. Consumers no longer trust the prices of fuel vehicles, and automakers can no longer rely on the pricing system to maintain market order. Price volatility has become the norm, and the once-stable pricing system has collapsed, leaving fuel vehicles in a true predicament of bottomless prices and a market devoid of confidence.

Dealer Tactics Exacerbate Pricing Chaos

The tactics employed by automotive dealers also contribute significantly to the pricing chaos. Apart from industry-wide issues, the recent pricing system disorder stems from problems within the dealerships themselves. Many of the so-called 'price plunges' and 'discounted prices' advertised online and on store posters are, upon closer inspection, the result of dealers stacking various incentives, such as national subsidies, regional subsidies, consumer vouchers, and automotive financial loan discounts. Moreover, these prices often exclude the cost of optional features, intelligent driving service packages, and other tactics. When consumers are lured into the store to select a car, they discover that the dealers' tactics run much deeper than initially imagined.

Therefore, the current disordered pricing system for fuel vehicles is a market outcome of ongoing fluctuations amid a major market upheaval. The challenges facing fuel vehicles are far from over. The pressing issue now lies in how to reshape the entire market system, a task that is testing the resilience of fuel vehicle automakers and the entire fuel vehicle dealership network.

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Jiang Han's Perspective