China tightens smart-car rules as fierce competition hits auto industry

China's automotive industry faces a tightening regulatory environment as authorities crack down on the rapid development of smart car technologies. A nationwide inspection campaign announced this week will assess the quality of Chinese-made vehicles, with some consumers potentially shelving purchase plans, according to dealers and analysts.

The campaign, led by the Vice-Minister of Industry and Information Technology Xin Guobin, aims to prevent the introduction of untested and unsafe products into the market, particularly in the realm of autonomous driving technology. The one-year program will focus on reviewing smart driving systems, product design, and vehicle safety.

Recent incidents, such as the March 2022 crash involving a Xiaomi SU7 equipped with a driver-assistance system, have contributed to the government's decision to enhance oversight of emerging technologies. The preliminary self-driving system alerted the driver to take control just two seconds before the electric vehicle crashed into a barrier at high speed, resulting in three fatalities.

Additionally, a growing number of complaints about EV battery quality have been reported, further emphasizing the need for stricter regulations. China's carmakers and suppliers are among the world leaders in EV technology and production, thanks to government support and consumer demand for innovation. However, intense price competition and the constant release of new models have created an "enemy within" for the auto industry, making sustainable growth increasingly challenging.

Overall, car deliveries in mainland China, including both traditional and electric vehicles, declined by 20.9% year-on-year in July, falling to 1.46 million units.