Reuters reported that the group has broken off the truce in the brutal price war over electric vehicles that it had brokered between 16 automakers, including Tesla.

The China Association of Auto Manufacturers (CAAM) said in a statement over the weekend, that it recognised the agreement had violated China's antitrust law and would retract it.

Intense competitive pressure led to the initial brokering of the truce. Since January, when Tesla cut prices in China, about two dozen automakers followed with price cuts of their own to stay competitive and stoke demand.

The list of automakers includes Chinese brands like Xpeng, Geely and its affiliate brands like Volvo, state-owned Chery Automobile, NIO and Great Wall Motors.

Global automakers followed. Ford cut prices on its Mustang Mach E EV. Toyota offered a discount on its bZ4X EV, and Nissan offered an incentive on its Ariya EV. General Motors, Honda, Stellantis, Ford and Nissan also marked down combustion vehicles, which are losing share to EVs and plug-in hybrids.

China's auto market, the world's largest, is on track to reach nearly 25 million vehicles in sales this year with overall growth of about 3%, and the share of EVs and plug-ins is rising fast.

Those changes have created increased competition over price and features that are driving sales for EVs but are also threatening industry-wide profitability, analysts say.

In March, CAAM had urged automakers and local authorities to cool "price-cut hype" to ensure what it called the stable development of the industry.

On 6 July, at an event in Shanghai, CAAM brokered a series of commitments signed by executives from 16 automakers. The signatories included industry-leaders in battery vehicles Tesla and BYD, EV-focused Chinese brands NIO, Li Auto and Xpeng as well as Geely. State-owned brands Chery Automobile, SAIC Motor, GAC Group, Dongfeng Motor and FAW Group also signed.

The signing was witnessed by an official from China's Ministry of Industry and Information Technology.

The letter included a pledge to "not disturb fair competition in the market with abnormal pricing" to stabilise the market and promote consumption. That was widely seen as a truce in the price war.

It appeared in doubt just a day later when Tesla said it was offering a referral payout equal to about $500 on its Model 3 and Model Y vehicles, including in China. Volkswagen's joint ventures with SAIC and FAW also announced price cuts in China on their ID-series EVs on Friday.

On 8 July, CAAM retracted the pricing pledge.

Liu Xu, a researcher at the National Strategy Institute of Tsinghua University, said the enforcement of antitrust law in China's auto industry had been selective and that the language of the pricing pledge was so vague it would be hard to determine if it constituted a price monopoly.