"Since May 23, a certain automaker has taken the lead in launching a substantial price drop campaign... triggering a new round of 'price war' panic," the China Association of Automobile Manufacturers (CAAM) said in a statement posted to its WeChat account.
The group warned that such "disorderly" competition would "exacerbate harmful rivalry" and hurt profit.
The statement, dated May 30, did not single out any company by name, but on May 23, BYD announced it was offering big trade-in discounts on nearly two dozen makes, offering discounts of up to 34 percent.
Its cheapest model, the smart-driving Seagull, now goes for a starting price of 55,800 yuan ($7,800), down from 69,800 yuan, with a trade-in.
Days later, Stellantis-backed Chinese EV startup Leapmotor announced similar discounts on two "entry-level" models through June 8.
Geely Auto announced Friday limited-time trade-in subsidies for 10 models, with its X3 Pro going for the lowest starting price of 44,900 yuan.
But there is growing domestic criticism against what the autos association called "involution" -- a popular tag used to describe the race to outcompete that ends up nowhere.
The CEO of China's Great Wall Motor, whose annual revenue was roughly a quarter of BYD's, compared it to the start of China's years-long housing slump triggered by the 2021 default of property giant Evergrande.
"Evergrande in the auto industry already exists," Wei Jianjun said this month in an interview with Chinese outlet Sina Finance.
"I hope that... all these years of hard work will not go to waste."
Beijing has poured vast state funds into the electric vehicle sector, supporting the development and production of less polluting battery-powered vehicles.
But China's automakers association on Saturday warned its goliaths to play fair.
"Leading companies must not monopolise the market," the CAAM statement said.
It added that "with the exception of lawful discounting, companies must not sell products below cost nor engage in misleading advertising".
Such behaviour disrupted the market and harmed both consumer and the industry, it said.
An unnamed official from China's Ministry of Industry and Information Technology added that price wars "produce no winners and no future", the state-backed Global Times reported Saturday.
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