Since Tesla was the first to lower prices in China in January last year, this price war in the car market has lasted for 18 months, from gasoline cars to electric vehicles, from domestic brands to luxury brands, without exception, they are all in close combat. The increasing discount numbers stimulate consumer desire, but the dual internalization of technology and price damages the gross profit margin of each car company, resulting in a significant reduction in profits in the automotive industry and pressure transmitted to upstream and downstream.
After more than 550 days, BMW was the first to withdraw from the gaming table. Starting from July, we will reduce insurance coverage in the Chinese market, including reclaiming discounts and reducing wholesale tasks for distributors. In short, we will no longer stimulate sales through price reductions, but prioritize maintaining profits. Subsequently, Mercedes Benz and Audi were rumored to raise prices, while Volkswagen, Honda, Toyota, Volvo, and others were reported to follow suit with price increases.
Recently, after visiting first tier markets, 21st Century Business Herald reporters found that the prices of BMW, Audi's main sales models have rebounded. Sales personnel of brands such as Toyota and Honda have stated that some models will have some discounts revoked from August. New energy brands such as NIO and Ideal have seen a "reduction" in their preferential policies and discount rates. Zero Run has also reported that "some model rights will be revoked from August 1st," but the selling prices of brands such as Volvo and SAIC Volkswagen have not changed yet.
However, as the price war in the car market stabilizes, BYD has once again ignited the flames of war. On the evening of July 29th, BYD's Formula Leopard brand announced a significant price reduction, with the only model on sale, the Leopard 5, starting at 239800 yuan, a decrease of up to 50000 yuan across the entire series.
Stepping out of the 'price war' cycle?
The statement of price increase is not entirely accurate. (We) are not raising the price based on the official guidance price, which can be understood as a reduction in the discount. Moreover, not all models have undergone price adjustments, mainly concentrated in X3, X5, 5 Series and other models, with a general increase of about 20000 yuan. For example, the X3 leading model had a minimum land price of 330000 yuan a month ago, but is currently over 350000 yuan A BMW salesperson in Beijing told 21st Century Business Herald reporters.
The prices of Audi's main sales models have also been raised, with discounts of about 2% on Audi A4, A6, Q5 and other models. An Audi sales manager cited the Audi A4 as an example, stating that the discount for its low-end version has decreased from 130000 yuan to 120000 yuan, a reduction of 10000 yuan. The narrowing of discounts is certain. No one can withstand the continuous trend of 'selling one car at a loss', but it will not suddenly increase by tens of thousands. The discount will gradually narrow according to market reactions
However, the policy of reducing quantity and ensuring price has "discouraged" a group of consumers, and consumers who have already signed contracts but have not yet picked up their cars have also been overshadowed by the news that some sales require "price increases before picking up their cars". A domestic new energy vehicle owner who is interested in purchasing the BMW X5 has postponed their purchase plan after being informed that the discount is 20000 yuan less than before, and plans to wait until the year-end promotion to see
Automotive blogger Sun Shaojun revealed on July 23 that "BMW's first-line data fell by 20% to 25% after the price increase in July, and it takes time for these customers to disperse to the top new energy brand data, including understanding and experiencing." In addition, he also stated that from the third week of July, after the BBA price increase, the overall entry and orders of new energy luxury top brands saw a small increase of about 10%, but the main sales growth still came from sales policy adjustments.
In the traditional off-season of automobile sales, new car manufacturers such as Ideal and NIO, which are benchmarked against BBA, have also experienced a reduction in their discount rates. Starting from July 22nd, the existing discounts of 3000 yuan or 5000 yuan on NIO ET5, ET5T, ES6, and EC6 models will be cancelled, but the discount rates for NIO ET7 and ES7 will remain unchanged.
The ET5T car discount has decreased by 3000 yuan, from 34000 yuan to 31000 yuan; the ES6 car discount has increased from 38000 yuan to 33000 yuan. In addition, the cash and configuration discount of 10000 yuan for Beijing Jingpai car purchases may also be reduced this quarter, and the discounts for other car models may also be lowered. It is recommended to place an order as soon as possible A salesperson from NIO told reporters that sales policies are not fixed and there is no intention to follow anyone. In early July, the free battery replacement voucher given by NIO's battery rental BaaS has been reduced from 4000 yuan to 2000 yuan.
Ideal Automobile is also adjusting its purchase rights. After the first sales period of Ideal L6 ends, the promotional rights have been reduced from the initial 20000 yuan to 10000 yuan; In addition, some models of the Ideal L series will begin to cancel the free charging stations starting from August 1st.
Several salespeople from Ideal Auto emphasized to 21st Century Business Herald reporters that "Ideal prices are stable and there will be no large-scale fluctuations. The salesperson of Xiaopeng Motors also said, "There will be no major price fluctuations for Xiaopeng Motors in the future. The price has already dropped significantly at the beginning of the year and has now stabilized
At the same time, a suspected PPT of Zero Run Motors has recently circulated on the internet, stating that "Starting from August 1st, Zero Run Motors will make significant strategic adjustments and reclaim some model rights". Zero Run Motors responded that 'the source of this image is unknown, we are currently verifying'.
However, the reporter found through the Zero Run Car APP that several products of Zero Run Car no longer provide some car purchase rights after July 31. For example, Zero Run C16 requires ordering users to place an order and pay a deposit of 5000 yuan through designated channels before 24:00 on July 31, 2024, and must pay the final purchase price and pick up the car before 24:00 on September 30, 2024, otherwise they cannot enjoy the listing rights.
After the mid year rush in June, OEMs and dealers entered a seasonal rest period. In addition, factories took high-temperature holidays, reduced production and cleared inventory, and other behaviors. It is normal to shrink the discount intensity. In previous years, there have also been cases of off-season discount shrinkage, which does not mean that the car market has entered a cycle of price wars, "said an industry insider to a reporter from 21st Century Business Herald.
Will it slow down in the second half of the year?
Compared with the aforementioned car companies, some brands are still on the sidelines due to price adjustments or equity declines.
The 21st Century Business Herald reporter learned from a Volvo salesperson that XC60, S60, and others have previously offered significant discounts and have not yet received any requests from manufacturers for price increases; A salesperson from SAIC Volkswagen said, "If you want to sell cars without lowering prices, you can't do it. Currently, the discounts for all models in the store have not been reduced, but some fuel cars may experience a reduction in discounts in the future, such as the Tiguan L cash discount of 40000 yuan, and there may be a reduction of several thousand yuan in discounts in the future
In addition, sales personnel from Dongfeng Nissan, GAC Honda, Buick, and other companies have stated that they have not received any price increase notices at present. The discounts offered in store range from 20000 to 40000 yuan, but "the price is already the lowest and will definitely increase in the future. It is recommended to place an order as soon as possible" has become a common statement among sales personnel.
Discounts are declining, this is a scene happening in 4S stores of various brands. It shows that the price is indeed at its lowest point and can be sold now. "Peng Baolin, Vice General Manager of GAC Toyota, recently posted on social media that it is believed that GAC Toyota will withdraw from the price war. Regarding this matter, an insider from GAC Toyota responded to 21st Century Business Herald reporters, stating that "the official has never announced its withdrawal from the price war, and this incident is an 'accidental involvement'". They also stated that GAC Toyota models still have preferential prices and prices will tend to stabilize.
Since the beginning of this year, multiple models under GAC Toyota have offered discounts of 20000 to 60000 yuan. The reporter learned from a Guangzhou Toyota dealership that in July, multiple models such as the 9th generation Camry, Fenglanda, and Weilanda will launch limited time promotions. In addition to enjoying up to 20000 yuan in trade in subsidies and 5000 yuan in new car subsidies, the terminal will also provide subsidies of 5000 to 7000 yuan.
21st Century Business Herald reporters learned that some joint venture brands have lowered their sales targets in some regional markets. A dealer representative told reporters, "The monthly KPI has decreased by more than ten vehicles, but the effect is not significant. Sales have declined severely, and even sold cars at a loss. Even if we cannot complete the task and receive rebates, we still lose money
BYD and Tesla still have the ability to continue lowering prices. The basic understanding in the industry this year is that market share is more important than profit, survival is the top priority, and when price reductions are still effective, they may have to lower prices, "said Xu Changming, former deputy director and senior economist of the National Information Center.
BYD, which has a huge sales base and higher gross profit margin, has launched 15 main models of Honor versions within a month. Without changing the battery and chassis, the new car adds wireless charging and seat massage, with a maximum reduction of over 30000 yuan. In May, the release of BYD's fifth generation DM plug-in hybrid technology once again aimed at joint venture car companies, attempting to squeeze their market share from 40% to 10%. After the launch of the Qin L DM-i and Sea Lion 06 DM-i, BYD's new mid size SUV Song L DM-i has recently been launched, with a total of 5 models priced at 135800 to 175800 yuan.
In addition to launching new cars, another brand under BYD, the Formula Leopard, has announced a price reduction. The only Leopard 5 in the entire series has been lowered by 50000 yuan to 239800 to 302800 yuan, hoping to exchange price for sales volume. In the first half of this year, the cumulative sales of Leopard 5 were 18300 units, with less than 3000 units sold in the past three months. After a price reduction of 50000 yuan, Leopard 5 will compete head-on with its competitor Tank 300 (199800 to 226800 yuan).
It should be noted that intense price wars pose a challenge to the profitability of car companies. According to the iResearch report, the price index of light passenger vehicles in China will decline by 13.4% in 2023, while the index in the United States will only decline by 4.9%.
Automobiles are a business that pursues scale and efficiency to the extreme. In the face of price wars and profound changes in supply and demand, car manufacturers need to find a balance between scale and efficiency.
Some manufacturers have realized that the price war is not sustainable, but no one will actively recover because there is no system that can control the policy steps of various car companies. Therefore, the price war will only continue in the early stage. The price war in the second half of the year may slow down, and after fierce competition in the first half of the year, the market may gradually form a new price equilibrium point. Cui Dongshu, Secretary General of the China Association of Automobile Manufacturers, believes that the continuous single vehicle losses of car companies are not a long-term solution. After a round of price wars, car companies may re evaluate their price strategies and seek more stable profit models. Currently, the quickest way to reduce inventory is to reduce production and stabilize the system.