Caixin News Agency, March 20th (Reporter Liu Yang): The price war in the domestic passenger car market will continue to be fierce in 2024. On March 20th, it was learned from within Tesla China that Tesla is about to increase its official price on April 1st, with the Model Y model selling at a price increase of 5000 RMB; Meanwhile, the current official current car insurance subsidy policy of 8000 yuan and the maximum paint reduction policy of 10000 yuan will also expire on March 31st. It is reported that the actual price increase in this price adjustment is as high as 23000 yuan.
Just last week, Tesla announced in the North American and European markets that the current world's best-selling model, the Tesla Model Y, will increase in price by $1000 and € 2000 respectively from April 1st, corresponding to RMB 7199 and RMB 15000, respectively.
This year, Tesla's performance in the three major markets of the United States, Europe, and China has not been ideal, and investors cannot see the hope of money generating money. As for why the sudden price increase has occurred, industry insiders believe that similar situations have already occurred before, and it is obvious that it is to "force orders". Without any surprises, Tesla's sales will have a significant increase in the coming days. "More importantly, Tesla's actions have sparked market attention on whether price wars should be fought upwards or downwards. This phenomenon not only reflects the differences in different corporate strategies, but also reflects the current complex competitive landscape of the automotive market."
Since the beginning of this year, with the further increase in penetration rate and consumer recognition of new energy vehicles in the domestic market, in order to further increase sales and seize more market share, foreign car companies such as Tesla, SAIC Volkswagen, SAIC GM Wuling, GAC Honda, joint venture car companies, as well as local independent brand car companies led by BYD and Ideal, have sparked a new round of price competition. According to incomplete statistics by reporters, as of now, there are a total of 63 vehicle models from 24 new energy vehicle brands participating in the competition.
"2024 is a crucial year for new energy vehicle companies to establish their foothold, and competition is bound to be very fierce." Cui Dongshu, Secretary General of the China Association of Automobile Manufacturers, said that with the rapid increase in penetration rate of new energy vehicles, the scale of the traditional fuel vehicle market is gradually shrinking, and the contradiction between the huge traditional production capacity and the gradually shrinking fuel vehicle market is bound to trigger a fierce price war. "The price war among car companies may last for several years until a new pattern is formed."
According to research data from the China Association of Automobile Manufacturers, the overall market discount rate for passenger cars in early January this year was about 20.4%; February coincided with the Spring Festival and the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival) Festival. In order to further stimulate consumption during the holiday, many car companies further upgraded the price war; By March, the car price war was becoming increasingly fierce. From the perspective of price reduction rhythm, the overall price reduction in 2023 is relatively balanced, but the price reduction in 2024 reached a super strong level in both February and March, with 25 models experiencing price reductions in February and 23 models in March. As of March 15th, the scale of this year's price reduction has been half of that of the entire year of 2023.
"There is actually no definitive answer to the question of whether a price war should be fought upwards or downwards. According to industry insiders' analysis, different companies have different market positioning, product strategies, and cost control capabilities, so they will adopt different pricing strategies.". At the same time, the automotive market is also influenced by various factors such as macroeconomic conditions, policy environment, and consumer demand, all of which can affect the pricing decisions of enterprises.
In the view of Chery Chairman Yin Tongyue, the "price war" has put companies in a passive position. If car companies do not respond, they may lose this part of the market. But Yin also admitted that price wars cannot be stopped. "The ability to lower prices is the ability to compete downwards, and car companies still need to compete for the ability to compete upwards. There is a lot of room for improvement."