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Tencent Auto "High Beam"

Author Guo Yifei

Edited by Yang Hao

After 18 months of price war among automakers,BMWBe the first to leave the gaming table.

Several dealers and store sales personnel confirmed to Tencent Auto's "High Beam" that from the beginning of July, BMW began to reduce sales and maintain prices in the Chinese market. Measures include withdrawing preferential discounts and reducing dealers' wholesale tasks.

A person from a leading dealer group told Tencent Auto's "High Beam" that we started to increase prices from the 9th, but it was not an increase in the official guide price, but a reduction in discounts. Depending on the model, the price range ranges from a few thousand to 20,000 yuan, and the adjustment range is not as large as the average 30,000 to 50,000 yuan reported online. In addition, BMW adjusted the wholesale task volume of dealers twice in June and July, with a ratio of about 14%-15%. The two indicators of financial penetration and intensive procurement are still under normal assessment.

In response to this, BMW China also publicly responded that in the second half of the year, BMW will focus on business quality in the Chinese market and support dealers to make steady progress. "Starting from July, BMW will reduce sales to ease store operating pressure, aiming to help dealers cope with short-term market challenges and alleviate business pressure."

According to the aforementioned person,AudiCurrently, we are also following the price increase, butBenzThe manufacturer has not taken any action yet. "Reducing the volume and maintaining the price should be a direction for luxury brands, and our dealers are also eager for Mercedes-Benz to follow suit. BMW took this step first, ensuring reasonable profits first, and then providing high-quality services. It cannot engage in a price war without bottom line."

A sales manager of an Audi store in a provincial capital city in East China told Tencent Auto's "High Beam" that starting from July 15, the prices of Audi's main selling models have all been raised, including A4, A6, Q5, etc., with a discount of about 2%. Taking the low-end version of Audi A4 as an example, the discount was 130,000 yuan before, but now it has been reduced to 120,000 yuan, and the selling price is as low as 200,000 yuan, but each car sold still loses 20,000 yuan, "dealers can't afford to keep losing money."

At the same time, a document circulating in the market titled "Notice on Market Adjustments of Audi Brand in Greater China" also mentioned, "In view of the sluggish economic situation and the re-evaluation of market relations, we have decided to moderately adjust the prices of our entire product line, and no dealer will be forced to suppress inventory." However, this content has not been officially confirmed by Audi China.

The current price war is intensifying, and as car companies continue to lose profits, the voices of "anti-involution" have begun to rise one after another. The price increase of BMW and Audi just caters to the delicate moment of the industry, and its implementation effect will also become an important reference for the final direction of this price war.

A senior industry observer told Tencent Auto's "High Beam" that if the three BBAs collectively raise prices, it would be equivalent to forming an offensive and defensive alliance, or at least reaching a tacit understanding. However, July and August are traditionally the off-season for automobiles, and the preferential prices will be recovered in the first 1-2 months of each quarter, so it is recommended to wait and see.

Mercedes-Benz A-Class is discounted 37%, but price-for-volume is no longer effective

Early 2021TeslaThe wave of price cuts that was first set off has driven the penetration rate of new energy vehicles to continue to increase, and the structure of China's passenger car market has undergone dramatic changes.

According to statistics from industry consulting firm Jielanlu, from 2021 to May 2024, the market share of new energy vehicles will soar from 14% to 39.5%. In the remaining 60% of the fuel vehicle market, non-luxury brands will drop sharply from 70.9% to 47.4%, while the share of luxury brand fuel vehicles will remain stable, only falling from 15.1% to 13.1%.

The struggle for luxury brands to survive is closely related to significant price cuts.

According to the statistics of the above-mentioned institutions, compared with two years ago, based on the official guidance price,BMW 3 Series, X3, Mercedes-Benz A-Class, C-Class,Audi A3, A4L, Q3, Q5L and other models, the discount rate has exceeded 26%, Mercedes-Benz A-Class even as high as 37%, the 2024 version of the 1.3T dual-clutch A 180L version of the full price fell to 157,000 yuan, even if it was just launchedBMW 5 Series, the discount rate is also up to 15%. In addition,BMW X5and 5 Series,Audi Q7，Mercedes-Benz E-Class、S-Class、GLE、GLSFor other models, the discount rate is less than 17%.

However, in 2024, HuaweiAsk the worldUnder the continuous impact of domestic brands such as Wei, Xiaopeng and Li Auto, BBA's strategy of exchanging price for volume is difficult to work.

According to official statistics, BMW and Mercedes-Benz's sales in China fell by 4.2% and 6.52% year-on-year respectively in the first half of the year. Volkswagen Group did not disclose Audi's specific sales in China, but the group's deliveries in China fell by 7.4%.PorscheThe brand declined the most, reaching 33%. Looking at the profit indicators, in the first quarter of 2024, the global profits of BMW, Mercedes-Benz and Volkswagen Group fell by 19.4%, 24.6% and 21.6% year-on-year respectively.

A luxury brand dealer commented to Tencent Auto's "High Beam" that for car companies, since they will not be able to sell their products even if they lower the prices and there will be no profit, which will cause invisible damage to the brand, it is better to raise prices and lower prices to protect profits.

The above-mentioned dealer said that we are also testing to see the market's reaction. The price discount will be narrowed step by step and will not be reduced all at once. If the price increases by tens of thousands at once, customers will definitely not buy it.

In fact, as early as last year, luxury brands had already taken action. In its 2023 annual report, automobile dealer Yongda Automobile revealed that "BMW, Porsche and others have proactively reduced their sales supply and demand plans."

The above-mentioned Audi document also mentioned that "after a period of inventory adjustment, the company has successfully completed the inventory optimization work in Greater China. We will take measures to rationally control production capacity, which will help to use resources more efficiently, optimize production processes, and ensure the continuous provision of high-quality products."

Losing 5-6 million per year, luxury brand dealers can no longer hold on

Luxury car brands such as BMW and Mercedes-Benz have achieved market share by relying on their dealers’ channel resources throughout the country. The two sides have worked together for a golden decade. When independent brands led by Huawei began to impact the hinterland of BBA, dealers became the ultimate victims of the game between car companies under the price war.

Despite selling more new cars, dealers are making less and less money.

Taking Yongda Auto as an example, its financial report shows that from the beginning of the price war in 2021 to 2023, its gross profit margin has dropped from 9.9% to 8.9% and 6.9%, and its net profit has dropped from 2.48 billion yuan to 1.412 billion yuan and 573 million yuan.

Traditional luxury brands were once the last profit base for dealers, but now they are following the footsteps of joint venture brands.

"In 2023, 43.5% of dealers will suffer losses, and only 27.3% will achieve their annual sales targets." The survey results of the China Automobile Dealers Association show that in contrast, more than 50% of luxury/import dealers will make profits, and nearly half will achieve their annual sales targets.

However, Shen Jinjun, president of the China Automobile Dealers Association, bluntly stated in a public speech in June that in the association's survey, dealers generally reflected that 2023 was the most difficult year since the new century. In the first half of this year, luxury brand dealers also suffered large-scale losses. Traditional luxury cars did not pay enough attention to new energy models, and market acceptance was not high. "Some cars are discounted by 50%, which is terrible."

In May 2024, the Chinese dealers of the luxury brand Porsche once forced the German headquarters to boycott the delivery of cars and demanded compensation for the losses of new car sales. The two sides finally reached a settlement. Previously, in order to avoid the intensification of conflicts between dealers and OEMs, luxury brands such as BMW and Mercedes-Benz have successively distributed subsidies to their dealers and alleviated their loss pressure by reducing retail target assessments, but did not include the measure of withdrawing preferential strength.

An Audi sales manager in a second-tier city in South China told Tencent Auto's "High Beam" that his store is going through the process of delisting. Last year, it sold thousands of cars, but still lost 5-6 million yuan. It makes 10,000-20,000 yuan from selling an imported car, but generally loses 20,000-30,000 yuan from selling a domestic car. The profit from after-sales maintenance can't make up for the loss of new cars. The boss can't bear it anymore. When sales were high and profits were good, there were too many 4S stores. This time, many stores have closed down.

He said that when the business was good, he used to have at least five or six groups of customers on weekdays, but now he has two or three groups, and they just come and go. Although he can still sell 10 cars a month, his commission has dropped from 2,000 to 3,000 yuan to 1,000 yuan, and his annual income has been halved from more than 200,000 yuan to more than 100,000 yuan. He is also preparing to switch to a new energy brand.