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Red Star Capital Bureau reported on July 17 that BMW China has withdrawn from the price war and will reduce sales volume to stabilize prices and ease the operating pressure of stores from July. Not only BMW, Red Star Capital Bureau learned today that Volkswagen, Toyota, Honda, Volvo and other brands have decided to adjust their terminal policies from July, reduce terminal discounts, or stop further price cuts.

It is worth mentioning that some dealers, including Nissan, Mercedes-Benz and Audi, said that they had not received official notification of price adjustment from the brand, but they would make dynamic adjustments based on market conditions and maintained a positive attitude towards "reducing quantity and stabilizing prices."

Several joint venture brands withdraw from price war

Mercedes-Benz and Audi have not received any official notification yet

BMW has invested heavily in the price war. The price of the BMW i3 has been cut by nearly half, with the bare car price just over 190,000 yuan, and it can also enjoy policies such as "zero down payment and three years of interest-free"; the starting price of the BMW 5 Series fuel car is about 310,000 yuan, which is 120,000 yuan lower than the official guide price.

However, the price cut did not bring sales growth. In the second quarter of this year, BMW's global sales fell 1.3% year-on-year, with the Chinese market falling 4.7% year-on-year.

BMW China finally decided to "reduce the volume to maintain the price". BMW China said 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.

A salesperson at a BMW 4S store told the Red Star Capital Bureau that the discount has been reduced by several thousand or tens of thousands of yuan compared to last month. For example, the price of the BMW i3 has "risen back" to 220,000 yuan.

After BMW China took the lead in announcing its withdrawal from the price war, many automakers could no longer sit still. Toyota, Volkswagen, Honda, Volvo and other brands clarified their terminal recycling policies.

GAC Toyota dealers told Red Star Capital that they did not raise prices, but starting from July, the price cuts would not be further expanded. "Car prices will remain stable, but the situation is different in each store and for different models in each region."

At present, GAC Toyota's July promotion is still in progress. The 2L gasoline version of the 9th generation Camry starts at 139,800 yuan, with a manufacturer's suggested price of 179,800 yuan; the gasoline version of the Landa starts at 95,800 yuan, with a manufacturer's suggested price of 125,800 yuan. "After July, these two official promotions will cease."

SAIC Volkswagen dealers told Red Star Capital that prices may recover in August. However, there will be a wave of discounts at the Chengdu Auto Show at the end of August.

Mr. Chen, a car dealer, told Red Star Capital that the brands he represents, such as Audi, Volvo, Toyota, and Honda, have all started to recycle their terminal prices since July. The intensity of the recycle varies from brand to brand and may be adjusted every day. "If the losses are too great, the manufacturers can't make up for it. Overall, the message I got is that price wars are unsustainable and we must work hard to return to value competition."

There are also brands that have not yet made clear information on price adjustments. For example, a regional dealer of Dongfeng Nissan said, "At present, there will be no major policy changes in areas such as Chengdu, and we will make dynamic adjustments based on market conditions."

Mercedes-Benz and Audi were also reported to have reduced their terminal discounts, but they stressed that this was a store-based behavior. A Mercedes-Benz dealer told Red Star Capital that “there has been no notification of changes in terminal prices, and there is no sign of recovery at the moment.” Audi dealers also said, “There is no change in the discounts at the moment, but the market is very chaotic, and it is hard to say what the situation will be in a week.”

Previously, the starting price of the Mercedes-Benz C-Class was as low as 225,000 yuan, about 110,000 yuan lower than the official guide price. On July 17, a salesperson at a Mercedes-Benz 4S store said that the starting price was 298,000 yuan, "We can still negotiate when we get to the store, but the lowest point has indeed passed, and it should rise further."

Industry predicts price war will ease in the second half of the year

Luxury car prices stabilize

Since July, the number of automakers announcing promotions has decreased significantly, and the intensity of promotions has been greatly reduced. The industry generally believes that the price war will ease in the second half of the year.

From July 15th to July 31st, purchases of the Changan Qiyuan A07 extended-range version can receive a subsidy of up to 40,000 yuan; purchases of the Changan Qiyuan A05 True Fragrance version and Q05 True Fragrance version can enjoy a renewal subsidy of 12,500 yuan.

From July 15 to July 31, Changan Mazda launched a limited-time discount event for models such as Mazda CX-5, Mazda 3 Angkesaila, Mazda CX-50 and Mazda CX-30, with a maximum replacement subsidy of 30,000 yuan.

Currently, FAW-Volkswagen has the biggest discount. From July 13 to July 28, the Bora starts at as low as 69,800 yuan, the Sagitar starts at as low as 89,800 yuan, and the Tanyue starts at as low as 139,800 yuan.

Li Yanwei, a member of the expert committee of the Automobile Circulation Association, told Red Star Capital that "BYD (002594.SZ) traded price for volume, triggering a downward spiral in new car prices. SAIC-GM, Honda, Toyota, and Nissan are no longer able to compete, and now it is FAW-Volkswagen, the most powerful company in the market, that is going to compete. It remains to be seen which automaker will be eliminated."

He believes that the overall discount level of the luxury car market in the third quarter was relatively stable. "The price system of the luxury car market was originally determined by BBA, and the higher price system was determined by Porsche, which began to reduce its sales as early as May. After two years of price wars, the new forces have reduced the average transaction price to the price range of 200,000-250,000 yuan. The price in this area is stubborn and there is no trend of stopping. It will only stop when several new forces fail."

He pointed out that "the impact of new forces on luxury car prices is not decisive, but the practices of BBA are the most important. BMW has to reduce wholesale sales and take discounts. It must first reduce electric vehicles, so that the price system of gasoline vehicles can be stabilized. If BMW reduces, Mercedes-Benz and Audi will naturally take back their discounts."

Citigroup recently released a research report stating that most automakers may not cut prices in the second half of the year. Since 2023, joint venture brands such as Honda, Nissan, Volkswagen, GM, Peugeot Citroen and Mazda have generally seen a decline in profits, and some even have negative net profits, which also means that they may not be able to further cut prices in the second half of the year. The worst result is that some joint venture brands may give up their market share in China in the future.

In a research report, Citi pointed out that data from the China Passenger Car Association showed that the number of models that have been reduced in price is decreasing; the price of lithium carbonate remains at about 90,000 yuan/ton, battery costs have dropped significantly, and the room for price reduction of electric vehicles has disappeared; oil vehicles can no longer be reduced, and the price reduction of fuel vehicles in May reached a historical high of 19.7%. Coupled with the round of price cuts in June, the gross profit margins of many oil vehicles may have fallen to negative values; the market share of plug-in hybrid and extended-range vehicles is highly concentrated, and the hybrid track has become relatively fixed.

At the 2024 China Automotive Forum, Wang Qing, deputy director of the Institute of Market Economy at the Development Research Center of the State Council, also judged that the price war would ease in the second half of the year. Executives of Geely, Chery, JAC Motors and other automakers also called for staying away from involution and price wars and taking the path of brand upgrading.

Red Star News reporter Wu Danruo

Editor: Deng Lingyao