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Tencent News "First Line"

Author Guo Yifei

Edited by Yang Hao

Automakers continue to voice their opposition to involution, and luxury brandsBMWBeing the first to withdraw from the price war has attracted great attention from the market.

On July 18, during the BMW Group China Sustainability Summit, Shao Bin, senior vice president of marketing at BMW Brilliance, gave an exclusive response to Tencent News' "First Line" saying that BMW's official pricing has not changed and that the terminal price is determined by online channel dealers, not by us.

Shao Bin believes that when supply exceeds demand, the discounts at the terminal will be larger, and when supply decreases, the discounts will decrease, which is normal. "Sometimes when the media interprets it, they may only see one or two points. In our opinion, this is a very normal thing, nothing special, and we don't understand why everyone is paying so much attention to this matter at this point in time."

He added that when manufacturers provide guidance, they mainly look at supply and demand, which is the most important factor affecting terminal prices. He suggested that everyone take a closer look at the rules behind it.

Previously, BMW lowered its annual sales target by more than 20%, which also eased the inventory pressure of dealers, and the latter began to reduce terminal price promotions.

Regarding the reduction of sales targets, Shao Bin believes that as the market changes, it is normal to increase or decrease sales targets. Of course, the higher the supply and demand match, the better. When the market is good, there will be increases, and when the market is bad, there will be decreases. This is the basic practice of sales operations, and it has been the case from the past to the present.

A person from a leading dealer group told Tencent News "First Line" that their prices started to increase on July 9, but it was not an increase in the official guide price, but a reduction in discounts. Depending on the model, the price ranges from a few thousand to 20,000 yuan. The adjustment is not as large as the average of 30,000 to 50,000 yuan said on the Internet. 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.

Earlier in May, BMW sent letters to dealers, implementing a number of subsidy reduction policies, hoping to help dealers cope with short-term difficulties and alleviate business pressure.

Regarding the intensity of future subsidy support, Shao Bin said that we and our dealers are independent legal entities, and all sales behaviors and rhythms are not decided by us alone. Regarding further subsidies for dealers, we currently have no plans.

Previously, BMW China 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."

This adjustment took place half a year after Shao Bin was promoted to senior vice president of marketing at BMW Brilliance.

In October 2023, he was promoted to Senior Vice President of Marketing of BMW Brilliance, responsible for the marketing, sales, customer service and support of the BMW brand in China. He has worked in the BMW system for more than 20 years and previously served as President of BMW (China) Automobile Trading Co., Ltd.

In 2023, a number of luxury brands such as BBA chose to collectively cut prices to maintain sales. Among them, BMW's annual discount rate was as high as 17.66%, higher than the industry average of 15.7%. Although deliveries in China increased by 4% year-on-year to 825,000 vehicles, the price war also led to an increase in revenue but not profit, with global net profit falling by 34.5% year-on-year.

Entering 2024, the strategy of trading price for volume is unlikely to work. In the first half of the year, BMW delivered 376,000 vehicles in China, a year-on-year decline of 4.2%, while global sales increased by 2.3% year-on-year during the same period. At the same time, in the first quarter, its global net profit fell by 19.4% year-on-year.

On July 17, BMW released the "China Sustainability Report 2023". It has released a sustainability report for 11 consecutive years. This report presents its latest progress and achievements in products and user services, intelligent production, low-carbon supply chain, talent cultivation, corporate social responsibility, etc.

The report said that the "new generation" model, which represents a new chapter for the BMW brand, will be launched next year. To welcome the arrival of the new model, BMW continues to increase its investment in China and upgrade its R&D and production system in China: in 2023, the new Shanghai R&D center and the second phase expansion project of the Shenyang R&D center will be officially put into use. The sixth-generation power battery project for the "new generation" model, with a total investment of 10 billion yuan, was fully completed in Shenyang in November last year, and the equipment installation officially started in March this year.

In addition, in April 2024, BMW announced an additional investment of RMB 20 billion in China to be used for large-scale upgrades and technological innovations of the Shenyang production base, laying the foundation for the domestic production of "new generation" models in 2026.