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Reporter Hanako Ken

Edited by Gao Yulei

In the first half of 2024, BMW (including MINI and Rolls-Royce) delivered 1.2133 million new vehicles worldwide, a year-on-year decrease of 0.1%. However, the BMW brand achieved a growth of 2.3%.

In the Chinese market, despite BMW's continued investment, the combined sales of BMW and MINI fell by 4.2% year-on-year, with the decline reaching 4.7% in the second quarter of this year, showing an expanding trend.

As price cuts and promotions failed to boost sales, BMW began to shift to “reducing volume to maintain price” in July, meaning it no longer stimulated sales by cutting prices, but instead prioritized maintaining profits.

In response, BMW Brilliance CEO Dai Hexuan said that prices are determined by dealers as independent business entities, and BMW will maintain intensive discussions with upstream and downstream partners to see how a sustainable business model can be implemented to ensure that all partners can make enough money to survive into the future. He repeatedly emphasized the "sustainability of the business model."

Subsequently, brands such as Toyota and Volkswagen followed BMW's pricing strategy, and some 4S stores of Audi and Mercedes-Benz also adopted price increase strategies. At the same time, the power plant reporter found through visits that the preferential policies and discounts of domestic new energy brands such as Weilai and Ideal have also changed, and have actually shrunk. In a traditional off-season for automobile sales, the promotion strategies of automobile companies have undergone subtle changes.

Reduced volume and guaranteed price: Discounts on "cash cow" models have been greatly reduced

"In fact, the statement that prices have increased is not entirely accurate. It's just that there are fewer discounts. However, not all models have fewer discounts. The discounts are mainly concentrated on models such as the 5 Series and BMW X5, with the reduction in discounts ranging from 5,000 to 20,000 yuan." said a salesperson at a BMW 4S store in Wenjiang, Chengdu.

A salesperson at a BMW 4S store on the South Fourth Ring Road in Beijing told the Power Plant reporter that this is basically the case across the country. BMW 5 Series, X5 and other high-priced models are the "cash cows" of the store. In terms of car sales, cars are divided into three types: high-profit, small profit or small loss, and loss. BMW 3 Series, X5 and 7 Series are high-profit models, 3 Series, X3 and X1 are the second type, pure electric cars are sold at a loss, and i3 can't sell much even at 50% off the recommended price. The profit basis of the store is to ensure the sales and profit margin of high-profit models.

"In several of our stores, the prices of models such as the 3 Series, X3 and X1 have remained basically unchanged. The most significant price increases are for the BMW 5 Series and X5." He said that this is because terminal prices have dropped this year compared to the same period last year. For example, models such as the 3 Series and X1 can enjoy terminal discounts that are 8-10 percentage points higher than the same period last year based on installment payments. The discount for the BMW X5 has also increased by 2-3 percentage points. The starting price of the 5 Series is even as low as 70% of the official guide price.

However, BMW's sales performance in the Chinese market is still relatively weak this year. BMW X5 sales fell from 11,935 in January 2024 to 6,727 in June. According to this trend, BMW X5 sales this year will be less than 93,800 in 2023. Including MINI, BMW's sales in China in the first half of this year decreased by 4.2%.

According to the data from the China Automobile Association, in the first half of this year, the sales volume of passenger cars in China increased by 6.3% year-on-year. Obviously, the price cuts not only did not bring about a corresponding increase in sales, but also offset the efforts made by BMW to ease the pressure on dealers.

In May this year, while Porsche China's dealers were jointly putting pressure on Porsche headquarters due to inventory pressure, BMW suddenly sent letters to all dealer stores, offering BMW 4S stores subsidies and exemptions such as a 3% price discount and a lower annual interest rate for late payment penalties, aiming to reduce the pressure on dealers.

"If we only give dealers subsidies and exemptions, but sales cannot continue to grow, dealers will still face great pressure. The premise of price maintenance is to reduce volume. Only by reducing the sales pressure of dealers can we push them to maintain profit margins by raising prices, and then add subsidies to ensure the health of dealers' cash flow." said a senior salesperson who once served as store manager of a BMW 4S store in Yizhuang, Beijing.

An Audi dealer channel source revealed that based on a slight decrease in June, the wholesale and retail sales target in July continued to drop by about 15% month-on-month. Looking at the entire quarter, it is expected to drop by 10%. "I heard that BMW's June target was reduced by 15%, and the annual wholesale and retail sales target in July was also reduced by 15%, which loosened the restrictions on dealers in terms of sales. The rebate threshold was also lowered, and related assessments were cancelled," he said.

"In the past two years, BMW has learned many new marketing methods and made many new attempts in the Chinese market, but it is difficult to return to the good days of the past. This time, reducing the volume and maintaining the price is the most realistic approach for BMW to ensure the viability of the channel." said an automotive industry insider familiar with BMW.

Price increase during off-season: collective action by luxury cars and new energy vehicles

One of the reasons why BMW reduced the volume to maintain the price is that the promotion rights of new forces are also gradually declining. The power plant learned through field visits that the sales rights of brands that compete with BBA, including Ideal and Weilai, have declined.

Taking Ideal as an example, after the first sales period of Ideal L6, the promotional benefits were directly halved from the initial approximately 20,000 yuan. If the car is purchased from outside Beijing without a Beijing license plate, there is only a 5,000 yuan car purchase benefit package. The same is true for the sales benefits of Ideal L7, 8, and 9. Starting from August, Ideal will also cancel the policy of giving away free home charging piles for these three models.

Starting from July 22, some of NIO's current car discounts will be reduced by 3,000-5,000 yuan, but some models, such as the 7 series sedan and SUV, will remain unchanged. However, a NIO official said that sales policies are not static and will be adjusted at any time according to market conditions, and it is not ruled out that the discounts of other models will be reduced.

NIO has always regarded BBA as its competitor. According to the data released by NIO in the third quarter of last year, as many as 48% of the owners of replacement cars were originally owners of BBA brands, and the proportion of some second-generation technology platform models was as high as 56%. In April this year, NIO launched the "1 billion fuel vehicle replacement subsidy" mainly to convert high-end brand users including BBA.

The substitution effect of new energy vehicles on fuel vehicles is increasing. Industry statistics show that the penetration rate of new energy vehicles will exceed 40% for the first time in 2023. According to the China Passenger Car Association, in the first six months of this year, the sales volume of fuel vehicles decreased by 13% year-on-year, while the sales volume of new energy vehicles increased by 33.1% year-on-year. The penetration rate of new energy vehicles in June increased to 48.4%.

However, behind this growth is that, as of June this year, the penetration rate of new energy vehicles in the luxury car market is still less than 30%. New energy vehicle brands have increased their product launches in the luxury car market, from Ideal L9, Wenjie M9, to BYD, Avita, Weilai, and Zeekr, all want to get a piece of the pie. But for BBA, the time window for the luxury market to transform to new energy is still long enough.

"The mid-year sales rush has just ended, and due to factors such as weather and reduced household consumption, July and August are often the off-season for auto sales, and auto brands' promotional policies are relatively mild. And the next peak season is not until the fourth quarter, so it is rare for brands to lead price increases in July. However, because sales are difficult to increase, and coupled with previous price cuts, the impact of this round of price increases on the used car market can be almost ignored." said a person who runs three used car stores in Beijing.

A person who provides sales tool training for auto 4S stores in Guangxi said that brands are now raising product prices out of helplessness because the price war over the past year and a half and their own lack of product innovation have directly pushed consumers to domestic new energy brands. Passively following the price war has shaken consumers' trust in the price system. For example, the pricing of the BMW i3 once caused the i5 to lose consumers' trust, aggravated the wait-and-see sentiment, and led to a continued deterioration in sales.

"Why have many BBA sales people left their jobs to join brands such as Ideal, NIO, QX, and Zeekr in the past two years? It's because of the high pressure on sales performance and the decline in income. Models with high commissions are difficult to sell and the bonuses are less. Cars with strong promotions are not profitable." He said that the landing price of the BMW 5 Series was still over 500,000 yuan in 2020, and now it is just over 400,000 yuan, so naturally the commission given to sales will not be much.

After BMW launched the policy of reducing the volume and maintaining the price, many consumers chose to wait and see. Mr. Li in Beijing is one of them. Two years after buying Tesla Model Y, he originally planned to take a look at the domestically produced BMW X5 this year, but when he was still hesitating, the salesperson who received him for the test drive told him that "the discount was reduced by 20,000 yuan." He postponed his car purchase plan and planned to wait until the end of the year when there was a promotion. "If it doesn't work out, there are other options. There are 4-5 people in the car owner group who are in a similar situation as me."

The more negative effect of the policy of reducing volume and maintaining price is the wave of contract cancellation by 4S stores. Consumers who signed the contract with the promise of a big discount and have not yet picked up their cars are asked by the store sales to "pay more to pick up the car". Mr. Wei from Xuzhou signed the car purchase contract one month ago and had completed the down payment and loan procedures. After the delivery of the car was postponed twice, he received the latest notice that "add 8,000 yuan to pick up the car". He bought a BMW 3 Series, "I think their delay was premeditated."

Such chaos has occurred in Chongqing, Zhengzhou, Shenzhen, Suzhou and other places. The salesperson at the BMW 4S store in Wenjiang said at the end: "If you don't have an urgent need, you can wait until the end of the year to see."