news

The fierce price war in the Chinese auto market was put on hold by BBA.

July 17,BMWAnnounced to withdraw from the price war. According to media reports, a 4S store salesperson said that the prices of all BMW products have been raised, ranging from 30,000 yuan to 50,000 yuan. According to terminal market sources,BenzandAudiThe prices of the models were also raised immediately.Toyota、Honda、VolvoThe above-mentioned brands will adjust their terminal policies from July, reduce terminal discounts, or no longer reduce prices further.

“BMW doesn’t want to provide subsidies or can’t afford them. In fact, this is also related to the bankruptcy of large dealers such as Guanghui. The overstocking and losses have caused the stores to be unable to operate normally. In fact, the stores are not afraid of losses, but the difference between purchase and sales prices is too large, which ultimately becomes a cash flow problem.” An industry insider told 36Kr.

This price war, led by luxury cars, has lasted for half a year, but at present, the effect of price cuts is limited.

“After the price reduction, orders may increase in the short term, but overall, the more the price is reduced, the less the customer flow will increase."A Mercedes-Benz dealer told 36Kr, "Mercedes-Benz's sales last year reached more than 700,000 units, but this year it is already very good to achieve 600,000 units, because the overall demand is declining."

Luxury cars are no longer popular

50% off BMW, 60% off Jaguar, 70% off TigerLand Rover), Mercedes-Benz C-Class with a price cut of 100,000 yuan... Since last year, luxury cars led by BBA have never stopped the price war. According to the terminal price monitoring of Jielan Road, almost all mainstream luxury models are reducing their prices.

For example, as an entry-level luxury carMercedes-Benz A-Class, once sold for as high as 300,000 yuan, but now the entry-level version is sold for only 157,000 yuan, a price cut in half.BMW 3 Series、Audi A4L、Mercedes-Benz C-ClassThe market discount rate for luxury mid-size sedans is basically around 30%. If you buy a car with a loan, the discount rate can increase by 5-6%.PorscheSince the price war started last year, MACAN's discounts have continued to increase, and the discount can be 64,000 yuan compared to buying a car in 22 years.

In addition to price cuts, Porsche has recently launched a 5-year interest-free offer.Macan The five-year interest-free policy plus some other benefits means the discount is about 15% off," said a salesperson at a Porsche store in Beijing.

The most direct reason for the price reduction is no longer a secret - against the backdrop of the rise of new energy vehicles and consumption downgrade, luxury cars from traditional fuel brands are no longer selling well.

The China Passenger Car Association report pointed out that in June 2024, the retail sales of traditional fuel vehicles in the domestic passenger car market were 905,000 units, a year-on-year decrease of 27%; the retail sales of new energy vehicles were 856,000 units, a year-on-year increase of 29%. The domestic retail penetration rate of new energy passenger vehicles reached 48.4% that month.

Dealers are feeling the changes in market demand. One dealer revealed that the dimensions of their price cuts are mainly determined by customer flow and inventory depth.

“The overall sales target has not changed, but there are fewer customers and less room for selecting customers. The manufacturer only gave a one-month extension, and the inventory is piling up, putting financial pressure on dealers. In addition, if the car is stored for a long time, not only will the warehouse maintenance cost be high, but customers are also unwilling to buy a car that has been stored for two or three months, so the car price has to be reduced.” A Mercedes-Benz dealer told 36Kr.

The latest "China Auto Dealer Inventory Warning Index Survey" released by the China Automobile Dealers Association shows that in June this year, the China Auto Dealer Inventory Warning Index was 62.3%, up 8.3 percentage points year-on-year and 4.1 percentage points month-on-month. The inventory warning index is above the boom-bust line.

In the past, many company owners often purchased luxury cars in the name of their company to deduct taxes. This practice was mainly to use tax policies to reduce the tax burden of the company.

Price is not a good trade-off for volume

Whether “trading price for volume” has achieved the expected effect is not so optimistic.

Especially for super luxury car brands, sales are still falling sharply. According to data released by SINOMACH Automobile, from January to May this year, the cumulative sales of luxury brands were 244,063 units, a year-on-year decline of 9%; the cumulative sales of super luxury brands in the first five months were only 2,208 units, a year-on-year drop of 35.4%.

Looking at it in detail, in the first half of this year, Porsche's deliveries in the Chinese market were 29,600 vehicles, a year-on-year decrease of 33%, far exceeding the average decline in the global market.

According to data released by "Sang Zhiwei V", a Weibo user certified as a "member of the Expert Committee of the China Automobile Dealers Association", from January to May this year,MaseratiCumulative sales were 681 units, down 69% year-on-year;Rolls-RoyceCumulative sales volume was 377 units, down 32.6% year-on-year;BentleyCumulative sales volume was 1,099 units, down 30.7% year-on-year;McLarenOnly 9 vehicles were sold, a year-on-year decrease of 91.3%.

Figure: Luxury car sales from January to May 2024

As for BBA brands, data shows that Mercedes-Benz's deliveries in China increased by nearly 10% in the second quarter compared with the previous month, but its deliveries in the first half of the year in the Chinese market still decreased by 24,600 vehicles compared with the same period last year.MINI) The decline in sales in the Chinese market further expanded from 3.8% in the first quarter to 4.7% in the second quarter. Although Volkswagen Group did not give the specific sales volume of Audi in the Chinese market, it also mentioned that the group's deliveries in China fell by 7.4% in the first half of the year.

What’s worse is that exchanging price for volume has not brought about any improvement in financial data.Last year, although the revenue of the three BBA automakers increased, their net profits all fell. In the first quarter of this year, the situation worsened further, with both the revenue and profit of BBA declining.

Specifically, in the first quarter, BMW Group's revenue decreased by 0.6% year-on-year to 36.614 billion euros, and its net profit decreased by 13.7% year-on-year to 2.79 billion euros; Mercedes-Benz's revenue decreased by 4% year-on-year to 35.873 billion euros, and its net profit decreased by 25% year-on-year to 3.025 billion euros; Audi Group's revenue decreased by 18.7% year-on-year to 13.725 billion euros, and its operating profit decreased by 74.3% year-on-year to 466 million euros.

"BBA has at least done well in terms of store traffic thanks to price cuts. Second-tier luxury brands are having a harder time, with the exception of Volvo andLexus, the store traffic and orders of other second-tier brands are on a downward trend.” An industry insider told 36Kr.

BBA, unable to win, finally chose to "call a halt". BMW China has made it clear that it will no longer use price wars as a means in the second half of the year, but will focus on improving business quality and supporting dealers to make steady progress.

But after giving up the price reductionFor BBA, sales are still highly uncertain, and sales support in the short term may rely on their order retention.The so-called order retention means that some of the undelivered orders (generally cars ordered in the last week of the previous month and some futures) of the sales stores will be delivered at the beginning of the next month. Reasonable order retention can reduce the sales task pressure of the store.

"If BMW does not cut prices, its sales will most likely drop significantly. It will not be obvious in July because the stores basically have 0.5% order retention. The data for August and September will be the key. The follow-up will mainly depend on whether the OEM can accept the price increase of dealers." The above-mentioned industry insider analyzed to 36Kr.

“Many OEMs have not reduced their workload, but are just hoping to gain a wave of customers.If the OEMs do not reduce their workload, prices will return to or approach the prices at the end of June.”

4S stores exit

In this disordered game, the ones who suffer the most are the dealers who are sandwiched between car manufacturers and car owners.

In June 2023, Pangda Automobile, once known as the "King of 4S Stores", was delisted, becoming the first 4S store to be delisted. A year later, Guanghui Automobile suffered the same fate: as of the close of July 17, Guanghui Automobile closed at 0.78 yuan per share, with its share price below 1 yuan for 20 consecutive trading days, and its market value was only 6.466 billion yuan, nearly 100 billion yuan less than its peak.

TeslaThe impact of the direct sales model brought by the new forces on 4S stores has long existed, and the decline of the latter is a scripted scenario. However, the collapse of fuel vehicle manufacturers this year has become the last straw that broke the camel's back for 4S stores.

According to an announcement from Guanghui Auto, the net profit loss in the first half of 2024 is expected to exceed 583 million yuan, and the highest loss after deducting non-operating items is expected to exceed 870 million yuan.

"The business is too big. In the past, Guanghui could make do with other businesses, but it has not laid out new energy. In the first half of this year, its traditional fuel brands collapsed across the board and it had funding problems. (Delisting) is a matter of time." An industry insider told 36Kr, "If this continues, more large groups will go bankrupt, because the larger the group, the greater the funding gap."

According to Guanghui Auto’s official website, its sales brands include luxury brands such as Mercedes-Benz, Audi, BMW, Cadillac, etc., all of which are mainly fuel-powered vehicles.

Guanghui Auto’s predicament is a microcosm of the current survival status of dealers.

As prices continue to fall, selling cars at a loss has become commonplace for dealers, and profit margins have been eaten up step by step. Listed auto dealership companies such as Zhongsheng Group, Yongda Automobile, Baideli Holdings, Meidong Automobile, and Zhengtong Automobile have also fallen into the dilemma of declining net profits.

In the past two years, car dealers have long said goodbye to the good days of "lying down and counting money". According to a survey report released by the China Automobile Dealers Association,In 2023, more than 70% of dealers failed to complete their annual task targets, with the loss ratio as high as 43.5% and the profit ratio only 37.6%.

“Audi 4S stores are now withdrawing from the market on a large scale. It is normal to lose 20,000 yuan on each car sold. Although the manufacturer will provide subsidies, the premise of the manufacturer's subsidies is that the 4S stores must purchase a sufficient number of cars from the manufacturer. This has become a vicious cycle..” said the above industry insider.

"And the second-tier dealers are losing more. They may still make money by selling to direct customers with replacement and installment payments, but there are few high-quality customers and everyone is competing for them, which means they can't make money from high-quality customers either."

Due to multiple factors, more and more auto dealers have been forced to withdraw from the network, close down or change their auto brands. The delisting of Guanghui Auto, the industry leader, is just one of the footnotes that the traditional dealer model is on the verge of being eliminated.

According to data from the China Automobile Dealers Association, the number of 4S stores that withdrew from the Internet in China from 2020 to 2022 was 2,362, 1,400, and 1,757, respectively. According to data from Autohome, more than 2,540 4S stores will withdraw from the Internet in 2023, setting a new record in the history of the Chinese auto market.

This year, the situation is even more grim:In the first half of the year alone, nearly 2,000 4S stores across the country closed down.。

During 36Kr's visit, a dealer described the current state of the auto dealership industry as "widespread misery". The industry's prediction of "eliminating 10,000 4S stores in five years" is becoming a reality in this price war.