Car companies' price war: a cessation or a halftime break
2024-08-14
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China Economic Weekly reporter Niu Chaoge | Beijing report
The fierce price war among auto companies seems to have taken new turns.
Starting from the price cut of Tesla in January 2023, the price war in the automobile market has lasted for 18 months. From fuel vehicles to new energy vehicles, from domestic brands to joint venture car companies, they have continuously launched discounts of all sizes, ranging from thousands to tens of thousands of yuan. However, recently, car companies have begun to adjust their "pricing strategies".
Recently, reporters from China Economic Weekly visited many auto companies' stores in Beijing and found that many auto companies have begun to reduce their original discounts. "Discount reduction" (the process of gradually reducing or canceling preferential policies provided by the government or companies) and "price stability" have become high-frequency words among auto salesmen. Is the price war among auto companies coming to an end, or is it just a halftime break?
Discounts are declining and prices are falling
A reporter from China Economic Weekly learned from a BMW 4S store in Chaoyang District, Beijing, that the store's discounts have been tightened. For example, the BMW i3 35L, which has a guide price of 353,900 yuan, now costs about 210,000 yuan. In mid-June, the same 4S store offered a price of 190,000 yuan. "The price should stabilize in the future. It may increase, but it is unlikely to drop," said the store salesperson.
In addition to BMW, prices in stores of many car companies such as Audi, Mercedes-Benz, and FAW-Volkswagen have also been adjusted. Many sales staff said that the types of discounts are gradually decreasing, and the landing price will be adjusted slowly, but they have not received any formal notice of price increase.
Not only have the established car companies started to raise prices, but new car companies are also on the verge of raising prices.
A salesperson at a NIO store in Chaoyang District, Beijing, told China Economic Weekly that the store's car purchasing benefits will be gradually reduced in August, and cash subsidies, optional funds, battery swap coupons and other discounts will be adjusted.
In addition, Ideal Auto will also reduce benefits. It is reported that the benefits of Ideal L6 will decline in August, and there will be no cash discount activities at that time. In this regard, the relevant staff of Ideal Auto responded to the reporter of China Economic Weekly that there is no relevant notice of price increase at present, but it is true that the benefits of car purchase will decline.
China Economic Weekly reporters noted that the current price increases are mostly relative to the previous large discounts, not direct price increases on the official guide price. In other words, compared with the previous discounts of tens of thousands of yuan, consumers may enjoy fewer discounts when buying cars later, and the price may become more expensive.
The price war may be postponed but there will be no price increase
Cui Dongshu, secretary general of the China Passenger Car Association, said in a statement that the price war is currently easing. He predicted that after the fierce competition in the first half of this year, the market may gradually form a new price balance point, and the price war in the automobile market may ease in the second half of the year.
Cui Dongshu believes that with the impact of new energy vehicles on fuel vehicles, especially the weakening of the competitiveness of traditional car companies, there have been promotional methods that have deviated from the normal trend in the market. Manufacturers are strongly pursuing task indicators such as gross domestic product and tax contribution against the background of declining product strength. The vicious sales price war has brought deep pressure to the circulation system. Some price competition has seriously deviated from the normal market behavior of price promotion. He suggested that it is very difficult for traditional car companies to achieve sales recovery through strong price promotions, and they should stabilize their mentality and achieve reasonable production and sales targets.
So, will this round of price correction trigger a new round of price increases?
Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, believes that the price war will not stop for now. "After the mid-year rush, OEMs and dealers have entered a rest period. Combined with the high-temperature holiday, production cuts and inventory clearance, it is normal to reduce the discount intensity, which does not mean that the price war cycle has ended," Zhang Xiang told a reporter from China Economic Weekly.
Zhang Hong, a member of the Expert Committee of the China Automobile Dealers Association, said in an interview with a reporter from China Economic Weekly that automakers that have not yet made adjustments will consider whether to follow this trend based on their own market conditions and strategies, but this will not trigger a collective follow-up by the entire auto industry, and there will be no large-scale price increases in the auto market for the time being.
"The rise and fall of prices are determined by market supply and demand, which is a normal market behavior. Different brands will customize their own pricing strategies based on their own positioning and market sales. Other brands will not follow this trend and generally increase prices." Zhang Hong said.
Auto industry analyst Zhong Shi also expressed the same view to the reporter of China Economic Weekly. He believes that the overall auto market is still in a situation of long-term oversupply, so price competition is still the main theme of the auto market. The overall price increase is absolutely impossible, but individual brands may take conservative measures to stabilize the price system at certain stages.
Sales anxiety behind the price war
Behind the price wars and price increases are actually the different responses of automakers in the face of sales anxiety.
"In fact, all car companies do not want to engage in price wars, but they are forced to be involved in them. Some non-luxury brand car companies see that some luxury brand car companies reduce discounts to stabilize prices, and they hope to take advantage of the opportunity to catch a ride, but the wishes of car companies are not equal to the reality of the car market." said Master Zhong.
In Zhang Hong's opinion, the current price increase phenomenon is more about automobile manufacturers taking advantage of consumers' mentality of "buy when prices rise and not buy when prices fall" and stimulating consumers' strong purchasing desire by raising prices.
In terms of sales, new energy vehicles are currently selling well. According to the China Passenger Car Association, in July this year, the wholesale sales of new energy passenger vehicle manufacturers nationwide reached 950,000 units, a year-on-year increase of 29% and a month-on-month decrease of 3%.
At the same time, the gap between car companies is also widening. In the past July, Ideal Auto delivered a total of 51,000 vehicles, breaking its monthly delivery record; Seres' sales of new energy vehicles were 42,200 vehicles, a year-on-year increase of 508.25%; Xiaopeng Motors delivered 11,100 vehicles; Nezha Auto delivered 11,000 vehicles; Zhiji Auto sold 6,000 vehicles...
As the gap widens, automakers that are anxious about sales have also begun to "denounce" the current various weekly sales charts.
It is reported that car companies generally publish audited car sales on a monthly or quarterly basis to help investors and consumers understand the company's operating conditions. However, many weekly sales charts released by the industry now use weekly intervals to rank car companies' weekly sales through various adjectives, such as luxury brand sales charts, new energy brand sales charts, new power sales charts, and medium and large pure electric sales charts.
A reporter from China Economic Weekly learned that the weekly sales charts currently released in the industry mostly use data from China Automotive Data Terminal Retail Data, that is, the insurance volume, not sales or delivery volume.
Li Bin, founder and chairman of NIO, recently said in a media interview that it is very cruel for car companies to compile and publish sales data on a monthly basis. Qin Lihong, co-founder and president of NIO, said that weekly data is not serious and that no more than 10 people in the company know NIO's weekly sales data.
Subsequently, Geely Holding Group Senior Vice President Yang Xueliang, Haval General Manager Zhao Yongpo, Xpeng Motors founder He Xiaopeng and other auto company executives also expressed their opposition to the release of the weekly sales list.
Faced with the fierce competition in the domestic market, some car companies have begun to seek breakthroughs abroad. Recently, Leapmotor and Stellantis Group established a joint venture company, Leapmotor International, which has been sending Leapmotor C10 and T03 electric vehicles to Europe since late July. Zhu Jiangming, founder, chairman and CEO of Leapmotor, said that China is the world's largest and most competitive electric vehicle market, and the praise from domestic Chinese customers is also a testament to the value of the product.
(This article was published in China Economic Weekly, Issue 15, 2024)
