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Since last year, the price war in the automobile industry has triggered heated discussions in the entire market. However, since the second quarter of this year, many giants have begun to withdraw from the price war, from BMW itself to the entire BBA, and even recently joint venture brands have begun to be unable to hold on. Is the automobile price war finally coming to an end?

1. Can joint venture brands no longer hold on?

According to China Newsweek, the price war that has continued since last year still has no end in sight. After most brands chose to lower prices, the price war seems to have turned into an endless internal conflict.

Recently, BMW, Mercedes-Benz, and Audi have all reduced their terminal discounts to varying degrees, announcing in different forms that they would stop "reducing prices to maintain volume" and instead "reducing volume to maintain prices." Subsequently, many brands including Volkswagen, Toyota, Honda, Volvo, and Cadillac also adjusted their terminal policies and reduced their discounts.

"The current price competition is mainly aimed at directly breaking through the lower limit of the original price, rather than increasing configuration without lowering prices." Cui Dongshu, secretary-general of the China Passenger Car Association, said that the price war does not actually have a significant effect on promoting sales in the short term, especially when prices are unstable, and consumers are particularly wait-and-see.

Recently, mainstream joint venture brands have taken different actions to adjust terminal prices, which is seen by the industry as a signal that they will collectively withdraw from the price war. After all, after more than a year of price war, most brands have not achieved the expectation of "trading price for volume", but instead "lost both volume and price", which has also led to a poor living environment for dealers and constant conflicts with manufacturers.

"Price wars are unsustainable, and companies still need to build a good brand. What we need to think about is how to deliver on our promises to users." Yu Jingmin, executive vice president of sales and marketing at SAIC Volkswagen, said in a recent interview that it is irresponsible to users to increase prices for the sake of market competition. In the era of internal competition, the most important thing is to build a brand moat, form brand awareness and customer base, and continue to deliver brand services to users.

Although joint venture brands have been pushed to the 40% market share red line, BYD Chairman Wang Chuanfu said at an event in August last year that by 2025, the market share of Chinese independent brands is expected to increase to 70%.

2. Is the car price war officially coming to an end?

Faced with the current situation where joint venture car brands are withdrawing from the price war, how should we view this matter?

First, in recent years, the Chinese auto market has experienced an unprecedented price war, which was initiated by Tesla. Relying on its strong brand effect and technological advantages, Tesla has adopted an aggressive pricing strategy in the Chinese market and rapidly expanded its market share. This practice has forced other automakers to join the competition and maintain their market share by lowering prices. However, most auto brands, especially joint venture brands, are actually responding to this price war passively. Tesla's success lies in its ability to produce competitive products at a relatively low cost while maintaining a high profit margin. This model is difficult for traditional automakers to replicate, especially in terms of cost control. Therefore, many joint venture brands find themselves in a dilemma: if they do not follow up with price cuts, they may lose market share; but if they cut prices, they will squeeze the already meager profit margins.

Secondly, the current price war has not only affected the profitability of automakers, but also changed consumers' car-buying mentality. In a unique market environment like China, consumers tend to follow the psychological law of "buy when prices rise and don't buy when prices fall". This means that when commodity prices rise, people tend to buy as soon as possible to avoid the risk of further price increases; when prices fall, they will wait and see, hoping for lower prices. This mentality is particularly evident in the automobile market. Although price cuts appear to stimulate consumption, they may actually cause consumers to postpone their purchase decisions and wait for better offers. In this way, even if sales increase in the short term, it may lead to weak overall market demand in the long run.

Third, with the fission of the automobile market, the living space of joint venture brands is constantly being compressed. On the one hand, independent brands have made significant improvements in technology research and development, product quality, marketing, etc., and have gradually won the recognition of consumers. On the other hand, with the popularization of new energy vehicles and the increasing demand of consumers for intelligence and networking, the advantages of joint venture brands in these areas have gradually weakened. The price war is undoubtedly a double whammy for joint venture brands. They not only have to face fierce competition from independent brands, but also have to deal with price shocks from new energy vehicle companies such as Tesla. Under this dual pressure, the sales volume and market share of joint venture brands have shown a downward trend. Although some joint venture brands have tried to maintain their competitiveness by lowering prices, this approach can often only temporarily relieve pressure and cannot fundamentally solve the problem.

Fourth, facing the increasingly severe market environment, joint venture automakers must re-examine their own positioning and development strategies. Exiting the price war does not mean giving up competition, but rather finding new differentiated competitive advantages. The most important point is to strengthen product strength, including technological innovation, design aesthetics, quality assurance and other aspects.

The market will eventually favor products that can provide real value. This means that joint venture brands need to increase R&D investment, develop new technologies and new functions that meet consumer needs, and continuously improve the overall performance of their products. For example, strengthening intelligent configuration, increasing driving range, and optimizing driving experience are all key areas of concern for consumers in the current market.

In addition, brands also need to focus on shaping their brand image and service experience, and win the trust and support of consumers through high-quality services and good reputation. In the field of new energy vehicles, joint venture brands can also explore cooperation opportunities with other industries, such as charging infrastructure construction, intelligent network technology, etc., to enhance their competitiveness.