"BBA" has slashed prices, and the luxury car market has changed

China Economic Weekly

2024-07-01 17:49Official account of China Economic Weekly

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01 Recently, luxury car brands such as Mercedes-Benz, BMW, and Audi have reduced their prices, causing netizens to ridicule that "if you don't work hard, you can only buy 'BBA'".

02 Industry insiders said that with the continuous improvement of the penetration rate of new energy vehicles, the engine advantages of old luxury car brands will become more and more "worthless".

03Due to the improvement of the intelligence of new energy vehicles, traditional luxury car brands have been challenged in terms of market share, with reduced sales volume and increased inventory pressure.

04Experts believe that luxury car brands need to accelerate scientific and technological innovation and enhance product competitiveness in order to survive and prosper in market competition.

05 On the other hand, the change of car buyers is also one of the reasons for the price reduction of luxury car brands, and young people are more interested in new technology, new performance, new design and new concepts.

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"China Economic Weekly" trainee reporter Niu Chaoge | Reporting from Beijing

"If you don't work hard, you can only buy 'BBA'." Such ridicule has been circulating on the Internet recently.

"BBA" is the English acronym of Mercedes-Benz, BMW, and Audi, which are often associated with luxury cars. But recently, the words that appear together with "BBA" are price reductions: from BMW's price "halved", to Mercedes-Benz's price "diving", and then to 200,000 yuan to win Audi. If the "BBA" don't work hard, the ridicule of netizens may become a reality.

Behind the price reduction is the emergence of changes in the luxury car market. Some industry insiders said that with the continuous improvement of the penetration rate of new energy vehicles, the engine advantages of old luxury car brands will become more and more "worthless". Perhaps finding a new selling point that can attract consumers as soon as possible is the top priority for "BBA" at the moment.

"BBA" prices have plunged

The reporter of "China Economic Weekly" came to a BMW 4S store in Chaoyang District, Beijing as an ordinary car buyer, and the sales staff introduced that some models are currently on offer, and the range can be "discounted" at most: taking BMW i3 eDrive 35L as an example, the landing price is about 190,000 yuan, and the guide price of the model is 353,900 yuan. "If you confirm that you want to, you can come to the store for a test drive first, and the price can be negotiated when the contract is signed." The store's salesperson said.

Coincidentally, the sales staff of a FAW Audi 4S store in Beijing told the "China Economic Weekly" reporter that most of the models in the store are currently subsidized around 100,000 yuan, the Audi e-tron series can be discounted up to 260,000 yuan, and the Audi Q4 e-tron entry model can even be won at a price of about 190,000 yuan.

Mercedes-Benz is no exception, and the discount in the store is often more than 10 yuan. "It's very suitable to buy a car now, and the subsidy for the tram in the store is quite large, like Mercedes-Benz GLA discount of 100,000 yuan, Mercedes-Benz EQE AMG can also discount more than 100,000 yuan." A salesperson at a Mercedes-Benz 4S store in Beijing told a reporter from China Economic Weekly.

Yan Jinghui, a member of the expert committee of the China Automobile Dealers Association, told the China Economic Weekly that the profit margins of these luxury car brands are relatively large, and throughout the marketing process of luxury car brands, most of them are phased preferential prices.

In addition, Yan Jinghui believes that with the improvement of the intelligence of new energy vehicles, the share of traditional luxury car brands has been divided to a certain extent, resulting in a decrease in sales and an increase in inventory pressure. "New energy vehicles are available at all price points, which naturally diverts the market at the same level, and in this case, the financial pressure on dealers is relatively large."

"There are many models of new power car companies, and there are many discounts, and the 'refrigerator sofa big color TV' is complete, if we don't show sincerity, you won't come to see the car." When asked why the price has been reduced so much, a salesperson at the BMW 4S store in Beijing told a reporter from China Economic Weekly.

Previously, BMW China had responded to the price cut, saying that the challenges faced by the entire automotive industry prompted manufacturers and dealers to work closely together to tide over the difficulties. Although BMW has an official guide price, the actual selling price of dealers is a market behavior and will fluctuate according to the actual situation.

Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, told China Economic Weekly that the pressure on these luxury car brands may be related to the fierce competition in China's auto market, and many domestic new energy models have entered the price range of luxury cars of more than 300,000 yuan, and sales are performing well.

"In the price segment of luxury cars, almost all of them have models from Chinese new energy vehicle companies. As a result, the market share of the 'BBAs' has been greatly reduced. Zhang Xiang said.

It's not just "BBA" that's under pressure, it's just the same pressure on every traditional luxury car brand.

The reporter of "China Economic Weekly" learned from the industry that in order to complete the sales task, Porsche China has recently backlogged inventory to Chinese dealers, resulting in the inventory pressure of dealers exceeding the normal sales level.

After the matter fermented, Porsche China issued the "Joint Statement between Porsche China and All Authorized Dealers", saying that the current automotive industry is undergoing unprecedented major changes, and it and dealers are facing complex problems together. Porsche China will maintain a long-term and trusting dialogue mechanism with dealers to jointly seek effective ways to respond to market changes.

According to the data of the Passenger Association, in May this year, the retail sales of mainstream joint venture brands were 490,000 units, a year-on-year decrease of 21%; the retail share of German brands was 18.6%, down 2 percentage points year-on-year; The share of Japanese retail sales was 14.8%, down 3.2 percentage points year-on-year, while the share of U.S. retail sales reached 6.7%, down 1.4 percentage points year-on-year. The traditional luxury car market also weakened. Retail sales of luxury cars in May were 240,000 units, down 3% year-on-year and up 19% month-on-month. The retail share of luxury car brands in May was 14%, down 0.2 percentage points year-on-year.

New energy is impacting the luxury car market

"The advantage of luxury car brands such as 'BBA' is mostly the engine, while Chinese brands have little advantage in this track. However, at present, China's new energy vehicle companies are much ahead in terms of intelligent networking, and this is what consumers value more at the moment. Zhang Xiang said.

Zhang Xiang believes that the competitiveness of traditional luxury car brands represented by "BBA" is gradually declining, mainly because its new energy transformation is progressing slowly, and price reduction can not solve the problem, how to keep up with the pace of innovation of new energy vehicle brands, and enhance product competitiveness is the key.

Zhang Hong, a member of the expert committee of the China Automobile Dealers Association, holds the same view, saying that the concentrated price reduction of luxury car brands is a decision made under the predicament of declining sales due to the impact of domestic new energy vehicles. In addition, the shift in car buyers is also one of the reasons for the price reduction of luxury car brands. Zhang Hong said that at present, the car buying crowd is mainly young people, who are not sensitive to brand precipitation and do not pursue brand loyalty. They yearn for new technology, new performance, new design and new concepts, and pay attention to the cost performance of the model, so they have a soft spot for fashionable and innovative new energy vehicles with a full sense of science and technology.

The China Passenger Association recently announced the top 10 retail sales of new energy vehicle manufacturers from January to May 2024, and the reporter of "China Economic Weekly" noticed that "BBA" was not on the list, which shows that "BBA" still has a lot of room for improvement in the retail of new energy vehicles.

In fact, this point has long been seen before the price cut, the "China Economic Weekly" reporter noticed during the 2023 Shanghai Auto Show and the 2024 Beijing Auto Show that the booths of traditional luxury car brands such as Mercedes-Benz, BMW, and Audi are no longer overcrowded, and the audience mostly gathers at the booths of Chinese brands such as BYD, Weilai, Xiaopeng, and Ideal, and even many foreign practitioners have made a special trip to visit.

"In the short term, price reductions will indeed bring about an increase in sales, but in the long run, exchanging price for volume may gradually lose its effect." Zhang Hong said that when the price of well-known brands continues to fall, middle-aged and older consumers will compare the price reduction of luxury car brands with models in the same price range. Then, these middle-aged and older consumers may make a move to buy luxury car brands that they previously thought were out of reach.

"As a representative of luxury car brands in the Chinese market, this price reduction will inevitably lead to price reductions by other luxury car brands. As the price war continues, some car companies will face the risk of being eliminated, and with some brands out, the auto market will gradually return to normal. Zhang Hong said.

Zhang Hong believes that China's consumer groups are multi-level, and it is the pursuit and mission of the automobile industry to meet the car purchase needs of consumer groups of all classes. Luxury auto brands will always remain attractive to China's high-income group, and if they can accelerate technological innovation and find the right market positioning, they can still survive and prosper in China's auto market.

According to the research report of Soochow Securities, in addition to the super first-line luxury car brands, since 2021, the terminal prices of BMW, Mercedes-Benz, Audi, Cadillac and other brands have continued to decline, and the Chinese auto market is completing the transition from brand-oriented to value-oriented, and product power has become the primary factor affecting purchases.

Yan Jinghui expects that in terms of subsequent prices, it will take a long time to return to the previous price level. He believes that for the luxury car market, it is necessary to keep up with the pace of the market in product design and strengthen innovation in intelligence in order to better participate in market innovation.

(This article was published in China Economic Weekly Issue 12, 2024)

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