"The price reduction has not significantly increased the sales of BBA, and the 'price for volume' has lost its meaning."
Text / Ba Jiuling
Recently, BMW's prices have been up and down like a roller coaster.
When many car lovers were still hesitant to buy a 50% off BMW car, the BMW dealer turned around and issued a price increase notice. The sales staff of the BMW 4S store in Chaoyang District, Beijing, said that the prices of all BMW products have been raised, ranging from 30,000 yuan to 50,000 yuan.
Following BMW, Mercedes-Benz and Audi have also adjusted their pricing strategies in the Chinese market. An Audi dealer said that the prices of main sales models, including Audi Q5L, Audi A6L and Audi A4L, have increased slightly, and may continue to increase in the future, but the magnitude will not be too large.
After BBA withdrew from the price war, there were unintended consequences: BBA prospective car owners who paid a deposit in June are now unable to pick up their cars due to the price increase of related models.
On social platforms such as Zhihu and Xiaohongshu, we can find many posts criticizing BBA, and many netizens complain that BMW salesmen are "not trustworthy" and "just bad money".
The adjustment of BBA's (Mercedes-Benz, BMW, Audi) price strategy has attracted widespread attention from the whole network. Topics such as "BBA price increase" and "more people come to see the car after BMW's price increase" frequently appear on the hot search list.
Subsequently, Toyota, Volkswagen, Honda, Volvo and other brands also clarified the terminal policy recycling. A GAC Toyota dealer said that they did not increase the price, but from July, the price reduction will not be further expanded.
These foreign brands seem to have reached a tacit agreement: to suspend big promotions in the Chinese market.
But local brands don't seem to have enough fun and are still engaged in price wars. Recently, Changan Automobile announced: from July 15th to July 31st, the purchase of Changan Qiyuan A07 extended range version can be subsidized up to 40,000 yuan; Chang'an Qiyuan A05 true fragrance version and Q05 true fragrance version enjoy a replacement subsidy of 12,500 yuan.
Regarding price wars and involution, various automakers have different views.
Yang Xueliang, senior vice president of Geely, believes that there is no way out of the endless price war. Li Yunfei, general manager of BYD's brand and public relations department, expressed a completely different view: in the context of the price reduction of battery raw materials, it is immoral for electric vehicles not to reduce prices.
Zeng Qinghong, chairman of Guangzhou Automobile Group, emphasized that "it is not a way to roll up like this." Wang Chuanfu, chairman and president of BYD, elaborated on the opposite point of view: volume is the essence of market competition, and only with competition can there be prosperity.
From this point of view, this price war in the auto market, which has lasted for more than 500 days, does not seem to be over yet. In China, the competition between car companies may become more intense, and strong companies such as BBA have to fight hard and wait for the battle......
BBA and price wars
For BBA, the Chinese market is the most important and difficult consumer market.
The importance is self-evident, for every three cars sold by BBA, one comes from China. In 2023, BBA's total global sales will be 6,199,100 units, and 2,291,100 units will be sold in the Chinese market, accounting for about 37%. BBA makes more money in the Chinese market than in Europe.
On the other hand, the crazy involution of the Chinese market has also caused BBA a headache. The price system of new energy luxury cars in Europe, United States, Japan, Korea and other markets is very stable, and BBA and Tesla enjoy high brand premiums; However, in the Chinese market, local luxury brands have sprung up like mushrooms after a rain, competing for volume, and volume, BBA has felt unprecedented pressure.
In the Chinese market, the new version of ZEEKR 001 built on a pure electric platform and with a 100-degree large battery costs only 269,000 yuan, which is cheaper than the "oil-to-electric" BMW i3. The ideal L7 with longer comprehensive range and larger interior space is more than 100,000 yuan lower than the Mercedes-Benz EQE.
As a result, the sales of blockbuster products such as BMW i3 and Mercedes-Benz EQE in the Chinese market have always fallen short of expectations. Some netizens even ridiculed that BBA's pure electric products are "miscellaneous electric vehicles" and "special vehicles for cutting leeks".
In order to stabilize its market share, BBA had to cater to Chinese consumers and launch price reduction promotions.
In 2023, the 2023 Mercedes-Benz EQS 580 4MATIC topped the list of price reductions for luxury cars, with an official guide price of 1.339 million yuan and a store discount of 669,000 yuan, a decrease of more than 50%.
Since the beginning of this year, Audi A6L and A4L have continuously reduced prices, of which the price of the A4L entry version has dropped from 320,000 to 190,000, almost a 6% discount.
In June this year, the official price of BMW pure electric sedan i3 was 353,900 yuan, and the price of the naked car dropped to 170,000 yuan, a drop of more than half of the time. Subsequently, the topic of "BMW's half-cut price cut" appeared on the hot search.
But by the time it was time for the mid-year inventory, BBA was dumbfounded. After a price reduction operation, only some models were on fire (the monthly sales of BMW i3 rose from more than 2,000 to more than 6,000), but the overall sales in China declined, Mercedes-Benz and BMW sold 352,600 and 376,000 respectively in the first half of this year, down 6% and 4% year-on-year.
BBA really didn't expect that it took the initiative to make profits, not only failed to stabilize the sales market, but also caused a lot of trouble: the old car owner felt that he had been wronged, which triggered the owner's rights protection action; BBA dealers fell into the dilemma of "buying one and losing one", and some 4S stores even closed down and ran away, which affected BBA's after-sales service system; What's more, BBA's image as a high-end boutique in the minds of Chinese consumers has been questioned.
After learning from the pain, BBA simply gave up the strategy of "price reduction and quantity assurance" and turned to the route of "volume reduction and price protection", focusing on business quality and supporting dealers to make steady progress.
But the question is, can BBA's wishful thinking work? When Tesla and Chinese luxury brands are still cutting prices and promotions, BBA unilaterally truces, isn't it afraid that its market share will be eaten up by its friends?
In this regard, Cui Dongshu, secretary general of the National Passenger Car Market Information Association, is optimistic. He believes that luxury cars and joint venture brands will only face a certain share decline, rather than a significant decline.
In fact, the basic plate of BBA is still very solid, and the first reaction of Chinese when it comes to luxury cars is BBA. In addition, BBA does not rely on the old to sell the old, but actively embraces new technologies, new processes and new models.
BBA Study in China?
The fierce competition in China's auto market has forced BBA to accelerate the pace of innovation.
In February 2022, the Audi Group announced that it would invest CNY 35.8 billion in Changchun, Jilin Province, to build a site dedicated to the production of pure electric vehicles.
On November 30, 2023, Mercedes-Benz China and BMW Brilliance established a joint venture to operate a supercharging network in the Chinese market to meet the growing demand for luxury charging services from Chinese customers.
On April 26, 2024, the BMW Group announced that it will invest an additional CNY 20 billion in its production site in Shenyang, China. The capital increase is mainly used for large-scale upgrades and technological innovation at the Dadong plant, aiming to fully prepare for the local production of BMW's "new generation" models in 2026.
……
As Mr. Gao Xiang, President and CEO of BMW Group Greater China, said, investing in China is investing in the future.
Because, the innovation ability of China's new energy vehicle industry chain is already at the world-class level. Six of the world's top ten power battery factories are from China. In terms of high-level autonomous driving (L4 and L5), 49.18% of the world's patent families have priority in China. The advanced experience of Chinese automakers in electrification and intelligence is worth learning from BBA.
Let's go back to the price war. Now everyone is most concerned about whether Chinese brands will follow BBA to stop the war or even join the ranks of price increases. Riders are curious, can BBA keep the top three in China's luxury car market?
We asked three experts who have deep insights into China's auto market to hear their views.
Since last year, the reason why BBA has chosen to reduce prices is because new car-making forces such as Ideal, Weilai, and Zeekr have eaten up part of BBA's share, and BBA still wants to dominate the Chinese luxury car market, to put it bluntly, it wants to guarantee its share.
Recently, BBA's market strategy in China has been changed to "reduce volume and protect prices", mainly because the store's bicycle losses are too large, and the pressure on dealers has reached the point where they have to relieve themselves, otherwise there may be uncontrollable things such as forcing the palace and going out of business.
So now, BBA has opted out of the price war, which is actually a smart move. The price reduction has not significantly increased BBA's sales, and "price for volume" has lost its meaning.
Withdrawing from the price war, whether it is for the channel or for yourself, you can stop the bleeding in time and retain your strength. Just the share may not be able to be kept.
During this time, Volkswagen, Toyota, Honda, Volvo and other brands have also decided to suspend the price war.
But it's hard to say whether Chinese brands will follow suit. Although in the era of electrification and intelligence, Chinese brands have a high voice in the market, and even some car companies seem to have the capital to fight a price war in terms of profits, but from the perspective of products, even Chinese auto brands, there is not so much room for a breakthrough in cost performance.
The threat that BBA is facing now is also the rise of Chinese brands such as Ideal and Wenjie to enter the luxury car market.
If BBA wants to maintain its top three positions in China's luxury car market, it needs to strengthen intelligent and localized reforms, strive to make its products more suitable for today's market and today's consumers, while retaining the style of luxury brands and capturing some consumers who have feelings for BBA.
In the past two years, BBA has built a factory in China, specializing in manufacturing new energy vehicles to cope with the competition of Chinese new energy vehicle brands.
However, compared with Chinese car brands, the current advantage lies in high standards and more rigorous and sophisticated processes, and the disadvantage is that the localized industrial chain is not yet perfect.
Therefore, the rise of BBA's electrification must not only make technological breakthroughs, but also a complete set of industrial chains to keep up.
This year, BBA should still be in the top three in the market, but in terms of monthly sales, the top three positions in the market may change next year.
No longer "reducing prices for volume" is BBA's initiative to save itself.
BBA's withdrawal from the price war has a good stabilizing effect on the auto market, because price stability is a relatively good foundation for maintaining market prosperity.
For example, from March to April at the beginning of each year, the entire auto market is facing an unstable price situation, which not only does not bring further increase in sales, but also makes consumers make a choice to continue to wait and see.
Therefore, this time, the active self-help behavior of car companies and dealers will form a control over the price war and bring a stable price to the market.
After consumers saw that the price was stable, the traffic of the 4S store exhibition hall actually rebounded significantly. When consumers think that the price of car companies cannot be reduced, the demand for normal car purchases will also be stimulated, rather than being driven by prices all the time.
From the perspective of the market, it will bring a better role in stabilizing growth, and I believe that after the price is stable, the whole market will return to a relatively good growth state in the next month or two.
In addition, although some traditional car companies have withdrawn from the price war, and new energy vehicle brands have not withdrawn from the price war, luxury cars and joint venture brands will only face a certain share decline, rather than a significant decline.
First of all, the price increase of domestic brands is a long-term trend. The strategy of new energy vehicles is to pull up the price by lowering the price and then launching new products, resulting in the actual price decline is not so large, especially after a wave of promotion efforts in March and May, the price has remained relatively moderate in the near future.
In this case, whether it is a joint venture brand or a luxury brand such as BBA, as long as the price remains relatively convergent, the impact on the market share will not be too great.
And consumers also have their own selection criteria.
When the price war enters a relatively stable state, the original users and potential users of traditional cars will still buy traditional fuel vehicles, but will not buy new energy vehicles, after all, there are still differences between the two in terms of value retention, convenience and reliability.
A temporary price reduction may stimulate sales, but always downgrading often stimulates wait-and-see, think about a house, a stock has been falling, will you buy the bottom as soon as possible?
Some time ago, McKinsey's report mentioned this, 64.1% of respondents felt that price cuts would not affect car purchase decisions, and 16.4% would wait and see, so from this point of view, BMW's first exit from the price war cannot be subjectively determined whether it is right or wrong.
The price is always the embodiment of supply and demand, the reason for the price increase is nothing more than two points, the increase in demand or the decrease in supply, the BMW price increase, obviously not the former, but the latter, when BMW intends to control the production capacity of electric vehicles, indicating that BMW for this year's electric vehicle sales expectations in China have been adjusted.
In China, BBA does not have the problem of "quantity", only the problem of "price", but how to find a balance between volume and price is a test of business wisdom.
For any industry, it is not advisable for any company to reduce prices without restrictions, especially for luxury brands like BBA, which will not only lower the brand tone, but also affect the quality of operation, which is extremely valued by an established company like BMW.
In addition, BMW announced a price increase at this time, which may also indicate that this round of car price war will come to an end, in fact, after BMW, Mercedes-Benz, Audi, Volkswagen, Honda, Toyota and other foreign brands have also followed suit, and the market is gradually returning to a "normal" state.
In the past few years, although China's electric vehicle industry has developed in full swing, the market has become bigger, and the industry has become stronger, there are only a handful of companies that can make a profit, which is unhealthy.
Under the fierce price war, parts companies, channel providers and R&D personnel are facing unprecedented pressure, and all parties are complaining.
Of course, it is not excluded that some new power companies on the verge of life and death want to rely on price war to the end, but this no longer has a substantial impact on the overall trend.
As for many people saying that BMW withdrew from the price war because it was scared by new domestic forces such as Hongmeng Zhixing and Weilai, this naturally has a certain truth, in the context of the economic slowdown, the growth rate of the luxury car market cake is not as fast as before, and incremental competition has become a stock game.
Looking ahead, the transformation of intelligent electrification will inevitably rewrite the pattern of the luxury car market, but it will not be achieved overnight, and all competitors are catching up in their respective fields.
Source: Wu Xiaobo Channel
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