Dongfeng Motor "killed crazy"! How much helplessness is behind violent promotions?

A car promotion event has triggered the biggest attention in the automotive industry this year.

Among this group of "strongest car purchase subsidy policies in the history of Hubei", the subsidies for Japanese and French cars of Dongfeng Automobile are the most "fierce".

Taking the Dongfeng Citroen C6 co-creation version with a guidance price of 211,900 yuan as an example, only 121,900 yuan after the comprehensive subsidy of government and enterprises, the subsidy amount is as high as 90,000 yuan (45,000 yuan for manufacturers and 45,000 yuan for government subsidies)!

This promotion really made the Dongfeng series highlight, and even the stock price of Dongfeng Motor magically rose to the limit.

Some people say that this is because although Dongfeng has cut prices and promoted it, government subsidies also account for a considerable part, so the positive benefits of clearing inventory and revitalizing assets on the whole are much stronger than being dragged down by the sales situation. It's a good deal.

But in real life, if a mall suddenly sells at a loss, many times everyone knows what it means.

In the short term, "price for volume" does lead to sales growth, but what about the long term?

Fighting a price war has always been a hand-to-hand roll that slashes at oneself and slashes at the opponent, and no one can dodge, depending on whose blood is more durable.

And this time, Japanese and French cars are clearing inventory so vigorously, is it to roll up? Or do you want to roll the cover?

A few questions: Why Hubei? Why JVs? How does it affect the market landscape?

01

I have to do it

"This subsidy is only for Hubei Province, and it is necessary to go to Hubei's license. The subsidy is also limited to March. ”

Such a large subsidy must be a great financial pressure on Hubei, but it also reflects Hubei's determination to reverse the sluggish local car sales.

Automobile is the first pillar industry in Hubei Province, and the GDP of the automotive industry exceeds 1/5 of the province. Hubei has 8 vehicle enterprises and 13 vehicle production plants, gathering more than 1,400 parts companies and 1,578 automotive industry scale related enterprises, and even Wuhan's Economic Development Zone is called "China Auto Valley".

In 2021, Hubei's total GDP exceeded 5 trillion yuan, surpassing Fujian Province, and GDP increased by 12.9% in comparable terms, ranking first among the 31 provincial-level administrative regions in the mainland. In 2022, Hubei's GDP growth rate will be 7.44%, which is also the leading level in China, and the scale is increasingly in line with Sichuan Province, which ranks sixth.

Behind this, the rapidly growing economic system of the automobile industry has contributed a lot.

However, Hubei's previous automobile industry focused on the field of fuel vehicles, and under the trend of accelerating the replacement of new energy vehicles, fuel vehicle brands are facing increasing competitive pressure.

Dongfeng Automobile is the key representative of Hubei automobile brand.

Therefore, it is also the focus of this large subsidy.

In recent years, Dongfeng Collective's automobile sales have continued to decline. In 2022, Dongfeng Group's total passenger car sales reached 2.15 million units, down 4.4% y/y. However, in order to reverse the trend, the Group has set a sales target of 2.63 million passenger cars in 2023, an increase of up to 22%.

In the first half of 2022, Dongfeng Peugeot sold 27,700 vehicles in wholesale, but the CBIRC showed that only 10,900 vehicles were insured. Dongfeng Citroen's wholesale volume was 22,400 units, but the actual vehicle insurance volume was only 15,000 units.

According to statistics, some models of Dongfeng Peugeot and Dongfeng Citroen have wholesale volume and even several times more sales, and dealers are under great inventory pressure.

In the context of the lack of significant advantages in product strength and price, and the continuous decline in sales, how difficult is it to challenge the pressure with such a large growth rate?

Therefore, some car series are sold at a loss, in fact, it is unnecessary.

But the problem is that in the context of fuel vehicles generally becoming the second option in the market and the increasing difficulty of the stock game, the price war played by Hubei must inevitably be followed by counterparts in other provinces.

A price war will inevitably arise.

For example, Dongfeng Honda's Yunnan and Guizhou regions have now also announced a limited time direct supplement of up to 60,000 for all Honda models.

It is not ruled out that other areas of Dongfeng, as well as other brand models, will also join in the copy.

But the probability is high.

After all, the potential purchasing power is so little, grab one less. Don't follow it now, and when you want to reduce the price in the future, the yellow cauliflower will be cold.

In fact, this year's meeting clearly instructed that the promotion of mass consumption and the continuation of automobile subsidies should be regarded as an important direction of work. It means car subsidies, which is a way to allow and promote. Therefore, this year, many places in the country have launched sales policies for various automobile brands, ranging from thousands to thousands.

Jilin, also a major automobile province, has introduced a policy similar to Hubei, with subsidies covering all autonomous and joint venture brand passenger cars and light goods vehicles under China FAW, with a maximum subsidy amount of 37,000 yuan.

Of course, the possible financial support of other provinces is rarely as deep as Hubei, so the pressure will be transmitted to local car companies, especially other brands at the same level of price.

The smoke of gunfire is bound to become thicker and thicker.

Among them, the biggest pressure may be the joint venture fuel vehicle.

02

The rout of the joint venture

One of the focal points of this promotion of the Oriental series is the joint venture Japanese car and the French car "fracture" promotion.

In fact, Japanese cars and French cars have long seen such a decline.

From January to February this year, Nissan's new car sales in China decreased by 41.4% y/y, Honda's by 45.2%, and Toyota by 12.2%. Although the sales volume is still large, it is inevitable that it will decline.

French cars are more significant, the Citroen C6, which plummeted by 90,000, has only sold 2,023 units in the past year, with an average of 169 units per month, and even a staggering 55 sales in January, Peugeot 2008, with sales of only 10,598 units in the past year, an average of 883 units per month.

This scale is not even comparable to an ordinary model of a domestic second-tier brand.

From a larger perspective, not only Japanese and French cars, but also joint venture vehicles based on fuel vehicles in recent years, in fact, there has been a huge decline.

In recent years, many joint venture car brands have either gradually fallen into huge losses, or have been declining, or even retreated, and the trend of the situation has increased.

Suzuki, Acura, Daihatsu, Fiat, Chrysler, Borgward, Opel, Brilliance Renault...

According to the Passenger Association, in 2022, sales of German, French, Korean, American and Japanese passenger cars in China will all plummet:

SAIC Volkswagen fell 14.7% year-on-year;

SAIC-GM decreased by 18.8% year-on-year;

Dongfeng Honda fell 17.8% year-on-year;

GAC Mitsubishi decreased by 49.13% year-on-year;

Guangqi Honda decreased by 6.2% year-on-year;

Dongfeng Nissan fell 20.9% year-on-year;

FAW Toyota decreased by 5.6% year-on-year;

Changan Ford decreased by 17.61% year-on-year;

Changan Mazda fell 21.43%;

Kia Motors decreased 38.4% y/y;

......

In January this year, the sales of joint ventures of all series continued to pull their crotches, and the decline rate was higher than the average decline in the market and domestic own brands.

Of course, domestic fuel vehicle brands have also been cleared a lot, including some PPT car companies that have been blown up by lightning. But overall, the ebb of the joint venture is more obvious.

So why did it end like this? The answer may be simple:

On the one hand, the positioning of joint venture cars has always been proud, and the price is often at least one or two grades higher than domestic cars of the same level configuration, and even high-end cars have never been so cold that only a few people can afford them. Twenty years ago, when none of the domestic cars could fight, the domestic automobile market was almost the world of joint venture cars, eating and drinking spicy and extremely profitable. However, with the accelerated rise of domestic cars that pursue the ultimate cost performance in recent years, through quality and price advantages, they continue to gain brand recognition from Chinese people, and the price of domestic cars in similar configurations is often only 2/3 or even half of that of joint venture vehicles. The dividend of the joint venture car with a cold price will also come to an end.

On the other hand, the era of new energy vehicles has accelerated, the rapid development of domestic new energy vehicle industry clusters has reached the top of the global N01, local brands and new forces have quickly seized the high ground, and joint venture vehicles mainly based on fuel vehicles are difficult to adjust their products for a while, and it is inevitable that they will be competed.

But are domestic and new energy vehicles the main culprits in the decline of joint ventures?

I'm afraid the answer is NO!

At any given time, China's auto market is large enough, as always, to support many big international brands, such as Tesla.

The collapse of the joint venture car may be more due to its own failure to adapt to the general trend in time.

03

No one can beat the general trend

From this big price reduction of Dongfeng Motor, we see the death throes of fuel vehicles.

Despite this big price reduction, Dongfeng Motor will receive a lot of orders, after all, a 210,000 Citroen C6 is only sold for 120,000 now, which is really fragrant!

But don't forget that being able to have this level of price reduction is only supported by subsidies.

The fate of fuel vehicles being replaced by new energy vehicles has long been announced.

It's just that this kind of replacement seems to be very slow in the early stage, and everyone doesn't think it is true.

After all, such a huge fuel vehicle industry, involving all aspects of the country and society, is not to end it can be ended. Moreover, although electric vehicles often appear as "revolutionaries", they still have many problems to solve, such as charging efficiency, infrastructure, and car prices.

However, with the passage of time, these problems are gradually being solved, infrastructure, especially the charging network, and the widespread popularization of fast charging technology, have also made the use of new energy vehicles more and more convenient, coupled with the many advantages of new energy vehicles themselves different from fuel vehicles, consumer acceptance has been greatly improved.

Taking China as an example, the monthly sales penetration rate of new energy vehicles has exceeded 30%, and for every 10 cars sold, 3 are new energy, and this data was less than 20% a year ago.

If there's one more obstacle, it's probably the price.

As we all know, the price of new energy vehicles is much higher than that of fuel vehicles of the same level, so the state has subsidized electric vehicle buyers for more than ten years, and the cancellation of this year's national supplement has also affected sales expectations for new energy vehicles.

However, new energy vehicles, whose primary goal is to seize the market, have never been afraid of price wars.

Tesla set off a big price reduction promotion at the beginning of the year, and then many new energy vehicles, including Qianjie, Xiaopeng, Geely, BYD, all followed, and the remaining new energy vehicle companies, although not directly officially announcing price reductions, are actually changing their patterns to reduce prices.

Once the price gap disappears, fuel vehicles basically have no last line of defense.

In particular, Tesla investors said that Musk's car manufacturing costs can be reduced by 50%, according to this trend, what can fuel vehicles do to fight back?

The automobile market as a whole is not an incremental market, selling one more electric car, selling one less fuel vehicle, they are trade-offs.

The automobile industry pays the most attention to economies of scale, if the decline in sales of fuel vehicles reaches a certain critical value, then it will no longer have economies of scale, and even fall into the situation of producing a loss.

This situation will be difficult to reverse, and even the larger the original car company, the larger the loss area, like a bottomless pit, no amount of subsidies is lost.

04

Go

This Dongfeng price reduction event also triggered a topic that is not new:

Where will fuel vehicles go?

In my opinion, the decline of fuel vehicles is an inevitable end, and in the face of this general trend, no one can beat it.

There are only two ways for them, either to cut the price and sell it off, and then directly close the door, or the strong man breaks his wrist and fully switches to new energy.

Every choice is extremely difficult.

The closure is good, the clearance is a big sale, a hundred, but the problem of the ship being difficult to turn around has never been extremely tricky.

A comprehensive switch to new energy sources is understandable, but what about money? What about technology? What about talent? Now that the industry is so competitive, how to fight with the head opponent?

Some people may refute that the price of domestic fuel vehicles, especially joint ventures, has always been much more expensive than foreign countries, and what is earned is the worship of foreign brands by the Chinese people, and the cut is the IQ tax of the Chinese people. In other words, these joint venture cars actually have a lot of room to reduce prices, saying that they bleed, over.

In November last year, the price of Mercedes-Benz EQE models was reduced by 50,000, and the price of high-end pure electric EQS was reduced by 200,000, which was an uproar.

How profitable are these foreign brands? Chinese how much money do people have stupidity?

It is undeniable that with the mastery of core technologies, joint venture brands have indeed made money in the Chinese market for many years, if it is not for the rise of independent new energy brands, I don't know how long Chinese will worship them. From this point of view, the price reduction of the joint venture car is also reasonable, or rather, they are just returning to reasonable.

There are also many people who ridicule foreign brands for being arrogant, not enterprising, and not changing in time, but in fact, this is also a wake-up call to many domestic car manufacturers.

You know, domestic car companies occupy half of the shares in the joint venture, if these brands go bankrupt, domestic car companies bear at least half of the loss, if you add the negative impact on the local economy and society, the loss rate is far more than half.

Since the joint venture policy, who is lazy and who is not enterprising, don't everyone see it?

Take Dongfeng Motor for example, how many new energy brands can you count?

Speechless, I can't count it, because he really has few hands on it, and it is estimated that even ride-hailing drivers are not familiar with it. The new brand Lantu, which has spent a lot of effort to launch, benchmarks the ideal ONE, with sales of less than 2,000 per month, and sales in one month this year have fallen below 1,000.

Therefore, what tortures the soul more than where the fuel vehicle goes, are those domestic car manufacturers, where should they go?

Although the comprehensive transformation of new energy is imminent, they are indeed doing it, but the transformation of state-owned car factories that can be seen is GAC, Changan, FAW, SAIC, BAIC performance is not good, compared to their perennial occupancy of fuel vehicle sales list, but in the new energy sales list is almost difficult to see.

In the competition for new energy that has become a red sea, who will have confidence in them?

05

epilogue

In the face of the unprecedented changes in a century, in the face of the general trend of new energy vehicles replacing fuel vehicles, is it smooth or reversed?

It's all in the business of a whim.

Transformation is not easy for any large enterprise, and it needs to face countless difficulties and dangers, but even so, it must be transformed, because no one can stop the trend.

In fact, so many lessons over the years have warned fuel vehicle companies more than once that if they do not actively transform, there is really only one way to die. But how many dare to make a big move, and how many strong men break their wrists?

If we can't break through on the new energy track, we may see more fuel vehicles cut prices to survive, as is the case for joint venture vehicles, as well as for local brands.

I just don't know, after this large-scale fuel vehicle price reduction, how will new energy vehicles be affected?

Especially those new forces who like to run trains with their mouths full and lose far ahead, it is really difficult to say whether the stories they tell will always be listened to.

But I think there is one group that has always benefited, that is, consumers, from their point of view, this hand-to-hand battle for price reduction, come a little more fiercely.