#Current affairs hot headlines #Since the beginning of this year, for various car companies, it can be said that you sing and I appear, after Tesla's large-scale price reduction, various price wars can be described as endless, at the same time, a variety of public relations wars, public opinion wars are not uncommon, market competition has become increasingly intense, at this time 16 car companies suddenly announced a handshake, car company war is finally coming to an end?
First, the 16 major car companies shake hands and make peace?
According to Yicai, at the 13th China Automotive Forum sponsored by the China Association of Automobile Manufacturers, 16 car companies jointly signed the "Commitment to Maintain Fair Competition Market Order in the Automotive Industry" (hereinafter referred to as the "Commitment"), the first article of the content of the "Commitment" is "not to disrupt the market fair competition order at abnormal prices".
The 16 automakers include both traditional automobile groups and leading emerging automakers, namely FAW Group, Dongfeng Motor Group, SAIC Group, Changan Automobile, BAIC Group, GAC Group, Sinotruk, Chery Automobile, JAC Automobile, Geely Holding Group, Great Wall Motor, BYD, NIO, Lili, Xpeng, and Tesla.
However, on July 8, the China Association of Automobile Manufacturers issued a statement saying that the China Association of Automobile Manufacturers organized 16 automobile manufacturers to sign the "Commitment to Maintain Fair Market Order in the Automotive Industry", and the association recognized that the expression "price" in the commitment letter "not to disrupt the order of fair market competition at abnormal prices" involved the expression "price", which was inappropriate and contrary to the spirit of the Anti-Monopoly Law, and deleted the above clause from the commitment.
CAAM also urged the 16 other automobile manufacturing member enterprises to strictly abide by the Anti-Monopoly Law and related administrative regulations, guidelines and rules, set their own prices, compete fairly, and jointly contribute to the healthy innovation and development of the industry.
In the first half of this year, the price war was the main tone running through the domestic car market. Since Tesla lowered the prices of two domestic models to the lowest in history at the beginning of the year, the price war, a war without gunsmoke, began in the car market, and then new forces followed suit to reduce prices. In March this year, the war further spread to the field of fuel vehicles, and the news of the big price reduction of Wuhan Dongfeng models swept the car circle in an instant, and the "Dongfeng Citroen C6 maximum subsidy of 90,000 yuan" became a hot topic in the month. Since then, real and false preferential information of major automobile brands has also emerged.
A number of car dealers told reporters that the price war has led to more chaotic price order in the car market, consumers' expectations for vehicle discounts have been raised, and many car dealers can only be forced to join the price reduction sequence, and profits have been further eroded.
According to the data of the weekly report of key enterprises, the China Association of Automobile Manufacturers estimates that automobile sales in June 2023 will be 2,505,800 units, an increase of 5.22% month-on-month and 0.14% year-on-year. In the first half of 2023, vehicle sales were 13,122,700 units, a year-on-year increase of 8.84%.
According to the estimated data of the Passenger Association, in the first half of this year, the wholesale sales of domestic new energy passenger vehicles will increase by 44% year-on-year to 3.53 million units, of which BYD and Tesla China contributed 1.2556 million and 476,500 units, respectively, with a market share of 35.6% and 13.5%, respectively, accounting for a total of 49%, compared with the first half of last year, the overall share of BYD and Tesla has increased by 12 percentage points.
According to the data of the Automobile Dealers Association, even under the stimulation of the price reduction of car companies, in June, the domestic automobile dealer inventory index still rose by 4.5 percentage points year-on-year to 54%, and the overall is still in the sluggish range, and for the sales performance in the first half of the year, only 21.3% of dealers said that it could be completed smoothly, 31.7% of dealers completed more than 80%, and 11.7% of dealers completed less than 50%.
Second, is the car company war finally coming to an end?
Recently, with the intensification of the market price war, the entire automobile market has entered a state of comprehensive chaos, in such a situation, the regulator took the initiative to promote the handshake of various automobile companies, which is undoubtedly a significant thing, how should we analyze this matter? And how to judge this matter?
First, the market woes caused by the price war have become deadlocked. Since the second half of last year, under the leadership of Tesla, major automobile companies have been involved in the dilemma of price wars. The cause of this price war is the increase in market saturation, the decline in consumer demand for cars and the launch of new models, which has led to intensified market competition, and car companies have had to reduce prices to attract consumers in order to compete for market share. However, in addition to a few car companies that followed the price reduction in the early stage, most of the car companies did not cause the market to improve because of the price reduction, but the market performance is getting worse and worse, although the market has recovered since June, but it is still in a sluggish state.
Price wars seem to be a good thing for consumers, and they can enjoy more favorable prices. However, in a market economy, lower prices are not better. When the price is too low, the profit margin of the enterprise is compressed, and the production and operation are unsustainable, at this time, the enterprise will adopt the way of reducing costs and reducing quality to maintain production and operation. Such vicious competition will eventually lead to market collapse and economic decline.
At the same time, there is a major problem behind this price war: market difficulties have formed. In the price war, Chinese consumers show the phenomenon of chasing prices and killing declines in behavioral economics. When the price falls, the lower the enthusiasm of consumers to buy a car, and the mood of holding coins and waiting is becoming more and more obvious. This is because consumers generally believe that there is room for further price declines, so they prefer to hold coins and wait rather than buy when the price is lower. This behavior has led to a dilemma in the market, making car companies fall into a vicious circle that cannot be extricated. This phenomenon is very obvious in the stock market, and it has also appeared in the real estate market of developed countries such as the United States and Japan before, and if there is no external force to break this dilemma, it is likely to cause chaos in the entire market.
Secondly, the phenomenon of low-price dumping in the market has also begun to appear, and the health of the market has declined rapidly. In the process of price war, the market also shows a trend of dumping at low prices. Except for a few car companies such as Tesla and BYD, most car companies have fallen into the endless cycle of selling one and losing one. This situation has led to a continuous deterioration in the health of the market, as car companies not only have to deal with sales losses, but also deal with the decline in brand value and product quality caused by price wars. It can be said that for the current price war, these car companies on the market are actually struggling to hold on, only relying on their own family base to see which competitor will fall first, and we have also observed that some tail car companies began to have problems, bankruptcy also began to appear, which is actually the embodiment of the rapid decline in market health.
At the same time, as the price war intensifies, the market competition is becoming more and more intense. In order to win more market share, various rumors began to appear, and various unfair competitions also appeared. These behaviors further disrupt the market order and increase the degree of market chaos. For example, a car company began to spread rumors about the head car company, and even did not hesitate to use the method of reporting to trample on its friends, which undoubtedly had a greater impact on the automobile market and was more detrimental to the development of the market.
Third, in this context, 16 large car companies shook hands and reached a series of cooperation agreements. This incident marks the possible end of this car war. Supervision has effectively identified the current chaos in the automobile market through macro-control, and pulled car companies out of the quagmire of vicious competition in a top-level design way.
For the current Chinese auto market, only healthy market competition can promote the long-term sustainable development of the market. The handshake of the major car companies can be seen as the beginning of the market's recovery of health. Through the cooperation of major car companies, the market can avoid excessive competition, prevent unfair competition, and protect the interests of consumers and enterprises.
In addition, this handshake also reflects the spirit of cooperation and win-win results. In the past competition, major car companies focused on the competition for market share, and ignored the possibility of cooperation. But now, they are beginning to realize that by working together, they can achieve common development goals. They can carry out in-depth cooperation in technology sharing, market development, resource integration, etc., so as to improve the competitiveness of the entire industry. In fact, from a more macro perspective we can find that China's automobile market is actually a whole, in the past competition, major car companies in order to pursue short-term benefits, often ignore R & D investment, but in fact, only technological innovation is the direction of market development, each car company has the basis to further promote the development of automotive technology innovation.
Therefore, the 16 major car companies shake hands and make peace, for the development of China's auto industry can be described as of great significance, when the price war is no longer the main theme, the focus of competition will shift to innovation and service, only deep cultivation of the market enterprises are likely to make a difference in this regard, as for who can have the last laugh, we may as well see.