The price war of car companies will escalate at the end of the year: Nearly 20 brands participated in the war this month, and the price of Xpeng's new car was reduced in less than half a year after it was launched
In the context of the impact on sales at the end of the year, price cuts by car companies have become commonplace.
小鹏G6
On December 18, Xpeng Motors officially announced a price reduction that in December, the Xpeng G6 series was reduced by 10,000 yuan for a limited time, and the starting price dropped to 199,900 yuan.
It should be noted that this G6, which is known as Xiaopeng's "life-saving straw", has only been on the market for less than half a year, which shows that its sales pressure is huge. Sales data shows that from July to November, the delivery volume of Xpeng G6 climbed from 3,937 to 8,750 units, accounting for nearly half of Xpeng Motors' monthly deliveries, which is of great significance for Xpeng Motors to get out of the trough.
However, some industry insiders revealed to reporters that the sales of Xpeng G6 are gradually peaking, and the weekly sales have been less than 2,000 after entering December, while its weekly sales were more than 2,000 before.
In fact, it is not only the G6 new car that has reduced the price, but also the Xpeng P7i model in early December, with a comprehensive discount of up to 26,000 yuan, and then the Xpeng G9 has also followed up with a price reduction, with a maximum discount of 19,000 yuan.
Xpeng's goal of stimulating sales is obvious. At the beginning of 2023, He Xiaopeng, CEO of Xpeng Motors, mentioned in an internal letter that the delivery target for 2023 is to deliver nearly 200,000 vehicles throughout the year. In the first 11 months of this year, Xpeng Motors' cumulative deliveries were only 122,000 units, completing 60% of the annual target.
In December, nearly 20 brands have officially announced price cuts
Like Xpeng, car companies in China's auto market are facing sales pressure. A round of price cuts in December was kicked off by BYD.
On December 1, BYD announced that it can enjoy a "fuel transfer fund" of up to 20,000 yuan for fuel vehicle owners or prospective fuel vehicle owners who have placed an order, and 5,000 yuan to 18,000 yuan for the purchase of some models of Ocean Network. This is the second time in two months that BYD has launched a big discount.
Immediately afterwards, Li Auto announced the launch of an annual rate of 2.5% for a limited time in December, and related models can receive a subsidy of up to 36,000 yuan.
Also on December 1, Leapmotor announced that it would open a limited-time discount at the end of the eighth anniversary in December, and its C11 models can enjoy a cash discount of 5,000 yuan for a deposit of 5,000 yuan, as well as a 5,000 yuan for the highest optional fund and 8,000 yuan for the highest financial discount.
Zhiji Auto also announced on December 1 that it has decided that Zhiji LS6 can enjoy a comprehensive discount worth 37,600 yuan, including a 12,000 yuan discount on cash rights and a specific limited-time equity price.
Changan's Deep Blue Automobile announced that users who made an order from December 1 to December 17 can enjoy a deposit of 1,999 yuan to 8,000 yuan for all models. Deep Blue's brother brands Qiyuan and Chang'an UNI have also launched preferential activities of up to tens of thousands of yuan.
In addition, independent brands including Nezha, Zeekr, Geely, GAC Trumpchi, etc., as well as joint venture brands such as FAW Toyota, FAW-Volkswagen, GAC Toyota, SAIC-Volkswagen, SAIC-GM, and SAIC-GM-Wuling have also officially announced relevant preferential activities. According to incomplete statistics from surging news reporters, there are nearly 20 brands that officially announced price reductions and promotions in December alone.
The price war in the auto market runs through the whole year, and the industry has opened the "meat grinder" mode
In January 2023, Tesla fired the first shot of price reduction in the new energy market, followed by a number of manufacturers such as Xpeng and Wenjie, and then in March, Dongfeng Motor's price war for fuel vehicles spread across the country. At that time, many industry experts said that the price war would not last throughout the year, but now it seems that the "price war" has actually been the norm in the auto market throughout the year.
On December 18, Nezha Automobile CEO Daniel Zhang issued an article criticizing the price reduction promotion behavior of car companies, saying, "Our domestic car companies are still selling a few more cars than others, and when they are engaged in a weekly data ranking, others are making a lot of money." Data growth is worthless if it comes at the expense of profits or even negative gross margins. ”
"The cost of marketing communications to increase exposure needs to be increased. But for the sake of impulse, a large price reduction promotion increases the loss and loses too much blood, and this kind of thing will not be done. Daniel Zhang added that exchanging price for volume is "fat".
However, exchanging gross profit for sales has been a choice that many car companies have to make. The automotive industry is a strong product-oriented industry, pursuing "sales is justice", and car companies are often sung down due to declining sales, and then encounter a word-of-mouth crisis.
Cui Dongshu, secretary general of the passenger association, pointed out that "in order to maintain the sales level, some car companies have relatively large price promotions at the end of the year. The use of profits to offset sales is also to ensure the effective operation of all links in their own industrial chain. ”
Industry insiders believe that the automotive industry has opened a fierce "meat grinder" mode, and "shutdown and turn" will be a problem that most car companies have to face.
Chen Yudong, President of Bosch China, said a few days ago that car companies can now sell cars through price reductions, which means that it is not enough volume, and if car companies lose money every year, the blood is exhausted, and a large number of "death" is called real volume. He believes that in the next five years, 80% of China's vehicle companies will face "shutdown and turnover". Previously, car company executives, including Zhu Huarong, chairman of Changan Automobile, have also expressed similar views.
Looking ahead to 2024, automakers generally expect to have a harder time surviving. Li Bin, CEO of NIO, recently said that the market will be more miserable, reminding employees to "give up illusions about the fierceness of market competition". At the previous Guangzhou Auto Show, a number of car company executives publicly stated that the price war will still be the main theme of the auto market in 2024. Liu Jie, vice president of commercial of Li Auto, judged that 2024 will be a key stage of the "knockout game" of new energy, while Yi Han, vice president of marketing of Xpeng Motors, predicts that the price war has become an irreversible trend.
Market institutions have different expectations for next year.
In the latest research report, SDIC Securities predicts that the profitability of vehicle companies is expected to continue to rise in 2024, first, the number of new models in 2024 is relatively small, the competition tends to be moderate, the probability of further preferential treatment of joint venture car companies is low, and the pressure on independent brands to reduce prices is small; second, the sales structure is expected to be further upgraded, and high-end models will drive profits upward; third, the price of raw materials such as lithium carbonate will decline, the technology of vehicle enterprises will continue to iterate, and the ability to control suppliers will be enhanced, and the cost is expected to continue to decline.
A few days ago, Fitch Ratings said in a research report that the competition in China's auto market will continue to intensify in 2024. Fitch believes that intensified competition is likely to weigh on market share and profitability of Chinese OEMs in the near term, weakening their cash generation capacity in the face of higher investment demand, and that JVs may continue to face challenges, with some leading JVs regaining market share with their aggressive EV transition targets, but their profitability will weaken due to lower margins on traditional combustion vehicles and increased exposure to low-profitability EV businesses.