The "price war" in the auto market is intensifying. On the eve of the opening of the 2024 Beijing Auto Show, the two car companies revealed the heavy news of price cuts: on April 21, Tesla China announced a price cut of 14,000 yuan for all models, and the price of the adjusted Model 3 refreshed version is only 16,000 yuan higher than the price of the Xiaomi SU7 standard version......; This is equivalent to the total scale of price reductions in 2022. Cui Dongshu, secretary general of the National Passenger Car Market Information Association, pointed out that unlike last year, this year's price reduction is mainly pure electric and plug-in hybrid and other new energy models, and there are few fuel vehicles, and independent brands and new car manufacturers are the main force to reduce prices, and joint venture brands have fewer price reductions.
01
Price reductions reached an all-time high in the first quarter
It is reported that the price reduction of domestic passenger cars in 2024 will reach a climax in February and March, with a total of 27 models reduced in February and 37 models in March, in the words of Choi Dongshu, "reaching an astonishing level in history".
It is understood that only two days after the Xiaomi SU7 press conference, car companies released price reduction information at the same time as if they had discussed: Wenjie announced that the new M7 entry version dropped by 20,000 yuan, and Weilai gave a subsidy of up to 1 billion yuan for the replacement of oil vehicles; Wuling Automobile officially announced that its Wuling Binguo launched a maximum of 10,000 yuan preferential activities, and the price range after subsidies is 55,800 ~ 83,800 yuan;Zeekr Automobile announced that its Zeekrypton 007 launched a rear-wheel drive enhanced version, and the official guide price is 209,900 yuan, which is equivalent to a disguised price reduction of 20,000 yuan; Subsequently, Geely Automobile gave a discount of 14,000 ~ 53,000 yuan for its Emgrand L, Xingyue L, and Haoyue series. In addition, Chery, Jiyue, and even Volkswagen have also started the price reduction mode, and the lowest price of Volkswagen Lavida is only 79,900 yuan.
In this regard, Zhang Junyi, managing partner of Oliver Wyman, said that part of the reason why car companies chose to reduce prices in these days is to grab these users before the "7-day no reason to cancel the subscription period" of Xiaomi SU7. Once the 7-day deadline has passed, the order of Xiaomi Auto will be locked. However, in the larger context, it must be price changes to boost sales and lay a good foundation for market performance in the second quarter.
In fact, long before the official announcement of the price of Xiaomi Automobile, new energy vehicle companies have already "fought" a round of price war. On February 19, BYD put forward the slogan of "electricity is lower than oil", announcing that the price range of Qin PLUS DM-i Glory Edition is 79,800 ~ 125,800 yuan, and the price range of Qin PLUS EV Glory Edition is 109,800 ~ 139,800 yuan, officially "killing" into the price range below 80,000 yuan; Zhou Yu, deputy general manager of SAIC-GM-Wuling Brand Division, immediately posted: "One word, with! Subsequently, the Wuling Xingguang 150km advanced plug-in hybrid sedan was reduced to 99,800 yuan, 6,000 yuan lower than the original price of 105,800 yuan; Nezha Automobile took the initiative to follow up and announced price reductions for a number of main models, among them, the price of Nezha X was reduced by 22,000 yuan, the price of Nezha AYA was reduced by 8,000 yuan, and the price of Nezha S was reduced by 5,000 yuan. At the same time, Nezha Automobile launched a hedging and redemption policy, saying that from now on (February 19) to March 31, 2024, the purchase of Nezha S and Nezha GT models can enjoy the right to purchase all new cars of Nezha Automobile at a 7% discount on the opening price within 2 years; In addition, Geely Automobile launched a new model of Emgrand L HiP Longteng Edition, and the price of the entry-level version was lowered by 20,000 yuan from the previous price to 89,800 yuan.
"In the first quarter of this year, the scale of price reductions for domestic passenger cars has exceeded 60% of last year, which is equivalent to the total scale of price reductions in 2022." According to Cui Dongshu's observation, as of March, there are not many models with price reductions, and there are some fuel vehicles in late March, but they are mainly concentrated in the field of new energy vehicles, and there are relatively few fuel vehicles. He added that price competition is mainly to directly break through the lower limit of the original price, rather than the model of increasing allocation without reducing prices. Therefore, he is only concerned about the situation that the new car is launched to break through the lower limit of the price in the early stage, that is, the price reduction in the narrow sense, as for some new cars to be listed in the first two years is very cheap, and then the price is raised, and then the price is reduced, if it does not break through the floor price when it is listed, in order to facilitate the calculation, it is not considered a price reduction.
02
The price reduction promotion can't stop
According to incomplete statistics, in April, nearly 40 auto brands and a total of 128 car series have announced discounts, subsidies or price reductions. Cui Dongshu analyzed that in the first quarter of this year, the promotion of new energy vehicles gradually reached a high level, and the degree of promotion has continued to increase in recent months, especially in March, and has now reached the historical high promotion level after September 2021. In contrast, the promotion of traditional fuel vehicles has rebounded sharply from August 2023 and has decreased to 18.3% month-on-month in February this year, but it is still at a recent high level.
A few days ago, the Shenzhen Price Identification and Monitoring Center issued a document saying that after investigating and inspecting the automobile market, it was found that the price of new energy vehicles in Shenzhen has generally fallen since the beginning of this year. Data show that since the beginning of this year, the price of new energy vehicles in Shenzhen has generally fallen by about 5%~10%. Among them, the price of 10 new energy vehicles monitored fell, and the largest decline was BYD Song PLUS new energy (DM-i 110km flagship type), with the price falling from 154,800 yuan at the beginning of the year to 139,800 yuan, a decrease of 9.69%.
From the supply side, the output of new energy vehicles in mainland China will be 9.443 million units in 2023, an increase of three percent over the previous year. According to the data, in 2024, the planned delivery volume of BYD, Wenjie, and Ideal will increase by 2.3 million vehicles, while the market demand is forecast to increase by only 2.1 million vehicles, and the market will be in a state of oversupply for a long time. In addition, the price of domestic battery-grade lithium carbonate began to decline after reaching a peak at the end of 2022, compared with the peak price of nearly 600,000 yuan/ton, it has now dropped to about 100,000 yuan/ton, a decline of 80%. According to industry feedback, the price of lithium carbonate is reduced by 100,000 yuan per ton, and the manufacturing cost of a pure electric vehicle with a battery capacity of 70kWh can save nearly 10,000 yuan.
On the other hand, from the perspective of the supply side, relying on the foundation of the electronic information industry, the mainland has formed a "three electrics" and "three intelligences" industrial chain with large new energy vehicle manufacturers as the main chain, as well as supporting industries such as charging piles. For example, BYD's advantages in the integration of the whole industry chain in the field of new energy vehicles, as well as the cost advantage brought by the growth of sales scale, give BYD the initiative in product pricing. Based on this, the Shenzhen Price Identification and Monitoring Center predicts that the competition for new energy vehicles will be extremely fierce in 2024, and predicts that the "price war" may be carried out in various forms, including price reduction promotions and positioning exploration.
03
I only see sales, but I don't see profits
The industry generally believes that the "price war" has a limited effect on the increase in sales, and even causes a counter-effect, making consumers have a wait-and-see mood. The effect of "price war" on short-term sales increase is actually not obvious, especially in the case of price instability, consumer wait-and-see sentiment is particularly strong, so the price reduction model may bring its own sales growth, but consumers will form an obvious wait-and-see situation for other related models, and as a result, related models have to reduce prices, if the price is not reduced, it will not be sold. Cui Dongshu bluntly said that some companies may rely on products to survive, but some companies may have to take price reduction measures, resulting in market stagnation, and then falling into the cycle of consumers waiting for further price reductions, affecting the healthy and sustainable development of the car market.
Judging from recent industry reports, price reductions do not have much gain on users' car purchase decisions, and even have a negative effect, and consumers of mid-to-high-end models are not sensitive to price fluctuations. Zhang Junyi said frankly that for ordinary consumer goods, price reduction and increment is a normal phenomenon. If it is a luxury product, then the price reduction may reduce the volume, and the price increase will increase. Applying an analogy to automobiles, this also explains why "price wars" gain for the entry-level market but are of little use for the high-end market. Moreover, people who buy luxury cars not only consider the model product, but also care about the brand experience, service and other hidden benefits in the future. On the other hand, new car owners will indeed get benefits after the price reduction, but old car owners will inevitably feel stabbed in the back, affecting brand loyalty. Therefore, the "price war" is a double-edged sword.
What is even more worrying is the damage to the long-term development of enterprises after they drive down prices in order to compete for the market. According to the data of the National Bureau of Statistics, the profit margin of the automotive industry in January ~ February 2024 is 4.3%, compared with the profit margin of 8.7% in the automotive industry in 2015. According to the financial report data, in the first quarter, only 14 of the 24 listed car companies in the A-share automobile sector achieved net profit growth, accounting for less than 6 percent.
thereinto Changan Automobile's cumulative sales in the first quarter reached 692,100 units, a year-on-year increase of 13.9%, but the net profit was only 1.158 billion yuan, a sharp decrease of 83.39% year-on-year, becoming one of the enterprises with the most serious decline in net profit in the A-share automobile sector; SAIC Motor Group is the same, the first quarter of the terminal cumulative delivery of 1.132 million vehicles, a year-on-year increase of 9.3%, the new energy sector is outstanding, sales of more than 210,000 units, a year-on-year increase of 47.9%, but in the reporting period, SAIC Group's operating income of 138.984 billion yuan, down 1.19%, net profit of 2.714 billion yuan, down 2.48% 。 "Although the current production and sales performance of the auto market is good, the feeling of car companies is not good." Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said recently that since BYD started a new round of "price war" at the beginning of the year, the market price competition has been extremely fierce.
However, it is worth mentioning that the financial report data of the leading player BYD is still bright, with operating income of 124.94 billion yuan in the first quarter, a year-on-year increase of 3.97%, and a net profit attributable to the parent company of 4.569 billion yuan, a year-on-year increase of 10.62%. What makes peers even more envious is that the general price reduction of 20,000 ~ 30,000 yuan for the main models does not seem to affect BYD's profitability. According to the financial report data, BYD's gross profit margin in the first quarter was 21.9%, a year-on-year increase of 4 percentage points, almost reaching the peak state of BYD since its establishment.
04
Costs are reduced to the extreme
In the face of the "price war", Zhao Yifan, general manager of SAIC-GM-Wuling's product marketing center, said that the price of the new car was not finalized until the day before the auto show, and almost "it changes every two minutes".
However, for car companies, the confidence of the "volume" price comes from the higher cost control ability. Shao Jie, chief technology officer of SAIC-GM-Wuling intelligent platform, said that firstly, at the supply chain level, strategic cooperation is carried out on the basis of the direct procurement model, and the front-end definition and R&D verification are done to allow the supply chain to provide targeted products, thereby reducing costs; On the other hand, the integration of parts and components has also had a positive effect on the cost control of enterprises. In the past, the car was composed of individual parts, but now it is a complete vehicle system, which can eliminate some unnecessary and non-value-generating parts. "The concept of building a platform for building a car can make each component achieve optimal design, which is very important for car companies." Shao Jie said.
In this regard, Zhu Yunyao, deputy chief engineer of the China Automotive Research Institute Political Research Consulting Center, once wrote an analysis that the return of upstream raw material prices for new energy vehicles and the large-scale cost reduction of parts and components are one of the factors driving this round of "price war". It is understood that in the past three years, the price of upstream raw materials for power batteries has experienced rollercoaster fluctuations, and has gradually recovered to the price range before the surge in the near future. For example, lithium carbonate rose from 50,000 yuan/ton to 600,000 yuan/ton, and now it has fallen to less than 100,000 yuan/ton; In 2022, rare earth prices soared, and after the second quarter of 2023, rare earth prices dived, and the price of drive motor magnets gradually returned; The price of automotive lidar continues to decline, from tens of thousands of yuan/piece to less than 4,000 yuan/piece, and in 2022~2023, the cost of forward radar and corner radar will drop by more than 10%.
"When the scale of the new energy vehicle market is small, external procurement and supply is the mainstream choice logic for risk reduction and light assets, but at present, the new energy vehicle market has been fully rolled out, and new energy vehicle companies with core supply chains have more competitive advantages." For example, in 2023, the sales volume of BYD Qin Plus will reach more than 450,000 units, and among the top ten models in global new energy vehicle sales, BYD has 6 models on the list.
However, it cannot be ignored that the pressure of "cost reduction" is not borne by vehicle companies alone, and the upstream of the industrial chain has also suffered a lot of damage. According to media reports, a senior Bosch executive once revealed in an interview with the media that some OEMs asked to reduce the supply price by 30% this year, "then we might as well go out of business." According to incomplete statistics, affected by the macroeconomy, the transformation and upgrading of the automotive industry and cost pressures, in the first three months of this year, five suppliers of Bosch, ZF, Freya, Valeo and Continental have announced layoff plans, totaling as many as 30,000 people.
05
A new market landscape is emerging
In Zhu Yunyao's view, the "price war" in this round of the vehicle market is fundamentally different from that in 2023, and the impact will be more far-reaching, mainly reflected in six aspects: first, in terms of supply chain structure, the demand for large-scale enterprises to strengthen the supply chain is becoming more and more intense, and the upstream suppliers of new energy and intelligent networking will be further pressured; Secondly, in this round of "price war", especially the advantages of A-class plug-in hybrid vehicle products, will quickly force the transformation of traditional A-class fuel vehicles to electrification, and the new energy vehicle market will also usher in more consumer demand; Third, in terms of product development, short-range plug-in hybrid and long-range electric vehicles will become one of the driving points. Fourth, in terms of product brands, new energy vehicle brands have evolved from high-end to mid-end, and the mid-end to low-end is moving closer, and low-end brands are more difficult; Fifth, in terms of business operations, some independent vehicle enterprises, marginal joint venture vehicle enterprises and foreign parts suppliers will face greater pressure; Sixth, in terms of the value system of second-hand cars, new energy vehicles and low-end traditional fuel second-hand cars will usher in a comprehensive impact.
"The fundamental reason for the recent 'price war' in the passenger car market is that new technologies replace old technologies, and the process of replacing fuel vehicles with new energy vehicles. Cui Dongshu believes that the price reduction will inevitably bring about an increase in model sales, especially after the price is relatively stable, and the market sales will gradually start. Looking back at the beginning of 2023, after the wave of price cuts, the price stability brought about a further increase in sales, and then the auto market continued to recover, until it reached a recent high in December last year. Therefore, he comprehensively judged that the comprehensive contribution of price reduction still has a certain effect.
Cui Dongshu predicts that with the gradual maturity of the market segments of various technical routes of new energy vehicles, new models will greatly enrich consumer choices, and the homogenization brought about by the increase in product supply will also intensify competition. "This year's 'price war' is likely to be carried out in a multi-mode mix such as price reduction promotions and positioning exploration, and new energy manufacturers will package more rights and interests to stabilize product prices." Cui Dongshu said.
Jiang Han, a senior researcher at Pangu Think Tank, explained in an interview with the media that a healthy "price war" usually goes through three stages: first, "price for volume", and sales volume has increased significantly in the short term; In the second stage, a winner emerges, and with the end of a round of "price war", the market share will eventually gradually concentrate on the top strong brands; Third, some backward enterprises are facing marginalization or even withdrawing from the market, the industry pattern is optimized and adjusted, the weak are eliminated, and the strong are stronger. "Although the first phase of the 'price war' is still not over, the winners of the second phase are already emerging." Jiang Han's judgment is that the "price war" will continue in the second quarter of this year, and the situation of enterprises increasing income but not increasing profits will still exist.
Text: Shi Yunyun Editor: Chen Wei Layout: Wang Kun
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