BMW withdrew from the price war, domestic car companies should not be happy too early, and greater challenges are ahead

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2024-07-23 22:27Posted in Guangdong science and technology creators

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01BMW's withdrawal from the price war has triggered a reflection on the continuous price reduction strategy of domestic car companies.

02 However, domestic car companies still face shortcomings in the field of key components and automotive chips in the field of new energy vehicles.

03Due to the price war, the losses of some dealers have intensified, which may affect the after-sales service system.

04 BMW's sales in the Chinese market have risen, indicating that consumers are seeking a premium for their brand.

05Domestic car companies need to pay attention to the underlying research and development to ensure the development of stamina and core competitiveness.

The above content is generated by Tencent's hybrid model and is for reference only

Text/Wang Xinxi

BMW's withdrawal from the price war has recently sparked a series of cynicism. Many people think that BMW does not roll the price, but is ready to roll and cover home. There is also a view that BBA will withdraw from the Chinese market due to the fact that BBA is only targeting high-end people and is further squeezed by domestic trams due to its high price market share.

But at present, the price war of domestic car companies has also reached the time to step on the brakes.

BMW withdraws from the price war and doesn't play, how should Chinese car companies play?

In the past, the price of Audi A4L naked cars dropped to less than 200,000 yuan, and the price of Mercedes-Benz C-class cars was about 200,000 yuan, with a price reduction of more than 100,000 yuan.

In this round, BMW took the lead in withdrawing from the price war, because the price war was becoming increasingly fierce and dealers could not afford to lose.

Under the price war that lasted for two or three years, BMW's profits continued to decline. In 2023, BMW's revenue will be 155.5 billion, a year-on-year increase of 9.04%, and its net profit will only be 12.17 billion, a decrease of 34.53%. In the first quarter of this year, revenue was 36.61 billion, down 0.65%. net profit was 2.951 billion, down 19.42%.

Behind the decline in profits, it is due to the fact that under the 4S model, if the car market is good, dealers generally do not give too many discounts themselves. In the past two years, dealers have to give additional discounts in order to complete the manufacturer's tasks, according to the data of the big Souche Zhiyun platform, in May this year, the discount rate of luxury brands is higher, Beijing Benz, BMW Brilliance, FAW Audi discount rates are 18.6%, 25.7% and 26% respectively; Therefore, when buying a new car, most luxury car dealers may be in a state of losing money, and 4S stores rely on after-sales and value-added business to support. Dealers' losses have intensified, and if no action is taken, there is a high risk of repeating the mistakes of Porsche dealers' rebellion.

The second is that the old car owner was stabbed in the back, which triggered the owner's rights protection action, and the BBA dealer fell into the dilemma of "buying one and losing one", and some 4S stores even closed down and ran away, which affected the after-sales service system of BBA.

Behind the price war and the decline in profits, the luxury cars represented by BBA have not achieved the first echelon of product power in the field of new energy vehicles. The sales of blockbuster products such as BMW i3 and Mercedes-Benz EQE in the Chinese market have always fallen short of expectations. BBA's BEVs have also been ridiculed as "motley electric vehicles" in the past.

Nowadays, BMW, which does not fight a price war, has seen more sales, more people are looking at cars, and stores have reported that orders have skyrocketed.

BMW, Mercedes-Benz and Audi are regarded as "luxury cars" in China.

This is also why BMW has increased prices this time, and more people have seen cars. For BMW, the more important thing in the future is to improve the quality and product strength of the car, and then rely on the brand advantage to win the market without reducing prices, which may be the direction of these foreign brands.

The question now is that foreign car companies are no longer playing, and one question left for Chinese car companies is, should the price war continue to be fought and how to play? Judging from the current Chinese auto market, the continuous price war is leading to the continuous cost and cost of the auto industry, and it is difficult for us to predict what the consequences will be.

According to data released by the National Bureau of Statistics a few days ago, from January to May this year, the profit margin of the automobile industry was 5.3%, which is still low compared with the average profit margin of 6.1% of downstream industrial enterprises. Among China's NEV companies, except for BYD and Li Auto, none of the other listed Chinese NEV start-ups are profitable.

Some time ago, the Beijing News reported that the mixed use of oil tankers has aroused widespread heated discussions among the public, behind which is to save the cost of washing tanks of hundreds of yuan, mixing kerosene tankers with edible tankers, completely ignoring public health, the reason is that domestic edible oil profits are scarce, and can only reduce costs in various links in the supply chain to obtain profits.

BMWs are no longer rolling prices, but it is a signal that the auto industry is moving towards healthy competition

For car companies, if there is no profit, there is no sustainable R&D investment, and without R&D investment, it is difficult to obtain a sustainable competitive advantage in products. In order to maintain the price advantage, the only way to reduce allocation and cut corners may be the only way in the end. However, on the one hand, the reduction is due to the potential safety hazards brought by the product itself, and on the other hand, it may lead to the inability of new energy vehicles to continue to gain a firm foothold in the high-end market.

For BMW itself, as a high-end luxury brand, to maintain sustainable competitiveness, there is a profit to do a good job in products, a good product to export to earn foreign exchange, many people do not know that a large number of BMW China factory cars are exported to Europe and the United States, to the national and local income of huge foreign exchange, to all links of the industrial chain to bring benign profits and revenue. BMW has been helping China's supply chain to go global in the past, and has even conducted sustainability reporting in China for 11 consecutive years.

BMW's exit from the price war is also due to its large investment in China, and it needs to make a profit to survive. BMW has invested more than 100 billion yuan in Northeast China over the years, invested 10 billion yuan to build the sixth generation power battery project last year, and invested 20 billion yuan this year to carry out large-scale upgrading and technological innovation of its production base in Shenyang. The money was not borrowed and did not bring any burden to the place. Compared with many companies that come to the Northeast to cheat money and land, and run out to make some money, BMW is undoubtedly much better to invest and take root in the Northeast.

Compared with BMW's large-scale investment in Northeast China, most of the domestic new power car companies are located in first- and second-tier coastal cities, and not many are willing to go to Northeast China.

This also proves that BMW is a foreign-funded enterprise that embraces China's supply chain, and there are not many foreign-funded car companies like BMW that can drive the employment of millions of people in Northeast China and the development of the industrial chain.

Today, the price war has been fought for two or three years, many car companies in the "quagmire" deeper and deeper, unable to get out, "anti-involution" has become a common voice, BMW started, triggering a series of joint venture car companies chain reaction, and domestic car companies may also follow up, collectively step on the brakes.

The state has repeatedly emphasized healthy development, healthy development is to ensure profits, BMW is not rolling prices, but is a signal that the automobile industry is moving towards healthy competition.

Volume prices are not a sustainable competitive route, and deeper challenges for Chinese automakers lie ahead

Many car companies may feel that the joint venture car companies withdraw from the price war, leaving a bigger cake for the domestic car companies that fight the price war, but don't be happy too early, the current domestic new energy car companies, due to the price war profits have been diluted, in the field of key components and automotive chips on the shortcomings are still obvious. Some time ago, the "Japan Economic News" quoted Gasgoo data as saying that the current proportion of power semiconductors that control current and affect the performance of new energy vehicles is only about 15% in China, and the localization rate of cutting-edge chips used to achieve functions such as automatic driving is less than 5%.

Therefore, the automotive supply chain still needs to have more profits to do in-depth R&D investment, China is rapidly promoting intelligent driving and unmanned driving, and the essence is also to hope to grab the lead in the field of power semiconductors and automotive chips.

In particular, the industry revealed that if Trump enters the White House, the automotive industry may have to face extreme pressure in the future, and it is necessary to do a good job in chip autonomy investigation, which is a tough battle for domestic car companies. In the face of hard decoupling, most of the domestic new energy vehicle companies such as Ideal, Weilai, and Zeekrypton use chips from Nvidia and Qualcomm 8195 and 8295. If Trump comes to power, the big challenge left to domestic car companies is coming.

Therefore, BBA, Honda, Toyota, Volkswagen and other joint venture car companies let Chinese car companies roll themselves, if Chinese car companies only want to continue to use the price war to grab more markets, and do not pay attention to the underlying research and development, trouble may come.

In the market development period, many new power car companies need to use data sales to draw cakes for investors because they do not have the status of the rivers and lakes, and they need to let everyone see the prospects of car companies, which is useful in the early stage.

But now the car price war has been fought for two or three years, except for a few car companies such as BYD, whether it is Xiaopeng, Weilai, GAC Aion, Nezha, etc., most of them have not yet escaped such a state of survival danger.

At present, behind the large sales of domestic head car companies, it is based on the national dealer network, new cars are pressed to dealers, forcing dealers to fight price wars, but many dealers do not make money, if these joint venture car companies are rolling product quality and quality, and at the same time can survive, these dealers see that others can make money without rolling prices, will they choose to withdraw from the network and delist?

Our automobile industry has passed the period of savage growth, whether it is the country's policy guidance, or to compete for overseas markets, it is determined that we will take a higher quality road.

However, under the smoke of the price war, many car companies have not seen a rise in R&D investment, losing money and making money, judging from the financial data of 6 listed car companies counted by Alix, only two car companies have achieved profitability, and other car companies are burning money, which is a more serious problem.

If you don't step on the brakes, under the vicious circle, only a very few car companies have independent research and development capabilities, and many companies may face a situation of clearing, not to mention that they will face a series of challenges in overseas markets in the future.

To ensure their own development stamina and underlying core competitiveness, so that they are not controlled by others in key components, whether there are enough profits to feed back the entire supply chain and dealer network, so that the industrial chain can develop and upgrade benignly, this may be worthy of the long-term layout and thinking direction of the domestic automotive industry.

Author: Wang Xinxi, Senior Reviewer of TMT This article is not reproduced without permission

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