After experiencing this price storm, some people finally understood what they should and should not do.
BMW was the first to wake up. Starting from July, BMW was willing to reduce sales volume in order to stabilize prices. It also took the initiative to reduce the pressure on dealers and lowered the wholesale sales tasks and rebate thresholds.
Perhaps they have already understood that if they want to engage in a protracted price war, domestic brands can afford it, but they cannot. This will not only undermine the brand's appeal, but will also betray their dealer partners who have supported them for many years.
The conclusion is that it is not right to do it for that little sales volume.
So the BMW i3 priced at 170,000 yuan is no longer available. We visited several dealerships and the sales staff quietly stopped promoting price cuts.
Not only BMW, but Mercedes-Benz and Audi have also begun to stabilize prices and voluntarily withdraw from price wars, which has become a decision made after careful consideration.
It seems that this fierce price war has to be put on hold from BBA.
01. After the price increase, more people are looking at cars?
In response to the claim of “exiting the price war”, BMW China said that it will focus on business quality in the second half of the year and support dealers to make steady progress.
This response also indirectly verifies the fact of withdrawing from the price war.
Dealers are also more confident in raising prices to sell cars. For example, in some stores in Shanghai, the price of BMW X3 has directly increased by 30,000 yuan, and other models have increased by at least 5 points.
One netizen said that he had his eyes on a BMW 325 standard wheelbase sports car. The price of the bare car plus various taxes, insurance, etc. was 257,600 yuan, plus two years of interest, a total of 275,600 yuan. This price was more than 10,000 yuan more expensive than when he looked at it last month. At the same time, he also went to other stores, but the prices were relatively high and there were no cars in stock.
According to a salesperson at a Chongqing store, BMW's discounts will be greatly reduced in the second half of the year. Starting from July, the price of the 5 Series will increase by at least 20,000 yuan, and the price of each i3 will increase by 30,000 yuan after the production cut; the 3 Series will undergo a second generation upgrade in September, and the price is currently stable. The new X3 will be launched in China next year, and the price of the X3 models on sale will remain stable, while the price of each X5 will increase by more than 20,000 yuan.
For cars that are unsaleable and have expired inventory, manufacturers will take them back from dealers and will not allow them to be sold at random prices due to inventory pressure.
In addition, several BMW sales representatives have confirmed that car prices have indeed increased, and some even increase on a daily basis. Even on the same day, the prices in the morning and afternoon are different.
However, what is strange is that after the BMW price increase, more people came to look at the car. Recently, there was a new trending search on Weibo:After BMW raised its prices, more people came to see the cars.
Image source: Xiaohongshu
A BMW salesperson in Yangzhou said that with prices adjusted three times a day, the number of new orders at his 4S store last Sunday (July 14) increased by 133% compared with the previous weekend's single-day increase in new orders.
Some bloggers on Weibo also said that BMW’s price increase has indeed resulted in more orders.
However, BMW's price increase has made some happy while others worried.
The happy people are naturally the lucky car owners who successfully bought at the bottom before the price increase, but there is another group of people who are stuck in the sensitive period of price reduction and price increase.
Many netizens said that they had paid a deposit before the price increase, but when they went to pick up the car, the salesperson told them that the price was invalid and they could not pick up the car without paying more money.
One netizen said that he ordered a 525i at the end of June. Due to the recent price increase, the 4S store refused to deliver the car and hinted that he needed to pay extra to pick up the car.
Many netizens responded in the comment section that they had encountered the same problem, and some prospective car owners even returned their deposits in anger.
Some people turned to Mercedes-Benz and Audi after seeing the price increase of BMW.But now Mercedes-Benz and Audi are also preparing to follow BMW's pace of price increases.
A salesperson at an Audi 4S store in Jinan told the Super Electric Laboratory that Audi has just issued a new policy. The A4L 40 luxury version, which was discounted to 228,000 yuan last month, has now increased to 243,000 yuan.
The Audi Q5L 40 Fashion Edition now has a bare car price of 255,000 yuan, which is more than 10,000 yuan more expensive than in June. The bare car price of the Q3 has increased by 6,000 yuan, but the prices of imported cars are relatively stable, and even the A5 40 Fashion Edition has dropped by 8,000 yuan.
Mercedes-Benz is also ready to take action. A salesperson at a store in Beijing said that they had received a price increase notice, but the specific increase and time were still unclear.
02. Price war is not worth the effort
BBA's collective withdrawal from the price war, although unexpected, is also reasonable.
Let's recall the beginning and end of BBA's “price-for-volume” strategy. A while ago, the bare car prices of the BMW i3, priced at RMB 353,900 to RMB 413,900, and the BMW iX1, priced at RMB 299,900 to RMB 339,900, were both reduced to around RMB 170,000 and 180,000 respectively. The bare car price of the BMW X1, which starts at RMB 288,900, has reached over RMB 190,000. The 5 Series and i5, which were launched in January this year, have terminal discounts of up to 25%.
In terms of data, in the first half of this year, the sales of BMW and MINI in the Chinese market were only 375,947 units, a year-on-year decrease of 4.2%. In the second quarter, the sales fell by 4.7% year-on-year. In contrast, the global sales of the BMW brand reached 1,096,486 units in the first half of the year, a year-on-year increase of 2.3%, and the sales of pure electric models increased significantly by 34.1%.
Therefore, simply using price cuts to boost sales will not be very effective for BMW.
Not only BMW, the Mercedes-Benz C200L, which started at 334,800 yuan, is now priced at 202,700 yuan, a drop of nearly 40%. The Mercedes-Benz EQB 260, which had a guide price of 352,000 yuan, can even be reduced to 176,000 yuan. A Mercedes-Benz dealer said that after the price cut, customer flow dropped by about 50% year-on-year, and the order conversion rate was even lower. In June, only 20% to 30% of the orders were completed.
An Audi sales representative revealed that currently the store loses about 20,000 yuan for each car sold. The operating pressure at the terminal has been too great for a long time, and the dealers may collapse before they win the price war.
Price cuts were once a weapon for BBA to retain their market share, but they are like a double-edged sword. Last year, BMW's discount rate was as high as 17.66%, far exceeding the industry average. However, trading price for volume only resulted in a 4% year-on-year increase in BMW's deliveries in China last year, but net profit fell by more than 30% year-on-year, and the EBIT margin of the automotive business was also lower than market expectations.
The same is true for Mercedes-Benz and Audi. In 2023, Mercedes-Benz sold 765,000 vehicles throughout the year, but its profit fell by 1.9%. Behind Audi's 13% year-on-year sales growth, its revenue fell by 20.6% year-on-year.
The situation is like this for car companies, and used car dealers are even worse off.
BBA's “56E” (BMW 5 Series, Audi A6L and Mercedes-Benz E-Class) and “34C” (BMW 3 Series, Audi A4L and Mercedes-Benz C-Class) have always been the hard currency in the used car market, and there is no worry about selling them. Even used car dealers will worry about not being able to receive the cars.
But after the collective price plunge, more people turned around and bought new cars directly. A used car dealer in Beijing admitted, “It's not just the customers themselves. After the BBA's value retention rate dropped, we even advised customers to buy new cars.”
Because the price of used cars is linked to the price of new cars, when the price of new cars drops, the price of used cars also drops. Some salesmen said that they sometimes adjust the price two or three times in a week. In the past two months, the price has dropped by 40,000 to 50,000 yuan.
At the same time, with the rise of new forces, Ideal and Wenjie also began to encroach on BBA's market share. The brand effect of BBA used cars was caught up and the value retention rate also declined.
Based on the data released by the automobile data service platform Jingzhengu and the China Automobile Dealers Association, based on the three-year age of the car, the value retention rate of all luxury brands will drop across the board from the end of 2023 to June 2024, with a general drop of more than 3 percentage points. Among them, BMW's drop reached 3.7 percentage points.
All signs indicate that it is time to end the price war among BBA.
03. Luxurious Defense Battle
“If you don't work harder, you can only buy BBA.”
This is a meme that has been circulating on the Internet in the past two years. Although it is a joke, it caused the brand value that BBA spent nearly a hundred years to build to collapse overnight.
Previously, BYD Chairman Wang Chuanfu said, “If luxury brands are sold at a discount, what about your brand (value)?” So for luxury brands, making concessions without bottom line is more like draining the pond to catch fish.
For consumers, they spent hundreds of thousands to buy a luxury brand a year ago, but before they could enjoy the “social status” brought by the brand, the manufacturer frequently cut prices and offered discounts. The momentary sense of success will soon be replaced by regret for being “cheated”, and the brand premium will be instantly shattered.
According to members of the expert committee of the China Automobile Dealers Association, the average transaction price of BBA has been falling year after year. In 2021, the year with the highest weighted average transaction price of BBA, the average transaction prices of Mercedes-Benz, BMW and Audi were 464,000 yuan, 461,000 yuan and 337,000 yuan respectively. In the first half of this year, they were 434,000 yuan, 351,000 yuan and 301,000 yuan respectively, all of which showed a significant drop.
What is more embarrassing is that these luxury brands have adopted a market strategy of “trading price for volume”, but this has not resulted in an increase in sales. Instead, most consumers are “wait-and-see”, and potential consumers believe that “there is still room for decline”. Once such expectations are formed, the negative impact on the brand image is getting bigger and bigger.
Not long ago, the automobile market data service organization Jielandu released a research report on the health of new energy vehicle brands in the first half of 2024. It mentioned that in terms of brand awareness, the awareness of traditional brands represented by BBA has generally declined, while the brand awareness of new car manufacturers “Weixiaolimi” has remained in a higher scoring range.
Losing both the wife and the army is obviously not a good deal. The more urgent issue facing BBA now is to establish its own luxury brand tone.
You know, for consumers who pay more attention to brand value and quality, price is not the only consideration.
For example, BMW's 3 Series or i3 was originally positioned for users above the 350,000 level. These users were attracted by the brand barriers and handling performance of the 3 Series. But when the price dropped below 300,000, the consumer group actually underwent subtle changes. These users may be more concerned about battery life and its economy.
However, the original advantages of the BMW 3 Series, its handling and experience, have not been highlighted, which has led to it being looked down upon by both customer groups.
It is better to stop losses in time than to quench thirst with poison. In this case, what car companies need to do is to re-evaluate their market strategies and brand positioning, and consider other ways to enhance their market competitiveness. “Defending brand value” has become a reasonable option.
However, for most industries involved in price wars, the transition from “reducing prices to maintain volume” to “reducing volume to maintain prices” is often followed by “falling both volume and price.”
Can the BBAs withstand it?