After the BMW i3 and i5 saw a significant price cut, almost in half, the news of their withdrawal from the “price war” made it a hot topic again.
BMW later responded officially that it will focus on business quality in the Chinese market in the second half of the year and support dealers to make steady progress.
Cailianshe reporters visited offline stores of three traditional luxury car brands, BMW, Audi and Mercedes-Benz.It was found that the offline BMW prices have been adjusted down, and because of this, some consumers who originally considered BMW have switched to Mercedes-Benz and Audi models.
However, Mercedes-Benz offline dealers also told reporters that they have been holding meetings to discuss adjusting prices. Audi dealers revealed that they need to clear out inventory and recover funds before the price adjustment.
BMW's price is adjusted back, while Mercedes-Benz and Audi will also raise prices after clearing out their inventory to attract customers
In June this year, the price cuts of traditional luxury models were on the hot search list many times. Among them, the BMW i3 caused heated discussions among the public because of its 50% discount, which was nearly halved. Less than a month later, the prices of many BMW models began to slowly fall back. Previously, some media people said that the stores suffered heavy losses due to the price war.Starting from July, BMW will reduce sales volumes to stabilize prices and ease operating pressure on its stores.
A BMW store salesperson in Shanghai told Cailianshe: “Take the i3, which is the most popular among people, as an example. The suggested price of the basic configuration model in 2024 starts at 350,000 yuan, and the lowest price at that time had dropped to less than 200,000 yuan. Now the price has been adjusted back to around 220,000 yuan. It is just a price adjustment, not an increase above the manufacturer's suggested price.”
The salesperson believes that this is just a normal price adjustment, not a “price increase”, and the price can still be negotiated. “We have preferential car purchase financial plans, such as a five-year loan. If you repay part of the loan in advance, you can directly waive interest for the next two years. This can also be regarded as a balance in the price.”
Another BMW salesperson said bluntly: “It used to be 'buy early and enjoy early', but now it's 'buy early and enjoy discounts'. We received an internal notice saying that there will be another round of price increases later.”
A consumer who was looking at cars told Cailianshe reporters: “Car prices are fluctuating greatly now, and the salespersons all said that the quotes are only for the day. I suspect that these salespeople are using the panic of price increases to urge buyers to place orders.”
The biggest beneficiaries of BMW's price adjustment are Mercedes-Benz and Audi. Some dealers did not follow BMW's price increase, and some models actually dropped by 5,000 to 10,000 yuan.
A salesperson at a Mercedes-Benz store said: “In order to grab customers 'sent' by BMW next door, all our colleagues' test drive appointments have been fully booked. From GLC to E series, most popular models have discounts, which are about 50,000 to 80,000 yuan lower than the previous suggested price.”
The salesperson added: “The current discount will be invalid after next week, and the boss is already in a meeting to discuss pricing. I think BMW has raised its prices, and Mercedes-Benz should not be far behind.”
Audi is also competing with Mercedes-Benz for BMW customers, but Audi's price cuts are much greater than Mercedes-Benz's. As Audi decides to fully switch to pure electric models in the even-numbered series, the Audi A4 and Audi A6 will be renamed the Audi A5 and Audi A7 series respectively.
Cailian reporter learned that the price discounts of Audi A5 and A7 in Shanghai range from 90,000 to 120,000 yuan, depending on the model and configuration. An Audi store salesperson told Cailian reporter: “Audi will definitely raise the price, probably in the near future. If the inventory is not cleared in time, the cars will be stuck in your hands, and there will be problems with capital turnover.”
Carmakers call for an end to price wars
Some industry insiders believe that the reason why BBA withdrew from the war, reduced sales and increased prices is not only to stop losses, but more importantly to maintain brand value.“The substantial price cuts of various models mean that the official price system has collapsed, which in turn affects the brand premium and has an adverse impact on consumers and dealers who have already purchased the car.”
At present, some dealers have been exposed to have cash flow problems.
In June this year, Zhuang Zhuping, after-sales manager of Yancheng Chengde Automobile Co., Ltd. of Senfeng Group, told the media that except for some electric vehicles that can make a profit, the sales of gasoline vehicles are basically loss-making. Since the outbreak of the epidemic, their company has lost about 5,000 yuan for each car sold, but the wages and commissions of 60 employees are paid normally, and the company's operating costs are about 1 million yuan per month.
On July 12, Guanghui Auto released its earnings forecast, predicting a net loss of 583 million to 699 million yuan in the first half of 2024. According to Guanghui Auto's official website, its sales brands include luxury brands such as Mercedes-Benz, Audi, Volvo, BMW, and Cadillac. The financial report shows that in the first quarter of this year, Guanghui Auto's revenue was 27.79 billion yuan, a year-on-year decrease of 11.49%; net profit attributable to the parent company was 70.9405 million yuan, a year-on-year decrease of 86.61%.
Guanghui Auto stated that the main reason was the slow recovery of automobile consumption during the reporting period, the decline in profitability of complete vehicles due to the industry's “price war”, and the squeeze of traditional fuel vehicles by the new energy vehicle market. The revenue scale declined but the cost was relatively rigid, resulting in a sharp decline in net profit attributable to shareholders of listed companies.
The latest VIA (Vehicle Inventory Alert Index) survey released by the China Automobile Dealers Association shows that in June this year, the domestic automobile dealer inventory alert index reached 62.3%, up 8.3 percentage points year-on-year. The inventory alert index is above the prosperity line, and the automobile distribution industry is in a recession. It should be noted that the inventory alert index of 62.3% is close to the data in November 2022 (65.3%).
Cui Dongshu, secretary-general of the National Passenger Car Market Information Joint Conference, said that the industry's destocking characteristics became increasingly obvious in June. The current structural adjustment pressure is being transmitted from the OEMs to the channel end more quickly, and dealers lack confidence in continuing to operate.
Some car companies have also begun to call for an end to crude price wars, allowing the Chinese auto industry to adhere to quality, service and sustainable development.
At the 2024 China Automotive Forum, Yang Xueliang, senior vice president of Geely Holding, said in his speech that lessons should be learned from the previous operation of the Chinese motorcycle industry. Crazy price wars and compressed profit margins are also compressed quality margins.We must study how to get rid of involution, get out of the vicious circle of involution, move towards a healthy competitive world, and get on a standardized development track. This is not only the responsibility of an automobile company, but also related to the future and destiny of the entire Chinese automobile industry. “