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 pressure on dealers and lowered 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 so for such a small sales volume. So the BMW i3 priced at RMB 170,000 is no longer available. We visited several dealers and the sales staff also quietly stopped promoting price cuts.
Not only BMW, but also Mercedes-Benz and Audi have begun to stabilize their prices and take the initiative to withdraw from the price war, which has become a decision after weighing the pros and cons. It seems that this vigorous price war has to press the pause button from BBA.
01 Are there more people looking at cars after the price increase?
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 indirectly confirmed the fact of quitting the price war. Dealers are also more confident to raise prices to sell cars. For example, in some stores in Shanghai, the price of BMW X3 increased by 30,000 yuan, and other models increased by at least 5%.
Some netizens said that they had their eyes on the 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, the total was 275,600 yuan.
This price is more than 10,000 yuan more expensive than the one he saw last month. He also went to other stores, but the prices were all higher 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 the i3 will increase by 30,000 yuan per car after the production cut; the 3 Series will undergo a second generation upgrade in September, and the price is currently stable.
The all-new X3 will be launched in China next year. The prices 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 BMW increased its prices, more people came to look at the car. Recently, there was a new trending search on Weibo: After BMW increased its prices, more people came to look at the car.
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.
There are also bloggers on Weibo who said that BMW's price increase has indeed led to more orders. However, BMW's price increase has also made some people 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 BMW's price increase, but now Mercedes-Benz and Audi are also preparing to follow BMW's price increase pace.
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 that cannot be afforded
BBA's collective withdrawal from the price war is unexpected, but also reasonable. Let's recall the whole story of BBA's “trading price for volume”.
A while ago, the bare car prices of the BMW i3 priced between 353,900 and 413,900 yuan and the BMW iX1 priced between 299,900 and 339,900 yuan were both reduced to around 170,000 and 180,000 yuan respectively. The bare car price of the BMW X1, which starts at 288,900 yuan, has reached more than 190,000 yuan. The 5 Series and i5 launched in January this year have terminal discounts of up to 25%.
As reflected in the data, in the first half of this year, the sales volume of BMW and MINI in the Chinese market was only 375,947 units, a year-on-year decrease of 4.2%.
In the second quarter, the sales volume fell by 4.7% year-on-year. In contrast, the global sales volume of BMW brand reached 1,096,486 in the first half of the year, a year-on-year increase of 2.3%, and the sales volume of pure electric models increased by 34.1%.
Therefore, simply reducing prices to boost sales is not very effective for BMW. Not only BMW, but also the Mercedes-Benz C200L, which starts at 334,800 yuan, is now priced at 202,700 yuan, a drop of nearly 40%.
The price of the Mercedes-Benz EQB 260, which has a guide price of RMB 352,000, can even be reduced to RMB 176,000. A Mercedes-Benz dealer said that after the price cut, the 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 reduction was once a weapon for BBA to maintain its market share, but price reduction is 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 its net profit fell by more than 30% year-on-year, and its automotive business's EBIT margin 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 not only bad for car companies, but also for used car dealers. 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 they are never worried about selling.
Even used car dealers were worried about not being able to receive 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 value retention rate of BBA 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.
Calculated based on a three-year vehicle age, according to data jointly released by the automobile data service platform Jingzhengu and the China Automobile Dealers Association, from the end of 2023 to June 2024, the value retention rates of various luxury brands will decline across the board, with a general decline of more than 3 percentage points.
Among them, BMW's decline reached 3.7 percentage points. All signs show that it is time to end the price war between BBA.
03 Luxurious Defense Battle
“If you don't work harder, you will have no choice but to 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 the year, they were 434,000 yuan, 351,000 yuan and 301,000 yuan respectively, all of which showed a significant drop.
What's even more embarrassing is that these luxury brands adopted a market strategy of “trading price for volume”, but it did not result in an increase in sales. Instead, it resulted in the “wait-and-see” attitude of most consumers, and potential consumers believed that “there is still room for decline.”
Once such expectations are formed, the negative impact on the brand image will become increasingly greater.
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 that have experienced price wars, after the transition from “lowering prices to maintain volume” to “lowering volume to maintain prices”, what often follows is a “drop in both volume and price”. Can BBA withstand this?