Luxury Car Brands Post-Price War: 2 Months On
Xiao Chen, who lives in Fujian, is planning to buy a Mercedes-Benz C260L this year.
In early July, he communicated with the 4S store and the on-road price was 288,000 yuan, which also included 5 minor and 5 major maintenance services.
However, he did not choose to place an order immediately but continued to wait and see.
But what he waited for was not a further reduction in the product's price, but the news of a price increase of tens of thousands of yuan.
Since late July, luxury car brands represented by Mercedes-Benz, BMW, and Audi have successively taken actions to withdraw from price wars.
Now that two months have passed, what is the current situation of these luxury brands in the market?
The impact of the price increase in June this year, the National Federation of Industry and Commerce Automobile Dealers Chamber of Commerce released a special research on "price inversion", showing that from 2023 to the first quarter of this year, the luxury brand "price inversion" situation is the most serious.
The so-called "price inversion" refers to the situation where the purchase price of goods is higher than the sales price.
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This phenomenon has long existed in the automobile industry and has become more and more serious with the continuous spread of the price war in the past two years.
However, as some luxury brands withdraw from the price war, the "price inversion" problem in the luxury car market has been alleviated.
On September 17th, a BMW 4S store salesman in Shandong told the Economic Observer that in the past two months, the store's discounts have indeed been adjusted, and the adjustment range of some models can reach up to 50,000 yuan.
The previous minimum on-road price of the BMW 530 leading version was just over 400,000 yuan, but now it needs to be about 430,000 yuan.
A consumer in Yunnan recently reflected on social media that he is preparing to buy a Mercedes-Benz C260L this year.
In June, he learned from the 4S store that the bare car price was 259,000 yuan, but now it has risen to 274,000 yuan.
It's not only in Yunnan, but also in many consumers in Fujian, Zhejiang and other places who have reflected that the price of Mercedes-Benz new cars in local 4S stores has risen.
It is worth noting that consumers in some areas do not feel the actual increase in the price of luxury brands this round.
On September 19th, a salesman at a Mercedes-Benz 4S store in Jiangsu told the Economic Observer that if customers choose installment loans and add some designated configurations, they can still continue to enjoy a very low bare car price.
If the loan is divided into 60 periods, the minimum bare car price of C260L only needs to be 250,000 yuan, and there is still room for negotiation.
According to the investigation of the Economic Observer, the adjustment strength of luxury brands in different provinces is not consistent.
In areas with very fierce competition, such as Beijing, the discount strength of each family has not been significantly reduced.
The Economic Observer learned on September 17th that the minimum bare car price of BMW 325i is 215,000 yuan, and the on-road price is less than 250,000 yuan, which is basically consistent with the price level in the first half of the year.
In the first complete sales month after withdrawing from the price war, the market performance of each luxury brand is different.
Data shows that the domestic luxury car retail sales volume in August was 220,000 vehicles, a month-on-month increase of 3%, of which Brilliance BMW's sales volume was 34,800 vehicles, a month-on-month decrease of 28.81%; Mercedes-Benz China's passenger car sales volume in August was 49,500 vehicles, a slight month-on-month decrease of 0.13%; Audi China's sales volume was 47,900 vehicles, a month-on-month increase of 5.9%.
"A little bit of price increase will indeed reduce some customers, but many people who really want to buy will still buy it.
They still look at the car itself, and the impact on high-end models is not very big."
The salesman of the above BMW 4S store said.
In the view of Yang Jing, the director of corporate ratings in the Asia-Pacific region of Fitch Ratings, July to August is the off-season of the car market, and it is not very meaningful to look at the month-on-month comparison.
However, looking at the year-on-year comparison, the sales volume of the top luxury car brands in July to August has indeed declined significantly.
In addition to the price factor, the short-term sales fluctuation of luxury car brands is also related to some luxury car dealers who cannot deliver vehicles due to the breakage of the capital chain.
In June this year, the news of the biggest car dealer in Yancheng, Jiangsu, Senfeng Group, facing difficulties in operation and the breakage of the capital chain was widely spread.
Public information shows that Senfeng Group has more than 20 brands, including Audi, Mercedes-Benz, Lincoln and other luxury brands.
In the past, luxury car brands represented by BBA (the collective name of Mercedes-Benz, BMW, and Audi) have always been the most powerful existence in China's car market.
However, since 2023, with the acceleration of the rise of independent high-end brands such as Wenji and Li Xiang, as well as the intensification of the price war, traditional luxury brands have also been under tremendous sales pressure.
In the first half of this year, in the Chinese market, the sales volume of Mercedes-Benz was 352,600 vehicles, a year-on-year decrease of 6.5%; Audi's sales volume was 320,400 vehicles, a year-on-year decrease of 1.9%; BMW's sales volume was 375,900 vehicles, a year-on-year decrease of 4.2%.
For traditional luxury brands, the practice of "exchanging price for volume" has not only failed to increase sales volume, but also damaged their own brand image.
In the past two years, as the discount strength of BBA's new cars has been continuously increasing, consumers have even made a joking remark that "I used to have no money to buy BBA, but now I have no money to buy BBA".
Yang Jing said that relatively speaking, luxury car brands are at the top of the value chain, and there is still a considerable part of high-end demand that will not easily turn to Chinese brand new energy vehicles.
Therefore, by maintaining the price to stabilize the price expectation and brand value, giving up part of the middle-class consumer market, and maintaining the profitability of the service level of the high-end product line, it reflects the confidence of luxury car brands in their own brand value.
However, compared with the well-off luxury car manufacturers, luxury car dealers have weaker risk resistance under heavy pressure.
The contradiction between Porsche dealers and manufacturers has become public this year.
In the second quarter of this year, some Porsche dealers who were dissatisfied with the inventory pressure and the heavy burden of sales targets chose to protest to the Porsche China headquarters.
In the end, Porsche agreed to reduce the sales target and implement a value-oriented and market-appropriate growth strategy for Chinese brands, thus temporarily calming the contradiction.
"The purpose of luxury car brands withdrawing from the price war is to regulate supply under the background of weak demand, thereby alleviating the previous situation of vicious price competition among dealers.
The main reason is that the brand relaxes the sales target assessment of dealers to reduce the inventory and capital pressure of dealers.
In this context, the recent terminal discount has been adjusted, which will help luxury car dealers reduce losses."
Yang Jing said.
Will the price reduction start again?
The "2024 First Half of the Year National Automobile Dealers Survival Status Survey Report" released by the China Automobile Dealers Association shows that luxury car dealers have suffered large losses.
Looking at the first half of the year's financial reports of listed automobile dealers, many dealers mentioned the poor performance of luxury brands as one of the reasons for the decline in performance.
Zhongsheng Holdings said in its financial report that the decline in new car sales revenue in the first half of the year mainly came from the decline in the average sales price of new cars, and the main reason for the price drop was the sluggish overall economic activity and weak demand for luxury cars.
As a dealer focusing on luxury brands, Baidili Holdings' new car sales revenue in the first half of the year was 3.67 billion yuan, a year-on-year decrease of 22.1%, and the gross profit margin was only -10.97%.
Meidong Auto also said in its first half of the year's financial report that the overall purchasing power and consumer desire were lower than expected, and the unit price of major luxury car brands all showed a significant decline, which led to a decline in the revenue and gross profit margin of the new car sales segment.
Faced with the difficulties of dealers, BMW and other brands introduced a series of measures in the first half of the year to help dealers through the difficulties.
At that time, BMW introduced a series of subsidy reduction policies for BMW 4S stores, including a 3% price discount (which can be paid in advance) to alleviate the cash flow pressure of dealers.
In July, BMW China also said that in the second half of the year, BMW will focus on business quality in the Chinese market and support dealers to make steady progress.
Subsequently, there was news that BMW China and Brilliance BMW canceled the sales target assessment for dealers in the eastern region from the third quarter.
The above policies are seen as the beginning of BMW's withdrawal from the price war.
Although theoretically, the price adjustment is beneficial to the brand itself and dealers to return to a healthier development mode, it has objectively brought about a decline in sales in the short term.
On September 10th this year, considering the continued sluggish demand in China and other important markets, BMW adjusted the guidance for the 2024 fiscal year: compared with the previous year, the delivery volume is expected to slightly decrease (previously slightly increased).
Less than two months away from the price war, facing the reality of the increasingly competitive market, whether luxury car brands choose to protect the brand or protect sales has become a new issue that needs to be balanced.
Recently, there are industry news that BMW is considering returning to the price war and preparing to significantly reduce the prices of its models, in order to achieve the sales target of 2024.
At present, many electric car models of BBA have a huge discount at the market terminal.
According to the recent quotes provided by car dealers, the official starting price of Audi Q4e-tron is 289,900 yuan, and the terminal can be discounted by about 100,000 yuan; the starting price of BMW i3 is 353,900 yuan, and if you choose to take a loan, the terminal bare car price will be below 200,000 yuan; the starting price of Mercedes-Benz EQE is 478,000 yuan, and the terminal can be discounted by about 40%.
In addition, there is news that the latest terminal price of BMW's flagship pure electric model i7, which has a starting price of 949,000 yuan, has dropped to a minimum of 663,300 yuan.
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