In 2019, many front-line car marketers still remember the brutal price war.
On the eve of the transition from the National V emission standard to the National VI, the intensity of the price war reached its peak, with a discount of 50,000 to 100,000 yuan for a bicycle, and there are even fancy car sales in the market where you buy a car and get a free car.This year was also the year when China’s new energy vehicle subsidies declined the most – more than 50%. In the end, the entire auto market fell by more than 8% in 2019, and new energy vehicles also experienced a rare decline.
Buy one get one free, familiar price war recipe source: Internet
In the bloody year of 2019, a number of weak brands were shuffled. BAIC Huansu, Chongqing Lifan, and Qoros all disappeared this year. Pang Da Auto Group went bankrupt, and 44% of dealers lost money.
Compared with 2019, this year’s price war in the auto market is earlier and more intense than that year’s. Some car company executives even used “shudder” to describe the price war that started in early spring.
The same as in 2019, this year’s price war is also on the eve of the switch of emission standards. The difference is that it is driven by the price reduction of new energy vehicles, driven by the “visible hand”, and spread from the regional market to the national market. What kind of effect it will eventually have on the auto market, most people maintain cautious, even pessimistic predictions.
A vicious cycle of price wars may be about to begin.
Billions poured into price wars
After the total sales volume of China’s fuel vehicle market decreased by 2.3 million in the past year, the Chinese auto market absolutely did not expect that the counterattack of fuel vehicles began with French vehicles, and it was intensified driven by government subsidies.
When the 120,000 Citroen C6 finally won the attention of the market, hot scenes of shopping for special cars began to be staged one after another.
Recently, the scene image source of Hubei Dongfeng Citroen 4S store: Internet
This price war started from Dongfeng and is spreading to Jilin, Shandong and other regions, triggering billions of subsidies to invest in the auto market.
Among the local governments, Hubei has the most subsidies. In other regions, such as Henan, Sichuan and other places, under the background of the national economic policy of stimulating domestic demand, the car market is stimulated by issuing car consumption coupons. This form has strict usage restrictions and only a few thousand yuan per car is subsidized. However, in the car market where price rules are not completely transparent, it is not possible for consumers to mention a car at the lowest price. However, this time Hubei joined hands with enterprises to subsidize bicycles as high as 90,000 yuan, which shocked the national auto market.
Soon Jilin Province followed suit, and the government and enterprises also joined forces to subsidize tens of thousands of yuan for bicycles.
Pinjia got a preliminary judgment on this price war when it discussed the topic of this round of price cuts with various people in the auto distribution industry, auto dealers, and auto companies:
Emission standard switching High inventory of dealers; a “visible hand” bailout behavior; set off by a major auto industry province; auto companies have invested funds to follow up; price cuts may last until May and June; side effects on the auto market are relatively large , it is difficult to judge.
From the perspective of the channel, the past year was not the worst year for dealers. There are rumors that the current national new car inventory has reached 6 million, but Pinjia learned from the Automobile Dealers Association that there are currently about 3 million new garages at dealers across the country, which is not the highest value in the same period of previous years.
High inventory is the price war incentive, but not the main reason.
There are also many speculations about the reason why it started with a French car. Judging from the market situation of French cars in recent years, it is also the Nth year of continuous decline. At this time, the government and enterprises jointly rescue the market, among which Shenlong subsidies are the most powerful. Some industry insiders speculate that an important reason for the introduction of subsidies at this time is that last year, Stellantis Group was rumored to withdraw from China. After a period of communication between Dongfeng and Stellantis Group, the two reiterated that determined to cooperate. Therefore, this government-enterprise subsidy, together with a series of production stabilization promotions of Stellantis Group and Dongfeng Motor’s joint venture DPCA, cannot be ruled out as an action to stabilize the joint venture situation after the former chairman of Dongfeng Motor Group, Zhu Yanfeng, resigned.
Source of Shenlong Automobile produced at full capacity: Shenlong Automobile
Promoting consumption in Hubei’s auto market, boosting local pillar industries, and repairing the once deadlocked joint venture relationship should be the purpose of Hubei’s subsidy campaign. Under the background of stimulating domestic demand this year, it seems necessary and helpless.
Other Dongfeng joint venture brands, self-owned brands, and vehicles produced in Hubei Province can also enjoy policy subsidies, which is likely to be a chain action of this policy rescue.
But the price cuts may be hotter than expected.
Since then, Jilin has announced that it will join hands with FAW to subsidize 150 million yuan. Chevrolet shouted “up to 70,000 yuan, and the whole country will be subsidized.” There will only be more brands involved. Behind this intensified price war, actions have begun to change.
And after the end of this round of subsidies, how can DPCA, which has little presence in the Chinese market, continue to save itself? When consumers tempted by price cuts start to wait and see, how can market demand be boosted? How do car companies that have participated in the price war return to the normal pricing system? What kind of survival challenges will this survival game experience?
Not a single snowflake is innocent
Back to the question of price wars, what is the essence of price wars?
A person in charge of marketing at a car company told Pinjia that the appearance is to fight for share, but in fact it is a fight to the death.
“If you follow, you will die. If you don’t follow, you will die.”
This round of national standard switching has superimposed more factors. The stimulus of the price war is multi-faceted. Many forces are involved. In addition to dealing with inventory, they must also deal with competition, and it is between fuel vehicles and new energy vehicles. Market share, pricing Many competitions in terms of rights and so on.
In the few days when fuel vehicles started a price war, BYD announced that the best-selling model Song PLUS will start discounts. Calculated according to the terminal discount of 6,800 yuan, BYD Song PLUS sold 37,900 vehicles in a month (the February sales standard). , the one-month preferential margin reached 250 million yuan. However, this model has a geometric level of lethality to the market, which means that BYD Song PLUS is listed as an opponent model, and the price strategy has to be adjusted again. The profit margins of car companies are further squeezed, and they are in the chain of contempt. The models at the bottom end are even difficult to turn over.
For Song PLUS with a monthly sales volume of over 30,000, the bicycle discount is 6,800 yuan, which means that the monthly discount exceeds 250 million yuan. Source: Internet
Recently, GAC Aion launched its best-selling model, the AION Y Younger, which is equipped with a new battery pack and lowers the price by 20,000 yuan. The entry-level price is 10,000 yuan lower than that of the same-level BYD Yuan PLUS. With more space, the price has reached the range of the fuel car Honda XR-V.
The new models challenge fuel vehicles at lower prices, which means that even if the inventory is cleared at a low price, it will be very difficult to return to the original price system.
More importantly, although the price war is mainly based on inventory clearance, if sufficient product upgrades are not completed during this period, it is likely to lead to insufficient stamina.
Users are still comparing prices in the past few months, and may start to pay attention to the new car market in the next few months. After a desperate struggle, the market does not give you breathing time at all.
The price war that started at the emission upgrade node in 2019 brought down a number of star models. The Trumpchi GS4, which once ranked high among independent SUVs, has never returned to the top ranks since then. Lang was defeated by a group of models with high discounts and strong power. It was not until more than a year after the product upgrade was completed that the market eased; after this battle, Geely decided to upgrade all series of four-cylinder engines.
A price war, the recovery period of the market may take 2-3 years,While car companies are working hard to adjust, they still need to use tangible hands to stimulate the market.
After the price war in 2019, many cities began to gradually cancel purchase restrictions to stimulate the market Source: Essence Securities
When Pinjia asked people in various fields of automobiles what they thought the consequences of this price war would be.
According to the China Automobile Dealers Association, this means that the newly recovered used car market will continue to experience volatility;
Car dealers said that it is difficult to cut prices, and it is even more difficult not to cut prices, and the capital turnover will become worse and worse in this vicious competition;
People from auto companies said that the vicious circle of price wars has begun. No snowflake is innocent. The big fish eat the small fish, and the small fish eat dried shrimps. There will be serious problems in this ecosystem. It is hard to say who will survive. In short, there is no winner.
In the early trading of March 10, the auto sector collectively fell, Great Wall Motors fell 8.72%, BYD, Dongfeng Motor, Jianghuai Automobile, and Changan Automobile all fell more than 5%.
The shaking started.
It can only be said that as a sober practitioner in the auto industry, it is difficult to cheer for this almost crazy price war. Even if it is as powerful as BYD, it may have to readjust its rhythm in the process of rolling and being rolled. After experiencing high growth optimism last year, the new energy vehicle market must look for a long-term development curve. After the turmoil in the Chinese auto market, the joint venture brands will continue to suffer greatly. The highlight moment of French cars may even be just a flash in the pan. The transformation of traditional car companies is imminent, and it has nothing to do with joint ventures or independence.
It’s time for the auto industry to fight for strength. Those companies who like to compare the auto industry to a marathon may realize at this time that although you try hard to maintain the rhythm, you will still be distracted by the sudden acceleration atmosphere. You must work hard when accelerating Think about it, not everyone can grit their teeth and survive the finish line.
Everyone was a little panicked, but no one knew how the story would end.