AutoBeta(AutoBeta.net)07/13 Report--

Car blogger Sun Shaojun 09 posted on Weibo on July 11 that BMW will reduce its quantity and protect its prices from July because of heavy losses in its stores due to the price war. It is also reported that BMW China has decided to withdraw from the "price reduction and protection share" that has lasted for nearly a year, by reducing sales to stabilize prices and ease the operating pressure on stores. On July 12, in response to the rumor that "BMW China will withdraw from the price war", BMW China said that BMW will focus on the quality of its business in the Chinese market in the second half of the year and support dealers steadily.

At the beginning of last month, BMW sparked a heated discussion because of the big price cut. According to media reports, there are rumors in the market that there are substantial discounts on BMW i3 and i5 pure electric models, of which BMW i3 models are sold at a 50% discount, and the price is nearly halved, including 4S stores in Beijing, Shanghai and Guangzhou. After the discount, the naked car is more than 170000, with a big discount. A salesperson at a BMW 4S store in Beijing said: "the i3 35L is about more than 170000. I didn't dare to say the price before, but now it's really appropriate, and the price can be discussed when we get to the store." In addition, the BMW i5 also offers offers ranging from 60,000 yuan.

In May before this, in view of the market background and the huge impact brought by domestic brands, BMW sent a letter to all dealers and stores and decided to issue a number of substantial subsidy relief policies for BMW 4S stores, including a 3% price discount. to help ease the cash flow pressure on dealers, at the same time, the annual interest rate for late payment of liquidated damages is reduced to 2.5%, and the storage fee for vehicles stranded in Hong Kong is reduced by 50%.

It is undeniable that in the past 2023, price cuts have indeed brought some sales growth to traditional luxury brands, including BBA. According to the data, BMW Group sold 825000 vehicles in China in 2023, up 4.2 per cent from the same period last year; Mercedes-Benz sold 765000 vehicles in China, up 1.7 per cent; and Audi sold 729000 vehicles in China, up 14.6 per cent from the same period last year.

However, with the strong rise of independent brands with the help of new energy tracks, the competitiveness of traditional luxury brands in the domestic market has declined significantly, leading to a loosening of their terminal prices. in the context of the extremely inward car market, it is not just BMW during the year. Luxury brands such as Mercedes-Benz, Audi and Porsche have all started price reduction promotion before, but the price-for-volume strategy is no longer effective.

BMW, for example, reported revenue of 36.614 billion euros in the first quarter of this year, down 0.6% from a year earlier, and net profit of 2.951 billion euros, down 19.4% from a year earlier. Of this total, revenue from the automotive business fell 1.1 per cent year-on-year to 30.939 billion euros, while net profit before tax fell 29.4 per cent year-on-year to 270.3 billion euros. In terms of sales, BMW sold 187700 vehicles in China in the first quarter, down 3.8% from a year earlier, making it the only major single market for BMW Group to decline in sales worldwide.

Three days ago, BMW Group released sales figures for the first half of 2024. Data show that in the first half of 2024, BMW Group delivered a total of 1.2134 million new cars (including BMW, MINI and Rolls-Royce) in the global market, down 0.1% from the same period last year. BMW brand global sales rose 2.3% to 1.0965 million vehicles, but the Chinese market showed a downward trend. BMW's cumulative sales in China in the first half of the year were 375900 (including BMW and MINI brands), down 4.2% from a year earlier. Industry insiders believe that BMW's price reduction strategy in China has failed to lead to sales growth.

It has been one and a half years since the "price war" of the automobile industry began in 2023, and now it has become a "protracted war". Especially after entering 2024, the competition of the domestic price war is very fierce, and more and more car companies seize the market by way of price reduction, which leads to the increasingly fierce price competition among automobile enterprises, and the price of new energy vehicles falls again and again. Of course, behind the "price war" is to survive by reducing prices, so as to stimulate the desire for car consumption. at the same time, car companies hope to exchange prices for volume to achieve sales growth to seize market share, and the price cuts of luxury brands are also to maintain market share. but this year, the benefits of price cuts for traditional luxury brands have become minimal.

"Automotive Industry concern" believes that a "price war" will also have a huge impact on the profits of auto companies. Previously, Yang Honghai, chief operating officer of Kia China, also said: the price war of "price for quantity" is an established fact for the industry to enter into deep competition, but the "price war" is only short-term effective, unsustainable and unhealthy competition. At present, the automobile industry is in a period of price war competition, BMW withdrew from the price war, whether the strategy of "stopping price reduction to protect share" will be effective remains to be verified.

It is worth mentioning that with the continuous improvement of the penetration rate of new energy vehicles in China and the promotion of independent high-end, how to launch new energy products with market competitiveness is also an urgent task for BBA. Admittedly, the test left to traditional luxury brands, including BBA, continues.

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