AutoBeta(AutoBeta.net)09/25 Report--

Against the backdrop of increasing competition in the luxury car market, BMW's sales nearly halved in August. In this context, BMW returned to the "price war", the terminal prices of many of its models "plunged".

A number of BMW stores in Beijing have cut prices quite sharply, with popular models such as flagship pure electric models i7, BMW 3-Series and 5-Series falling to varying degrees, the Securities Daily reported. this series of price cuts are clearly aimed at sprinting sales targets by the end of the year to make up for previous sales losses. Take the BMW 3-Series as an example, the official guidance price is 29.99-399900 yuan, while the dealer quotation is 21.60-288000 yuan, and the overall discount is between 8-110000 yuan, so is the BMW 5-Series. The official guidance price is 43.99-525900 yuan, while the dealer quotation is 31.99-405900 yuan, with a discount of about 120000 yuan. Industry insiders said that BMW's return to the "price war" is related to multiple factors such as plummeting sales, market pressure, failure of the early price increase strategy and fierce market competition.

As BMW Group's largest market in the world, BMW has declined in China. According to the data, BMW sold only 34800 vehicles in the domestic market in August, down 42% from a year earlier. None of its models exceeded 10,000. The highest selling model was the BMW 3-Series, with 7921 vehicles. BMW X3, BMW 5-Series and BMW X5 are all at the level of 5000, 5971, 5600 and 5103 respectively, while other models are all less than 5000.

Over the past few decades, China's first-tier luxury car market has long been dominated by the German BBA brand, which has shaped the people's general understanding of luxury cars, among which BMW has occupied a leading position in the luxury car market with its excellent technology and brand influence. However, in 2024, with the rapid development of the new energy vehicle market and changes in consumer preferences, BMW is also facing unprecedented challenges. Even if it follows domestic brands to cut prices sharply, BBA sales did not pick up, but led to a decline in gross profit margin, thus affecting the profitability of the group. In this context, BMW has to re-examine its market positioning and competitive strategy, although price reduction may reduce brand profit margins, but it is an effective means to boost sales and maintain market share.

Not long ago, BMW Group announced a downgrade of its guidance for fiscal year 2024. As sluggish demand in key markets such as China also affected sales, BMW made the following adjustments to its guidance for fiscal year 2024: delivery will decline compared with the same period last year. It had been expected to grow, and profit margins before interest and tax in 2024 would be between 6 and 7 per cent (previously between 8 and 10 per cent). Return on capital use (RoCE) is between 11% and 13% (previously 15% to 20%)

In the first half of 2024, BMW Group delivered 1.213 million new cars worldwide (including BMW, MINI, Rolls-Royce), basically the same as in the same period. Among them, BMW Group delivered 376400 vehicles in the Chinese market, down 4.3% from the same period last year, accounting for 31% of BMW Group's total global sales. As for the reasons for the decline in sales in the Chinese market, BMW and its peers are under pressure in the key market, where local carmakers are winning market share with lower-cost electric vehicles, forcing its European competitors to cut prices sharply. Under the wave of new energy, the Chinese are gradually abandoning imports and joint venture luxury cars.

In addition to BMW, life is also difficult for Mercedes-Benz and Audi. If BMW joins the price war, then Mercedes-Benz and Audi will also be forced to join. After all, the three BBA companies are the most direct competitors. Once BMW's price system changes, the other two will also change. However, if caught in a "price war", it will undoubtedly erode the value of the BBA brand and affect profit margins, but without a positive pricing strategy, it is difficult to effectively defend market share, resulting in continuous downward pressure on sales. Therefore, the current market dilemma is not only for BMW, but also for Mercedes-Benz and Audi, and even for a large number of domestic luxury brands.

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