Selling a car loses 200,000 yuan, BBA refuses price war, and the Chinese auto market enters a period of anti-involution

No more curling!

BMW announced that it will officially withdraw from the price war in the second half of the year, focusing on business quality while supporting dealers to move forward steadily.

After BMW fired the first shot, the other two of the three German automakers, Mercedes-Benz and Audi, quickly followed suit and officially announced their withdrawal from the increasingly fierce price war in the Chinese market.

As soon as the news came out, BMW 4S stores raised the prices of their main models, with the highest increase reaching 20,000 yuan.

During this period, there have been many criticisms of price wars and internal circulation in the domestic automobile industry. However, the criticisms from most manufacturers were only verbal. BBA was the first to express its disgust for price wars through action.

Why did the three German giants take the lead in withdrawing from the price war?

First of all, I would like to state that whether or not we can afford a price war is not within the scope of this article. All products have costs, and appropriate price cuts are normal business activities. However, excessive price wars will inevitably seriously overdraw brand power and "save costs in invisible areas of the product."

Some people think that BMW and Mercedes-Benz can no longer afford it, so they quit. This interpretation is indeed a bit simplistic. Does BBA consider it affordable if it lowers its price to the same level as Wuling? This is ridiculous. The world is flat, but it is also stratified.

Take BMW as an example. In this round of price war, the fuel-powered models generally saw a price reduction of more than 100,000 yuan. The high-end 7 Series and X7 even saw a price reduction of more than 200,000 yuan. In addition, many new cars were reduced in price as soon as they were launched on the market.

This is an irreparable harm to luxury brands. Luxury cars are not only a means of transportation, but also a social tool that speaks for users. If a car worth hundreds of thousands of yuan is reduced in price at any time, it will cause strong dissatisfaction among current car owners. Just like Xu Jiang's line in "Kuang Bi": What grade, using the same TV as me?

Once consumers associate price cuts with BBA, the brand will enter the countdown to collapse.

Price wars will also affect the stability of dealers. According to Mercedes-Benz sales staff, they lose 70,000 yuan for every C-class car they sell. If dealers suffer losses for a long time, they will consider withdrawing from the network. This is a time bomb buried in the future for BBA, which has been deeply involved in the high-end market for many years.

More importantly, even if a fierce price war is launched, it will not stop the decline in sales.

In the first half of 2024, BMW's sales in China were 375,900 vehicles, down 4.2% year-on-year; Mercedes-Benz's sales in the first half of the year were 352,600 vehicles, down 6% year-on-year.

A price war that fails to increase sales will make dealers panic and destroy the brand's century-old foundation. From any perspective, they have sufficient reasons to withdraw.

In fact, excessive price wars are a fatal blow to the normal order of the automobile industry. Whether it is BBA or other manufacturers, price wars are actually fair in terms of sales. The market is so small, and if everyone cuts prices, it is equivalent to no one cutting prices.

All manufacturers hate price wars, but why do only BBA dare to say no? Because they are still the best in China in terms of quality, design, service, etc., and have a strong appeal to consumers. After the price war ends, high-quality consumers will gather again under the brand, and the luxury brand positioning will be maintained.

At the same time, after stopping the price war, dealers are also willing to advance and retreat with BBA, and the entire marketing network can avoid turbulence. No matter how the future develops, a stable dealer team is a must. Don’t you see that some domestic new energy brands always jump back and forth between the direct sales and dealer models? This unstable service system will definitely not give users a better experience.

Moreover, even if they want to develop new energy, luxury brands must immediately stop price wars that "kill 500 enemies and lose 2,000 of their own."

High-end new energy vehicles are not easy to make. It will take a long time for BBA's new energy vehicles to be accepted by consumers. But if the price war continues, the value of the car that users just bought will depreciate significantly. Who will support the brand in the future? There is no such a sucker in the market.

Higher prices correspond to better product performance, which is the correct direction of development. After stopping the price war, BBA will be more relaxed in developing new energy, and consumers will have more confidence in their brands.

In fact, BBA has not given up on new energy models, and so far, the trend of the global automotive industry's transformation to new energy has not changed. But no matter how they develop new energy, they must maintain their luxury positioning.

After several years of price wars, BBA's brand image has been severely damaged. Now they have come to their senses and it is a completely rational choice to extricate themselves from this quagmire.

Next, BBA will get back on track and reshape its high-end image with high-end positioning to stabilize its high-end customer base. In fact, whether in the fuel vehicle market or in the new energy market, BBA must stick to this path.

If nothing unexpected happens, luxury brands such as Porsche, which are also involved in the price war, will follow suit, gradually withdraw from the price war and return to the normal development order.

In today's auto market, which is constantly falling, the actions of these luxury brands can be regarded as a breath of fresh air in the forest. Their timely change of direction will also cool down the current frenzied price war, which will be of great benefit to the development of the entire Chinese auto market.

China is the world's largest automobile market, accounting for 30% of global automobile sales, and new energy vehicles account for 60% of the global market. In such a huge market, there is a need for both commuter vehicles like "Chopped Pepper Fish Head" and high-end options like BBA.

High-end car models are not cabbages in the market. Their product cycles are relatively long and their user groups are relatively fixed. In many cases, they are also a symbol of the owner's identity and status. Such models often represent the highest level of technology. They must maintain a high-end positioning in order to become the backbone of the market.

Whether it is a luxury brand like BBA or a manufacturer that wins by scale like Toyota, Volkswagen, BYD, and Geely, they must make profits. Only with profits can accumulation be achieved, and only with accumulation can the ability to conduct independent research and development and attract truly high-end talents.

Nowadays, many manufacturers are obsessed with price wars, and many car models are sold at cost price or even at a loss. In the short term, this may attract users with a relatively low car purchase budget, but in the long run it is killing the goose that lays the golden eggs, fixing their brand image in the low-end market, and also overdrawing the company's hopes for future development.

Any business needs to make a profit, just like living needs to eat. The frequent price cuts have resulted in slim profits for manufacturers, making it difficult for them to survive, and it is basically impossible for them to conduct independent research and development. Everyone says Huawei's products are expensive, but why are they expensive? Because research and development costs money, and if the salary is low, not to mention scientists, even engineers will not come to work.

Only when employees earn money can they have spare money to consume. When there are more employees, the vitality of the social economy can be boosted. This is the simplest positive cycle system. The premise for achieving it is to allow enterprises to accumulate wealth through products or services.

So far, only a very small number of manufacturers such as BYD and Ideal have achieved profitability in China's new energy market, while the rest have basically been making losses all year round. This is an unhealthy development state and is unsustainable.

Currently, Chinese brands have a market share of more than 50%, and contribute more than 80% of new energy sales. This achievement is hard-won. With such a foundation, the crazy price war should be stopped in time. The development focus of the entire market should be on improving product performance, rather than competing to see who sells cheaper.

Ordinary brands dare not talk about rejecting price wars, because everyone is lowering prices. If anyone does not, sales will collapse, forming a vicious cycle.

But BBA is different. They have obvious advantages in product performance and brand recognition. They may take advantage of this opportunity to reverse the low-price trend in the Chinese auto market, especially in the new energy market.

After years of Internet education, we all understand that free is the most expensive; but it may take us a little time to understand and accept the simple truth that low prices are expensive.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.