Domestic brands will reduce prices and enter the first echelon in the future to survive

From the 1 billion yuan red envelope subsidy campaign initiated by Great Wall Motors in March to the official price reduction by Changan Automobile at the end of May, domestic brands such as JAC, SAIC, Geely, and GAC were also unwilling to stand idly by, and following suit in price cuts, which seemed to have set off a new round of "price reduction wave."

The reason is that the current automobile market is facing huge sales pressure. According to the data from the China Association of Automobile Manufacturers, in the first five months, my country's automobile production and sales only increased by 4.5% and 3.7% year-on-year, but the growth rate was 1.3 and 3.3 percentage points lower than the same period last year, and the growth rate continued to slow down compared with the first four months.

At the same time, according to data released by the China Automobile Dealers Association, the dealer inventory warning index was 51.8% in May, down 7.4 percentage points from the previous month, but still above the warning line. Looking back at the performance this year, based on the prosperity and decline line of 50%, it has reached the warning level for five consecutive months.

Peng Bo, global partner and vice president of Greater China at Strategy&, said in an interview with the Securities Daily that the price cut was mainly due to the market downturn and the high competitive pressure among companies. Automakers need to further boost sales, and dealers also need to digest inventory to ease operating pressure and risks.

He also mentioned that this wave of price cuts can also be seen as large brands with scale advantages in the industry squeezing out weaker brands, thereby completing market elimination.

Price reduction on the table

In fact, the development momentum of my country's automobile market has slowed down since the beginning of this year. According to data from the China Association of Automobile Manufacturers, in May this year, domestic passenger car sales were 1.7513 million units, a year-on-year decrease of 2.64%.

Among them, from the perspective of independent brands, SAIC Passenger Cars, Geely Automobile, GAC Trumpchi and other brands have achieved growth, but Changan Automobile, Great Wall Motors, BYD and other brands have not performed well. The reporter sorted out the data and found that among the 39 independent car companies, based on the 33 companies that have announced comparative data for the same period, 14 achieved sales growth in May, while 19 decreased.

At the same time, according to data from the China Automobile Dealers Association, the inventory warning index has remained high this year. Gong Bing, vice president of Changan Automobile, said: "With the intensification of market competition and the rapid increase in inventory, the price war between manufacturers has started in full swing."

Under such circumstances, on May 27, Changan Automobile announced an official price reduction. According to reports, in addition to several new products such as the mid-size SUV CS95 and the family MPV Lingxuan that were launched this year, the nearly 10 products involved in this official price reduction almost cover most of its main models.

It can be said that Changan Automobile's official price cut has become the focus of attention of brands and consumers for a while because it involves many models and a large price reduction. However, the reporter sorted out the data and found that in fact, in addition to Changan Automobile and Great Wall Motors mentioned above, domestic brands such as JAC, Geely, and SAIC Roewe have also made some moves.

The reporter saw from the official websites of major brands that Geely’s homepage posted the words “Mid-Year Sale”; JAC Motors’ homepage also has a special “Official Promotion” section, listing the price reduction policies of its various models, ranging from 1,000 yuan to 8,000 yuan.

From the sales point of view, the reporter conducted an on-site investigation of several major domestic brands' dealer outlets. A salesperson at the Chery 4S store in Huilongguan, Changping District, told the reporter that the current price of Tiggo 5 has been reduced by 7,000 yuan, and the price of Tiggo 3 has been reduced by 9,000 yuan. The Great Wall Motors 4S store in Changping District posted a price reduction of 16,000 yuan for Haval H6, and a discount of up to 28,000 yuan for Haval H8.

Regarding this official price reduction, a salesperson told reporters that many dealers had already given certain price reductions in the store before, and the official guide price is now being uniformly lowered. The change may not be too obvious at the terminals that have already offered discounts.

Accelerate the survival of the fittest

Fierce market competition has put great pressure on both brands and dealers. Judging from the sales of domestic brands in May alone, the performance of former domestic brands such as Changan and Great Wall was not satisfactory. Among them, Great Wall Motors continued the slight decline trend of last month, down 6.7% year-on-year; Changan Automobile's decline reached 25.8%.

Cui Dongshu, secretary-general of the China Passenger Car Association, said in an interview that the "official price reduction" measures taken by Changan Automobile and other domestic brands are actually proactively adjusting themselves and quickly clearing inventory in order to restore growth momentum and compete with competitors for sales again.

Regarding this wave of price cuts, some dealers also expressed a certain degree of concern when interviewed by reporters. For domestic brands, they should avoid maneuvering over prices. Crazy price wars will hurt both themselves and others and will deteriorate the brand image.

Auto analyst Chen Qingyi also holds a different view on the so-called "price war". Although there is an official price reduction, consumers still consider quality as the primary indicator when purchasing a car, so price reduction is almost only useful for highly competitive products. Good quality products are more likely to quickly occupy the market after the price reduction, but if the product itself is not strong, the official price reduction is futile.

Earlier at the Global Automotive Forum, An Conghui, president of Geely Auto, said that domestic brands still have to fight a "protracted war" on quality. Zhu Huarong, president of Changan Automobile, also pointed out that "competition will be more intense in the future, especially in the next five years. I think that if five domestic brands can survive well in the next five years in the Chinese market, it will be very satisfactory."

Industry insiders pointed out that, in fact, compared with developed countries, including the United States, Germany, and Japan, the number of domestic auto companies is basically maintained in the single digit. Now, for the dozens of domestic independent brands, it is likely that they will only survive if they enter the first echelon in the future.

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.