Promotion Wave Spread! Is A General Car Price Cut Coming?

"We've sold out all the cars and we need to book them now! We cannot guarantee that we will be able to meet the subsidy deadline." On March 8, at a Dongfeng Citroen 4S store in Wuhan, a salesperson was repeating the same message in front of the camera, which showed an empty showroom.

This car buying boom in Hubei is "directed" by the local car purchase subsidy policy. The discount range of some models is more than 90,000 yuan. Many foreign consumers even call them "to Hubei to grab a car".

This wave of price reduction planned by local and auto companies, like a "catfish", quickly leveraged other regions and enterprises to follow, "big price reduction" shows a spreading trend. A new energy vehicles open, sweeping fuel car "price reduction tide" is rapidly hit.

Policy packages were issued in many places to accurately boost automobile consumption

From the beginning of the year, when Tesla started to slash prices, to Hubei Province launched a limited time special offer, the car market "price wave" intensified. The range of price reduction is also involved in the field of new energy vehicles and fuel vehicles, competing for consumers in a "fight", very fierce.

From the government level, Hubei Province jointly launched government and enterprise subsidies for car purchase. For those who buy "Dongfeng series" models in Hubei, the subsidy amount for a single car can reach up to 90,000 yuan. This news spread quickly, and the enthusiasm for car purchase in Hubei market was immediately ignited. The boom has now spread across the country, with dozens of provinces and municipalities, including Shanghai, Zhejiang, Henan, Sichuan, Heilongjiang, Shanxi, Yunnan, Hainan and Guizhou, following suit with policies to boost car consumption.

Henan will extend the car purchase subsidy policy until the end of March 2023, offering consumers a subsidy of 5% of the purchase price of a new car purchased in the province. Tianjin will issue a car consumption subsidy of 60 million yuan, Shandong will issue a car consumption voucher of 200 million yuan, and so on.

Car companies have also begun to cut prices, setting up a "ring" to win over consumers. China FAW launched the "Qihui Jilin - 100 million Yuan limited time Benefit subsidy" activity, with a total subsidy of 150 million yuan, and the maximum subsidy for bicycles can reach 37,000 yuan. Dealers around the country are also continuing to follow up, Jining Dongfeng Peugeot models can enjoy government subsidies of 30,000 yuan, enterprise subsidies as high as 75,000 yuan, SAIC GM Buick announced that as of March 31, its various models are eligible for subsidies, Hubei consumers can enjoy government subsidies up to 70,000.

Many brand outlets in Guangzhou are also "robbing" consumers. Guangqi Honda Hao Ying, Accord discount 20,000-30,000 yuan, FAW-Volkswagen launched any brand replacement tour, travel, can enjoy 16,000 yuan replacement support, Guangqi Toyota Highlander landed 308,800 yuan, and enjoy 5,000 yuan purchase gift during the pre-sale period. The highest discount of SAIC Audi A7L is 38,000 yuan, the price of some models of Mercedes-Benz is up to 120,000 yuan, the price of FAW Audi A6L is 90,000 yuan, and so on.

"Price cutting" spread, low sales are the trigger

Why are there massive price cuts in the car market this year?

Data from the Federation showed that the retail sales of passenger cars in February 2023 reached 1.39 million units, a year-on-year growth of 10.4% and a month-on-month growth of 7.5%. The cumulative retail sales from January to February totaled 2.679 million units, down 19.8% year-on-year.

As one of the national pillar industries, automobile plays an increasingly important role in boosting domestic consumption, stabilizing industry and economic development. Behind the overall price reduction of automobiles, it is the urgent need to boost the automobile market pressure, inventory index keeps rising, auto companies have to compete for customers at low prices to stimulate the desire of automobile consumption.

According to the data of China Automobile Dealers Association, the inventory warning index of Chinese automobile dealers in February was 58.1%, up 2% year on year. The survey showed that 80.2% dealers believed that the sales volume in February was not up to expectations, the inventory pressure was great, and the cash flow situation was poor. Due to the fierce market competition, many auto companies cut prices, and the operating conditions of dealers declined. This is also an important factor in the price reduction of cars.

The "price reduction tide" of new energy vehicles has also promoted the price reduction of fuel vehicles. With the official end of the "state subsidy" of new energy, since the beginning of the year, after the official price reduction of Tesla, Ask, Xiaopeng and other new energy vehicle enterprises launched a "price war", advanced technology on the car, the price is greatly discounted, causing great pressure on fuel vehicles. In 2022, BYD sold more than 1.8 million cars, officially surpassing FaW-Volkswagen, the "big brother" of fuel car, sounding an alarm for the fuel car market. How to speed up is the internal driving force for fuel car price reduction.

Stimulus policies need to be a combination of short and long

"I never expected the C6 to sell without a car." Hubei a Dongfeng Citroen 4S shop sales staff said.

Cui Dongshu, secretary general of the association, said that Hubei's round of subsidies jointly conducted by the government and enterprises is a strong measure to reverse the downturn in car sales, which has caused a great change in consumer choices in the market. "The car purchase subsidy policies introduced around the country will form a stable and strong support for the car market in the first quarter, which can better release the consumption potential of consumers and help boost sales in the short term."

The overall "price reduction" of automobiles has a positive impact on the overall market sales, but for the whole industry, it is only a "delaying measure", difficult to promote consumption to achieve a "long-term effect". Analysts in the industry said that policies to stimulate consumption should be combined with "long and short". In the short term, price for volume will bring a certain increase in sales, but in the long term, there are certain hidden dangers to the brand image and long-term development of automobile enterprises. "Short-term promotion should be combined with long-term policies to improve the consumption environment, so as to promote consumption 'long-termism'".

In this regard, China Automobile Dealers Association suggests that manufacturers adjust sales targets in time according to market demand to avoid excessive inventory of dealers caused by supply and demand imbalance. It also suggests that financial institutions moderately adjust and increase interest rate subsidies for auto consumer loans, manufacturers can timely cash dealers' rebates, and moderately increase business policy assistance and other measures.

Since February, many provinces and cities have introduced policies to promote automobile consumption and stimulate the release of demand. Spring auto shows in many cities have been launched from late February to March, and the "launch wave" of new cars from most manufacturers is beginning. The automobile market is expected to grow steadily in March. Minister of Commerce Wang Wentao also stressed at a press conference of The State Council on March 2 that new policies and measures will be actively introduced this year to support the consumption of new energy vehicles.

[Reporter] Gong Qianshu intern He Yuhang

【 Author 】 Gong Qianshu

[Source] Nanfang Media Group Nanfang + client