Withdrew from the price war in July, domestic sales halved in August, and BMW authorized dealers once again lowered terminal prices in September.

Although BMW China responded that BMW had not made any recent adjustments to its recommended retail prices, and that authorized dealers were independently setting retail prices based on market conditions, with the final transaction price being influenced by specific transaction circumstances. However, from the results, the prices set by dealers have once again drawn BMW back into the price war.

Among luxury brands, Audi and Mercedes-Benz have also seen reductions in their terminal prices since mid-September, with adjustments of approximately RMB 300,000 to RMB 400,000 for Audi A8L and Mercedes-Benz EQC.

As the crucial 'Golden September, Silver October' sales period for boosting annual sales, Auto Insight also visited several Beijing BBA dealerships during the National Day holiday, where several salespeople introduced recent promotional information. 'Basically back to July prices,' said a BMW salesperson to Auto Insight.

▍Prices return to 'freezing point,' with more wait-and-see buyers

Auto Insight found that since September, several BMW dealerships in Beijing have begun adjusting prices for various models, such as reducing the starting price of the BMW iX1 from its manufacturer's suggested retail price of RMB 299,900 to RMB 188,800, and the starting price of the i3 from RMB 353,900 to RMB 178,800. For BMW's flagship pure electric model, the i7, the bare car price of the entry-level model with a manufacturer's suggested retail price of RMB 949,000 has dropped to RMB 663,400.

The direct reason prompting BMW dealers to 'return' to the price war is sales. Previously, BMW had anticipated a stable market environment starting from the third quarter of this year. However, in reality, BMW's sales in August, after exiting the 'price war,' nearly halved compared to the previous year.

So will consumers respond favorably to this round of BMW price cuts? Judging from the situation at 4S stores during the Golden Week holiday, the results are hardly optimistic. Firstly, consumers tend to buy when prices rise but hold off when prices fall. After BMW announced the gradual restoration of prices in July, there was indeed a surge in sales, prematurely releasing the pent-up demand of buyers who were holding onto their money. After this group of consumers completed their purchases, the remaining buyers were less eager to buy cars. Coupled with the current price reductions, more and more consumers are once again expecting prices to continue falling.

During the visits, a BMW salesperson told Auto Insight: 'After prices rose in July and August, there were fewer people visiting the store. Before that, at least models like the i3 and the 3 Series could attract some customers with low prices, but after the price advantage disappeared, it became evident that more people were only coming to inquire and few were placing orders, all of them in a wait-and-see mode.'

Inside the store, Auto Insight also observed that although there was a corresponding influx of car shoppers during the long holiday, most were still primarily there to look at cars, with very few placing orders. Salespeople believe that BMW's frequent price fluctuations, with prices rising and falling within a short period, have made consumers more cautious. Especially given the current downward trend in sales, sales sentiment at 4S stores is higher, leading to more 'unexpected' prices emerging. These factors combined have significantly increased consumer wait-and-see sentiment.

▍Price defense line 'in distress,' market pressures emerge

In addition to BMW, Audi and Mercedes-Benz, also luxury car brands, are also facing difficulties in the price war. After BMW withdrew from the price war in July, Mercedes-Benz and Audi formed an 'offensive and defensive alliance' and withdrew from the price war together. However, their sales are still on a downward trend, facing similar difficulties as BMW.

'The best-selling Audi A4L and Q5L both have significant price reductions now. The A4L's comprehensive discounted bare car price can reach below RMB 200,000, and the Q5L can reach around RMB 230,000. The Audi Q4 e-tron's bare car price is RMB 190,000, which is even more discounted than in July,' said an Audi salesperson to Auto Insight. Similarly, Mercedes-Benz also offers considerable discounts: 'The entry-level C-Class can now be had for RMB 200,000, the GLC for around RMB 270,000, the E-Class for around RMB 300,000, and the EQE for RMB 260,000, basically in line with July prices.'

The increasingly fierce competition is putting significant pressure on BBA. In September, Li Auto delivered a record high of 53,709 new vehicles in a single month, marking a year-on-year increase of 48.9%; WEY delivered 35,560 vehicles. During the National Day holiday, Auto Insight also saw a steady stream of car shoppers at Huawei stores in some third- and fourth-tier cities. A friend who had originally planned to upgrade to a BMW or Mercedes-Benz model ultimately chose the WEY M5, attracted by its long range, Huawei's ecosystem, and Hongmeng Intelligent Driving experience.

Previously, BBA's H1 2024 financial reports showed a downward trend in performance indicators, with the most significant decline in profits. Regarding the reasons for the decline in performance, BBA all mentioned that China's increasingly competitive market environment had a significant impact on their performance.

It is certain that BBA's re-entry into the 'price war' can bring about a certain market effect in the short term, but in the long run, the sustainability of this strategy remains questionable. Especially now that domestic brands and new energy vehicles are continually squeezing the market, finding a balance between maintaining brand value and increasing market share will become a question that will determine the fate of these brands.

In the era of new energy vehicles, multinational brands are currently in the throes of transformation, while domestic brands continue to make inroads, particularly in research and development investments. They have accumulated technological advantages in the fields of batteries, motors, and electronic control systems, combined with supportive policies, winning the 'votes' of consumers with real money. In this incremental market, they are gradually eroding the market share of multinational brands.

In August, the penetration rate of domestic brands in new energy vehicles was 75.9%, while that of multinational brands was 7.8%. Looking back further, five years ago, the market share of joint venture and domestic brands was 5:4. By August 2024, including luxury brands like BBA, the overall market share of these multinational brands had been eroded to 36.8%.

It is worth noting that in the first eight months of this year, China's new energy vehicle sales reached 7.037 million units, an increase of nearly eightfold compared to 2019. It is estimated that new energy vehicle sales will reach 11.5 million units this year. For automakers, while overall production and sales volumes are growing, the polarization will become even more pronounced, which is also a side of the transformation and upgrading of the automotive industry.

Typesetting | Yang Shuo Image source: Auto Insight