In China's automotive market, a general price drop of 30,000 yuan should be enough to salvage Elon Musk's failed product unveiling event.

The event was a failure. It was 52 minutes late, and nearly all expectations regarding production models, the new Model 2, and progress on FSD were unmet. As a result, when the Optimus robot emerged, Tesla's share price plummeted 4% from a 5% gain. Within 30 minutes, the event erased over 430 billion yuan in Tesla's market value overnight.

Fortunately, Musk had planted several low-price Easter eggs. For instance, the cost of a self-driving taxi is less than $30,000, even cheaper than a base model Model 3. The Optimus robot costs $20,000 to $30,000, prices that exceed industry expectations. While these are promises for the future, they aim to stimulate purchasing desire.

Similarly, in China's automotive market, with the current global economic climate, it's challenging to ensure sales during periods of declining consumer spending. After a brief but intense price war, new best-selling models have emerged, indicating that China's automotive market has the potential to find new lows in car prices in 2024.

"Our store sold over 100 cars in September. I've heard that nationwide sales are exceeding 120,000 units," said Lin Kang, a recent college graduate who has been working as a salesperson at a Xpeng 4S store for eight months due to limited job opportunities. During this time, he learned that much of what is said online is often exaggerated.

For instance, it's commonly believed that if the price is low enough, any car can sell. However, in 2024's real automotive market, even offering discounts on older models doesn't guarantee sales. For example, the Xpeng G9, which is larger and has longer range and better features than the Model Y, starts at just 240,000 yuan, yet national sales barely exceed 5,000 units per month.

A general price drop of 30,000 yuan: the ultimate destination for car prices in 2024

Sales is a pragmatic profession; no one wants to waste effort on deals that won't close. To sell cars now, salespeople hope that automakers will set aggressive low prices for new models. Promotions focus on lifestyle and aspirations rather than discounts, as the lack of price reductions means that advertised benefits and policies are all that's on offer.

Since September of this year, such examples have abounded in the automotive industry. For instance, one Lantu store in Beijing sold over 30 Dreamer models during the National Day holiday, and Ledo L60's daily test drives were fully booked. Moreover, over five leading automakers are experiencing similar success stories.

Huawei's HarmonyOS-powered vehicles sold 28,600 pre-orders in just seven days. Yu Chengdong revealed that the AITO M7, which loses 30,000 yuan per unit, surpassed 20,000 pre-orders within 14 days of its launch.

The Lantu Dreamer, deeply integrated with Huawei, surpassed 18,000 pre-orders within 20 days of its debut.

ZEEKR 007X surpassed 20,000 pre-orders, while AVALON 07 hit that mark within 20 hours of its launch. Even lesser-known brands like IM Motors' LS6 have surpassed 20,000 pre-orders since its September 26 launch.

The automotive industry jokes that many brands completed their annual sales targets during the National Day holiday. Besides the seven companies mentioned above, other automakers setting aggressive prices include Geely, which launched the Xingyuan with a starting price of 69,800 yuan, positioning it as the only competitor in the sub-100,000 yuan segment, taking on BYD's Dolphin and Seagull with a single A0-class model.

At the global launch of the Xpeng P7+, although the backdrop behind He Xiaopeng touted it as the best sports sedan under 300,000 yuan, everyone knew that a starting price above 180,000 yuan would be embarrassing.

It would cannibalize Xpeng's own G6 sales and face competition from the 2025 BYD Han, expected to sell over 30,000 units per month starting in October with a starting price of 165,800 yuan. This indicates that the market has settled on a price range of 160,000 to 170,000 yuan for new energy sedans in this segment.

In summary, it's not just the launch prices of individual models that are sending signals; all best-sellers are doing so, searching for the low point of car prices in 2024 to better convert sales.

It's akin to the six major sects besieging Guangming Peak, as Chinese automakers collectively take aim at the Tesla Model Y.

The main sales version of the Tesla Model Y costs 249,900 yuan without direct discounts. Instead, it offers a zero-interest policy with a minimum down payment of 79,900 yuan.

The Ledo L60, without discussing the Baas model, starts at 206,900 yuan, a price reduction of 43,000 yuan.

ZEEKR 007X starts at 229,900 yuan, a price reduction of 20,000 yuan.

AVALON 07, equipped with a lidar and Huawei ADS 3.0 Full-Scenario Smart Driving System for an additional 10,000 yuan, starts at 249,900 yuan, on par with a Tesla without FSD.

IM Motors' LS6, after a 20,000 yuan launch discount, starts at 219,900 yuan, a price reduction of 30,000 yuan.

Considering that the ADS 3.0 Full-Scenario Smart Driving System sells for an additional 30,000 yuan on HarmonyOS-powered vehicles, these new Model Y challengers, which have achieved high sales, have generally lowered the prices of their mid-sized new energy intelligent SUVs by 20,000 to 40,000 yuan.

The same is true in the compact car market. Originally, pricing power for two-box pure electric compact cars rested solely with BYD and SAIC Volkswagen. Models with over 400 kilometers of range had entry-level prices of 99,800 yuan for the BYD Dolphin and 120,000 yuan for the ID.3. However, the emergence of Geely's Xingyuan further drove down prices to 82,800 yuan, a reduction of nearly 20,000 yuan, or over 30,000 yuan compared to the ID.3.

In fact, looking at the top-selling models in the current market, they are also lowering prices while undergoing model changes and upgrades. As a result, the new market perception is as follows:

In the mid-sized car market, the Passat Pro launched in early September, offering a limited-time one-price deal for the 380TSI high-power version starting at 159,900 yuan. A year ago, this configuration and powertrain model cost around 190,000 yuan after discounts. The latest monthly sales figures show over 25,000 units sold.

The Camry Hybrid also lowered its price by 30,000 yuan upon launch compared to its predecessor, starting at 179,800 yuan. The MPV market is no exception, with models like the Sienna actively lowering prices to below 300,000 yuan, and the Buick GL8 dropping from a starting price of 250,000 yuan to just over 200,000 yuan.

Of course, this also includes BYD, which disrupted the pricing system earlier this year. With the introduction of its fifth-generation DM technology, models like the Qin PLUS (79,800 yuan), Qin L (99,800 yuan), and Seal 06 DM-i (price not specified) have driven down entry-level prices for mid-sized sedans from the previous range of 130,000 to 150,000 yuan by an additional 30,000 yuan.

Moreover, the low point in car prices will be a universal downward trend, affecting not just affordable family cars and luxury vehicles but also high-end and ultra-luxury models.

A further price drop of 30,000 yuan is still not low enough?

More expensive cars will see even greater price reductions, far exceeding the general 30,000 yuan reduction in the mass market. This is related to the EU's taxation on Chinese new energy vehicles, China's shift in environmental protection requirements, and other countermeasures. Recently, the Ministry of Commerce stated that it is studying measures to increase tariffs on imported high-displacement fuel vehicles.

China has a clear definition of "high-displacement vehicles," referring to fuel vehicles with engines larger than 2.5 liters. In terms of taxes levied on imported vehicles, the excise tax is linked to displacement: 9% for 2.0L-2.5L (inclusive), 12% for 2.5L-3.0L (inclusive), 25% for 3.0L-4.0L (inclusive), and 40% for over 4.0L. As a result, many netizens realized years ago that half the cost of purchasing expensive sports cars, super luxury sedans, and SUVs goes toward taxes.

Porsche sales have been declining, with a 29% drop in China's automotive market in the first three quarters. Other companies like Mercedes-Benz and BMW have also been making related preparations, downsizing engine displacements over the years. A recent example is the all-new Mercedes-Benz G500, whose core change is the replacement of its 4.0T V8 engine with a 3.0T inline-six cylinder engine paired with a 48V system.

In contrast, models like WENJIE M9 and LIXIANG L9, priced above 400,000 yuan, are steadily eroding the market share of traditional luxury brands. Once policies to increase taxes on high-displacement vehicles are implemented, many models will inevitably see further price reductions of tens of thousands or even hundreds of thousands of yuan.

Such price reductions exceeding the current industry trend of a 30,000 yuan drop are only a matter of time.

"A further 30,000 yuan price drop is not the low point. Cars priced above 300,000 yuan can still drop further," is a sentiment shared by both frontline sales consultants and automotive executives when asked about pricing logic during new model launches.

Taking Yu Chengdong as an example, his statements at product launches have shifted from broad to specific over the past six months, providing a more concrete understanding of current market price trends.

On April 23, 2024, before the Beijing Auto Show, Yu Chengdong publicly wrote that Huawei's high-end intelligent driving systems priced below 300,000 yuan were all sold at a loss. On August 26, at the AITO M7 Pro launch, he said that each entry-level model sold at a loss of nearly 30,000 yuan. At the ZHIJIE R7 launch on September 24, Yu Chengdong concluded by saying that each ZHIJIE R7 was sold at a loss of 30,000 yuan to allow more people to experience high quality and eventually achieve profitability through scale.

The general price cut of 30,000 yuan is not a rash decision. It is deeply related to the failures in competition with benchmark models in recent years. Taking Tesla as an example, a few years ago, the competition strategy of Chinese automakers was to maintain basically the same or about 10% lower pricing compared to Tesla models of similar sizes, while significantly upgrading configurations.

For instance, when competing against the Model 3 in its early stages, the pricing was above 260,000 yuan before 2022. When NIO ET5, which caused the app to crash for 10 minutes upon its release, was launched with a subsidized starting price of 258,000 yuan, it appeared only slightly lower than Tesla's price at first glance. However, the actual pricing strategy was to compete with Tesla's two-wheel drive models with NIO's four-wheel drive models, achieving a 10% lower price point.

Xiaopeng P7 followed a similar logic. When it was launched in April 2020, the starting price after subsidies was 229,900 yuan. At that time, the Model 3 had just been locally produced, with its starting price plummeting from 355,800 yuan to around 260,000 yuan. Xiaopeng quickly established its position with a price difference of over 10%, leading to sales of over 60,000 vehicles in 2021. However, as the Model 3's price dropped further to just above 250,000 yuan, Xiaopeng P7's orders began to be rapidly snatched away.

The above is not an isolated case. BCG, a consulting firm, conducted a global consumer survey during the pandemic. During black swan events (such as the 2008 financial crisis and the pandemic), the proportion of price-sensitive consumers quickly rose above 70%. However, even with such a high proportion, a price difference of less than 5% for the same product has virtually no impact on consumer decision-making, affecting only less than 10% of the population for daily consumer goods.

For major consumer goods, a price or value contrast of over 10% is needed to stimulate demand. This conclusion aligns with the current trend of general price cuts of 30,000 yuan.

As for whether a price cut of around 30,000 yuan is sufficient, it is not entirely important. In today's automotive market, even new car launches are quickly followed by corresponding price adjustments. For most automakers on the offensive, a price cut of 30,000 yuan is already close to the bottom line.

Closing Thoughts

Money has a sense of smell. When confidence and expectations are low, stock prices and car sales can fluctuate.

However, this is just the low point of car prices in 2024. It will continue in 2025.

There are many evident examples, such as ZEEKR and Xiaopeng entering the extended-range market, or the fifth-generation DM model, which was announced with the potential for further downsizing to A0-class vehicles due to its high integration.

The clear trend for the consumer market is that new cars that fail to keep up with price changes are losing competitiveness.