"In the vortex of market competition, BBA's price reduction strategy has sparked concerns about brand value; meanwhile, the profitability challenges of electric vehicle companies have become increasingly prominent."

@TechInsight Original

"The golden September and silver October in the auto market have finally returned," Wang Yuan, a salesperson from a multi-brand new energy company, exclaimed to "TechInsight." "It's been years since I've seen such long queues for test drives and car inspections."

In fact, the price war in the automotive market has shown no signs of abating in recent years, completely upending the existing sales system. Car companies have offered discounts throughout the year, and frequent price cuts have kept consumer expectations in flux, leading to a sluggish market.

However, the trade-in and scrapping subsidies offered by the government directly have allowed consumers to enjoy tangible benefits while also encouraging car companies to increase discounts, thoroughly stimulating the market. According to the China Passenger Car Association (CPCA), retail sales of new energy passenger vehicles are expected to reach 1.1 million in September, up 47.3% year-on-year.

"After September in the past, car manufacturers and dealers would tighten policies, and while events got bigger and bigger, prices didn't really drop much. But this year is different, with a combination of price wars, trade-ins, year-end sales, and various promotions making it cheaper than ever before," Wang Yuan added.

A market recovery doesn't necessarily mean a recovery for all automakers. Observant people will notice that all the sales success stories in September and October came from new energy manufacturers, with headlines like "record high" and "breaking through X0,000 units" grabbing attention. In contrast, the three established luxury automakers BBA (BMW, Benz, and Audi) continue to struggle with declining sales despite price cuts.

"Many potential BBA customers have turned to new energy vehicles, especially for family cars priced around 200,000 to 500,000 yuan," Wang Yuan explained to "TechInsight." "While BBA still has some influence, their product specifications are not as attractive as new energy vehicles."

In fact, BBA's sales in China have decelerated for several consecutive years, impacting their global performance. Recently, there have been reports of large 4S and even 5S dealerships closing due to cash flow issues, forcing BBA into a zero-sum game.

01.

The "luxury filter" is gradually fading

In terms of sales, BBA's performance in the domestic market continued to decline in 2024.

In the first half of the year, Mercedes-Benz sold 350,000 vehicles, a year-on-year drop of 10%; BMW sold 364,000, down 5%; and Audi sold 330,000, a decrease of 3%, even with significant price cuts.

The decline in sales in the Chinese market has had a significant negative impact on their overall performance, especially on profits. Financial reports show that Audi's operating profit fell 42% year-on-year, BMW's net profit declined 14.6%, and Mercedes-Benz's net profit dropped 20%. This trend continued into the third quarter of this year.

Crucially, while BBA previously benefited from high luxury premiums and could still earn significant profits even with low sales, they now struggle to sell even with price cuts, which have cascaded down to dealerships, causing many of them to collapse under the weight of losses on every sale.

"Although orders have increased in September and October, sales still can't compare to previous years," a BMW salesperson in Beijing told "TechInsight." "Beijing Xingdebao (BMW's first global 5S dealership) even closed due to financial issues."

Starting in late June this year, BMW gradually withdrew from the price war. But just three months later, rumors of a return to price wars began to spread. While BMW hasn't explicitly announced a restart, its actions speak louder than words. For example, the BMW i3's terminal discount exceeds 150,000 yuan, according to the salesperson, "but unfortunately, there are still not many consumers inquiring about it."

Mercedes-Benz and Audi are in similar situations to BMW.

According to Mercedes-Benz's latest sales report released in October, it delivered 170,000 new vehicles in the Chinese market in the third quarter, a year-on-year decline of 13%. FAW-Volkswagen Audi delivered 410,000 vehicles in the first three quarters, down 10.32% year-on-year.

Of course, BBA's decline is not due to the high-end luxury market as a whole. Instead, domestic new energy vehicle brands targeting the same segment have gained popularity. In the first three quarters of this year, Li Auto sold 340,000 vehicles, a year-on-year increase of 34%. AITO, backed by Huawei, followed closely behind with sales of 289,500 vehicles. Additionally, NIO, ZEEKR, and other automakers also achieved varying degrees of growth.

The feedback from the sales side sheds light on the real reasons behind BBA's struggles.

"I remember once when a customer circled the Audi showroom next door but ultimately chose us," Wang Yuan recalled with a hint of excitement in his eyes. "He told me that the intelligence and innovation of new energy vehicles were more appealing to him. That moment, I realized that the times have truly changed."

However, the biggest problem lies in the strong marketing capabilities of domestic brands, which have changed domestic consumers' perceptions of luxury cars. In particular, opinions such as "buying BBA is just buying a logo," "buying BBA is all about showing off," and "buying BBA will get you mocked online" have gained traction. While these may seem like jokes, repeated exposure can make them seem more credible to some consumers.

As a result, the "luxury" filter for BBA is fading, and even some second-tier brands are being pushed to the brink. Even BBA faces a bleak future, and it's difficult to find a solution.

02.

What the new forces haven't learned yet

Frankly, the rise of Chinese luxury brands at the expense of traditional luxury brands like BBA has become a long-term trend in the industry.

More and more Chinese consumers are less concerned about where a brand originates and more focused on the functions and values it provides. This trend has led to an increase in purchases of domestic luxury products in recent years.

"In the minds of many young users, BBA may still be considered luxury, but the so-called luxury premium has become very low. Many domestic cars at the same price point can already offer a dimensional advantage to some extent," said Wang Yuan.

But have BBA truly sunk to the point of "struggling to survive," as some online comments suggest?

Judging from the general feedback from netizens and consumers, the main reason BBA struggles to sell is their high brand premiums. Put simply, their configurations are generally mediocre, but they sell at high prices. To improve comfort, customers need to spend extra money on optional features.

"While it's possible to buy a BBA for 200,000 to 300,000 yuan, the configurations are indeed very basic. Features like seat heating, automatic steering wheel adjustment, electric tailgate, keyless entry, and more are mostly optional," said Wang Xue, who is planning to buy a car soon. "For a good experience and configurations commensurate with the price, it's not something that can be solved with just a few tens of thousands of yuan."

Especially now that domestic brands offer fully loaded models with powerful engines for 200,000 to 300,000 yuan, BBA's cost-effectiveness becomes even lower. However, it's worth noting that premiums beyond technology come from social consensus. While BBA may lack cost-effectiveness in terms of products, their core competencies are still lacking in the new forces.

Put simply, the BBA brands are renowned and prestigious both domestically and internationally. This century-old heritage is one of BBA's core strengths.

Additionally, their chassis tuning, four-wheel independent suspension, disc brakes, perfect weight distribution, excellent handling experience, intelligent four-wheel drive, Hofmeister kink, and other technologies still support BBA's core experience and remain hallmarks that other brands struggle to replicate.

Especially in chassis tuning, "While many brands do well in chassis materials, some still feel a bit loose after test drives," Wang Xue said bluntly. "It's not that they're bad, but when you consider that many brands have only been around for a decade or even a few years, it's difficult for them to surpass traditional brands in areas that require accumulation and refinement."

Frankly, even in an era where car manufacturing has become as simple as assembling a smartphone, creating a good car still requires time and feedback from consumers, experiences that new brands struggle to catch up with in a short time.

It's worth noting that in China, BBA doesn't have a "quantity" problem; it has a "price" problem. As the data shows, even though many say BBA is struggling to sell, they still deliver over 100,000 vehicles per quarter. Therefore, finding the right balance between quantity and price is a significant challenge for BBA's operational wisdom.

However, judging from BBA's current narrative logic, they are seeking to find unchanging factors in a changing era and evoke the market's unique memories and recognition of the brand by returning to its classic roots. From the perspective of TechInsight, these approaches may create a "generation gap" for the current consumer mainstream of post-90s and post-00s generations.

03.

Whose profitability challenges are more severe?

Oliver Zipse, CEO of BMW Group, once said, "BMW only has a 3.3% share of the global automotive market, so we don't need to serve everyone."

This sentiment applies to Audi and Mercedes-Benz as well. Indeed, BBA has never been a mass-market brand. However, in the domestic market, they must face market changes.

While BBA was once niche, their prices remained high, allowing everyone in the supply chain to profit. But now, with the rapid evolution of electrification, not only are electric vehicles being sold at discounts of up to 40% off, but even some of their flagship gasoline-powered models have been dragged into price wars. Despite this, BBA's attempts to increase sales through price cuts have failed to meet expectations.

Halting the decline has become their top priority.

BBA has delved deeply into battery, motor, and power system technologies, and various forms of electrification transformation are in full swing. However, a trend that cannot be ignored in the luxury car segment is that powertrains are no longer the primary focus. In the electric era, no one has a clear advantage in the exploration of the three electric systems, which is also a factor in the rise of other brands.

"In the eyes of Europeans, cars evolved from horses, so they naturally focus on their power. In contrast, Asians see cars as evolved from palanquins and thus prioritize comfort. What began as a slight cultural preference eventually evolved into distinct manufacturing systems," said Kenya Hara, a leading figure in Japanese design and the art director of MUJI, in a cross-disciplinary commentary.

In fact, Hara's initial analysis of the product definition differences between Japanese and German/American automotive brands now applies equally to Chinese and European/American brands. Especially in the era of new energy vehicles, "refrigerators, TVs, and large sofas" have become the new "three major components" of cars, topping the list of considerations for Chinese consumers when purchasing a vehicle. In contrast, the "horse" attributes of a car don't seem to matter as much.

However, for the niche segment of luxury electric vehicles, while focusing solely on creating a "palanquin"-like product may seem narrow-minded, simply piling on features is also a low barrier to entry.

But just like making a smartphone, the built-in experience is the main focus. Who cares about the battery model? The reason luxury brands can establish a premium over mass-market brands is that they offer not just top-notch performance but also maximize space, interior design, and comfort configurations.

While many argue that refrigerators, TVs, and large sofas in cars are pseudo-demands, actual sales figures prove that cars with these features do sell better at the same price point.

Finally, returning to the industry at large, unlimited price cuts are not advisable for any company, especially luxury brands like BBA. Such actions can not only lower brand positioning but also affect operational quality.

However, the same is even truer for domestic electric vehicle manufacturers. While the market has expanded and the industry has strengthened, only a handful of companies are profitable, which is unhealthy. Amidst this intense price war, component manufacturers, distributors, and R&D personnel are facing unprecedented pressure, and complaints abound.

Against this backdrop, how many companies are truly faring better than BBA?