After retail sales of new-energy vehicles in the Chinese market surpassed those of fuel vehicles for two consecutive months, fuel vehicles, which are gradually becoming a niche choice, are once again fighting a price war.

On 24 September, Buick announced the launch of the new-generation Buick Enclave Plus with its starting price further reduced to 169,900 yuan. This price is a 60,000 yuan cut from its guide price of 229,900 to 259,900 yuan.

This move is not an isolated case, as a number of models such as Passat, Dzire and Mondeo have recently adopted similar pricing strategies, further confirming the trend of pragmatic pricing in the fuel car market.

Some consumers say that the promotional efforts of popular joint venture models such as the Passat and Camry, which have been reduced to less than 150,000 yuan, were ‘unthinkable in the past’.

In terms of trends, the rapid growth of the new energy vehicle market has exacerbated the competitive pressure on fuel vehicles, and during the traditional low season of July and August, new energy vehicles delivered some of the best sales figures in history, further eroding the market share of fuel vehicles.

Behind this trend is the growing concern of consumers for environmental protection and economy. According to statistics, the monthly sales penetration rate of new energy passenger car market in July and August has consecutively exceeded 50%, making fuel cars face unprecedented challenges.

In order to seize the traditional ‘Golden Nine and Silver Ten’ sales season, major automobile companies have made price adjustments for new cars on sale and to be listed at the Chengdu Auto Show in late August and early September, further promoting the escalation of the price war.

A distinctive feature of this round of fuel car price war is the ‘direct official price cut’. This type of price adjustment is different from previous time-limited offers or individual dealer price cuts, and it is widely believed that straightforward price adjustments help guide consumers to place orders and reduce wait-and-see sentiment.

Since the beginning of 2023 to the present, car companies have tended to use limited-time offers or price adjustments through dealers. This has instead spawned waiting behaviour and shop comparisons among consumers, making it difficult to translate concessions into actual sales.

It should be noted that a recent report submitted by the Automobile Dealers Association shows that current auto dealers are generally facing losses in new car sales, with increased risk of cash-flow deficit operations and broken capital chains.

The intensification of the price war has led to a rise in the overall discount rate, and the cumulative loss of the overall retail market in the first eight months reached 138 billion yuan, which has forced many automobile companies to sell at a loss through price reductions in order to generate cash flow as much as possible and to complete the inventory clearance.

On the other hand, the price-cutting strategy may bring about an increase in sales volume in the short term, but in the long run, the price war will undoubtedly be a test of the industry's profitability.

Independent brands in the replacement of joint venture brands to become the protagonist of the market, generally faced with the dilemma of ‘increasing revenue does not increase profits’. Data show that in the first half of the year, the net profit of 30 major domestic automobile listed companies and only 1/3 of Toyota, about 2/3 of the Volkswagen Group.

Source: Interface News