(Economic Observer) What signal does the "price war" in China's auto market send?

  China News Agency, Shanghai, March 14th (Pufan) Recently, the Chinese auto market has been extremely "busy".

At least 30 auto brands have participated in this round of "price wars". The scope and magnitude of the decline have surpassed the 2004 North-South Volkswagen joint price cuts and the 2008 global financial crisis car promotion.

What's more special is that behind this round of "price cuts", not only many car companies participated, but also local governments directly ended.

  What brought the car "price war" into the public eye was the car purchase subsidy activity launched in early March in Hubei Province.

Many car brands under Dongfeng Motor Group have collectively cut prices significantly, and Dongfeng Citroen C6 has become an "net celebrity car" with a comprehensive subsidy of up to 90,000 yuan (RMB, the same below).

A reporter from China News Agency observed that the C6 has already ranked first in many domestic car "watch lists" and "hot lists", but its sales volume in January this year was only 55 vehicles.

  Subsequently, the "butterfly effect" began to appear.

FAW-Volkswagen, SAIC-Volkswagen, Changan Deep Blue, Chery and other car companies across the country have launched subsidized car purchase activities.

Traditional luxury brands such as BMW, Mercedes-Benz, Audi, and Cadillac are also "gearing up" and starting to deal with the "price war."

  According to He Songsong, partner of Riess Strategic Positioning Consulting in China, the entire Chinese auto market has shown a booming new energy market and pressure on the fuel vehicle market since last year. The 'catfish effect' has been produced, and everyone's determination to participate in the price war has been detonated in the auto market that was originally 'ice and fire'."

  There is a characteristic of this round of car price reduction promotions. Many car companies or models are participating in the form of government-enterprise cooperation.

Still taking Dongfeng Citroen C6 as an example, in its 90,000 yuan car purchase subsidy, the government and enterprises each subsidize 45,000 yuan.

It is undoubtedly an important reason why the government and enterprises work together to promote sales and promote the recovery of the auto market as soon as possible.

  According to data from the Passenger Federation, the retail sales of China's passenger car market in January 2023 were 1.293 million units, a year-on-year decrease of 37.9% and a month-on-month decrease of 40.4%.

Although sales in the auto market picked up in February, overall retail sales from January to February totaled 2.679 million units, a year-on-year decrease of 19.8%.

  According to the Ministry of Commerce, 2023 has been designated as the "consumption boost year".

In addition to Hubei, Beijing, Shanghai, Shandong and other provinces and cities have also launched car purchase policy "gift packages" this year.

For example, Beijing and Shanghai continue to implement subsidies for replacing passenger cars with new energy vehicles, while Shandong and Harbin issue automobile consumption coupons.

  In this regard, Cui Dongshu, secretary-general of the National Passenger Federation, analyzed that the car purchase subsidy policies introduced by various regions will form a stable and strong support for the auto market in the first quarter.

"In particular, some targeted replacement subsidies are of great significance for promoting the development of new energy vehicles and eliminating old vehicles. They can better release consumers' consumption potential and help increase sales in the short term."

  The auto market is under pressure, and the pressure on various auto companies is not small.

As a financial pillar enterprise in Hubei Province, Dongfeng Motor's sales have been declining year by year in recent years.

Data show that from January to February 2023, Dongfeng Motor's cumulative sales fell by 48.48% year-on-year, and the decline in passenger vehicles reached 51.3%.

  Zhang Xiang, dean of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, told a reporter from China News Agency: "Dongfeng Motor is a major contributor to financial revenue in Hubei Province. , The government subsidy is also to hope that enterprises will tide over the difficulties."

  Yang Yongping, president of the industry think tank Yiou Automobile, also held the same view: "The overall sales of other brands and car companies in Hubei, including Dongfeng, have not been very good in recent years, and the production capacity has been overcapacitated to a certain extent. The company's price reduction and government subsidies are actually a digest Inventory, the process of solving the inventory."

  China FAW launched a car purchase subsidy campaign for consumers in Jilin Province in early March. The total subsidy amounted to 150 million yuan, and the maximum amount of bicycle subsidy was 37,000 yuan.

Behind the subsidy is also the decline in sales. According to data, China FAW will sell 3.2 million vehicles in 2022, a year-on-year decrease of 8.6%.

Entering 2023, from January to February, the two main brands of FAW-Volkswagen and FAW Toyota will decrease by 24.9% and 7.3% year-on-year respectively.

  Whether it is Dongfeng Citroen, Dongfeng Honda, FAW-Volkswagen, FAW Toyota and other brands with a relatively high price reduction, they are all joint venture brands with fuel vehicles as their main products.

"At present, the entire domestic new energy market is in a stage of rapid growth, and self-owned brands are mostly focusing on new energy, so the overall growth is increasing. For joint venture car companies, the proportion of traditional fuel vehicles is still very high, so the overall decline." Zhang Xiang said.

  It is worth mentioning that starting from July 1 this year, the National VI B emission standards will be fully implemented, which means that China's motor vehicle pollutant emission standards have entered a new stage.

Once the new standards are implemented, models that do not meet the emission standards cannot be sold or registered.

Yang Yongping said: "Before the implementation of the National VI B standard, it is really imminent to digest the unqualified vehicles in inventory and replace them with cash flow." (End)