The price war in the auto market intensifies, Geely, BAIC "join the war"

Per reporter Dong Tianyi per editor Sun Lei

In the wave of "price reduction" in the car market, there are car companies coming to "participate in the war".

A few days ago, the reporter of "Daily Economic News" learned that Geely Automobile launched a subsidy policy of halving the purchase tax, and the comprehensive discount can reach up to 4,5 yuan. The reporter learned through inquiring about the Geely Automobile APP that the event requires consumers to purchase 99 yuan exclusive rights and interests card coupons, which are valid until 3:31 on March 20, and each car can only use one piece, and users across the country can participate in the activity.

According to the Geely Automobile APP, the purchase tax halving activity involves most of Geely's main sales models, including Xingyue L, Xingyue L Thor Hi· F, 2023 Xingrui, etc. It is worth mentioning that the Geely Xingyue L 8AT two-wheel drive flagship model that was listed a few days ago is also in the scope of this event, and the new car market guidance price is 16,82 yuan, and users are expected to save more than 7000,<> yuan in purchase tax after purchasing coupons.

In addition, BAIC Motor also opened limited-time discounts, BAIC Mofang Supreme Comprehensive Discount of 2,5 Yuan, Beijing X7 Supreme Comprehensive Discount of 3,5 Yuan, the event period is from March 3 to March 12.

The "subsidy war" intensifies

With the addition of Geely and BAIC, this "subsidy war" in the car market triggered by the "Dongfeng system" has intensified, according to incomplete statistics, up to now, more than 30 car brands, including Mercedes-Benz, BMW, Audi, Buick, BYD, etc., have participated in it through manufacturer subsidies or dealer price reductions. It is understood that in addition to direct price reductions, there are also cash offs, insurance subsidies, financial discounts, and optional packages in addition to direct price reductions.

Not only car companies, but also the heat of Hubei Car City makes other provinces and cities "unable to sit still".

According to the reporter's incomplete statistics, up to now, Guangdong, Henan, Beijing, Shanghai, Zhejiang, Heilongjiang, Jilin, Shanxi, Yunnan, Hainan, Guizhou, Tianjin and other places have introduced relevant policies to promote automobile consumption, and the methods are also different, including extending the time of car purchase subsidies, issuing consumption coupons or car purchase subsidies, increasing car purchase indicators, and so on.

Huatai Securities believes in a relevant research report that it is expected that under the joint promotion of policies and car companies, automobile consumption is expected to gradually recover from February. The moderate continuation of the local government subsidy policy, aiming to smoothly transition the "national subsidy" and the market "cold period" after the expiration of the purchase tax halving policy, will form a certain support for domestic passenger car consumption in the first quarter of this year. The survey report released by the China Automobile Dealers Association also shows that stimulated by various favorable policies, 2.62% of dealers have improved their sales targets for 3.

For the "fancy" discount and price reduction tide in the domestic car market, Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, told the "Daily Economic News" reporter that the moderate reduction of product prices is conducive to stimulating consumer demand for automobiles, and there has been short-term hot sales of some models. However, under the wave of price reduction in the car market, it should also be considered that China's automobile industry is accelerating the development of electrification, intelligence, and networking, and enterprises have invested heavily in research and development, and the profit margin of the entire industry is also in a low position in recent years. A simple price competition strategy is not a long-term solution for car companies.

"Car companies should focus on the long term, actively keep up with the wave of 'new four modernizations', launch products in line with the trend of industrial development, and carry out healthy market competition, especially in terms of product technology quality and service brand power." Chen Shihua suggested.

The A-share dealer sector dived

For the "profit-making" behavior of car companies, the capital market sentiment is also pessimistic, just when this round of "price war" reached its climax, on the morning of March 3, the A-share automobile sector fell collectively. Among them, Great Wall Motor fell 10.8%, losing 72.248 billion yuan of market value in only half a trading day. Dongfeng Motor, Jianghuai Automobile and Changan Automobile all fell more than 5%, and BYD fell more than 4%.

On March 3, A-share auto stocks fell sharply again in early trading, but stopped falling after midday. Wind data showed that by the close of the day, the automotive sector index was down 14.0%. Among them, the shares of Cialis, ST Shuguang, BAIC Blue Valley and Jianghuai Automobile rose, while the shares of Great Wall Motor, Dongfeng Motor and Changan Automobile fell by 35.4%, 28.2% and 28.1% respectively. It is worth mentioning that Great Wall Motor fell by 86.5% in five trading days, Changan Automobile and Dongfeng Motor reached 19.68% and 11.69% respectively.

In addition, the A-share auto dealer sector also fell sharply. As of the close on March 3, Guanghui Auto's stock price was 14.2 yuan per share, down 15.1%; Sinomach Automobile shares were 38.8 yuan per share, down 45.0%. In terms of Hong Kong stocks, as of the press release of the "Daily Economic News" reporter, the stock prices of Zhongsheng Holdings, Yongda Automobile, and Harmony Auto fell first.

"Some joint venture brands have high inventory, and there have been sharp price cuts to complete the demand for clearance, among which some models in Hubei have made large concessions, which has affected users' car purchase sentiment, and the sales lead volume of stores has recovered to the level of the fourth quarter of 2022, but the holding of currency is heavy, and the transaction rate has only recovered to 2022% of the fourth quarter of 3." Huatai Securities believes that according to the estimate of the amount of this round of price reduction, it is expected to end in March, which is actually a short-term disturbance.

"Coupled with the pressure of clearing some models of manufacturers and dealers, the price war in the first half of this year will have a great disturbance to the sales rhythm and profit release rhythm of the industrial chain." Shenwan Hongyuan Securities expects that under optimistic circumstances, the oil vehicle price war may end around May; In pessimistic cases, no later than the end of June; However, in the medium and long term, short-term encounters between oil trucks and trams are inevitable, and it will be a protracted war.