Chinanews.com, March 3 (Zhongxin Finance Ge Cheng) "The government subsidy policy has been introduced for about a week, and there are significantly more customers arriving this weekend. Dan Dan, a salesperson at a 30S store in Beijing's Fengtai District, told Zhongxin Finance that the flow of customers in the store has increased recently, but consumers "see more and buy less."

Recently, many places across the country have opened the car purchase subsidy model. According to incomplete statistics, more than ten places, including Hubei, Beijing, Chongqing, etc., have recently launched car purchase subsidy policies, involving more than 40 car brands. After the introduction of the subsidy policy, why are consumers still waiting and seeing?

Infographic: A car show attracts a large number of visitors. Photo by Liu Zhongjun

"There are many people looking at the car, but fewer people placing orders"

On March 3, Beijing's Fengtai District launched the issuance of automobile consumption coupons, and consumers can receive up to 21,4000 yuan in car purchase subsidies. The total amount of subsidies for this event reached 1000 million yuan.

Dandan introduced that the district government subsidized a total of 1000 million yuan, about 3000,3000 vehicles can enjoy the subsidy, and each car has an average subsidy amount of <>,<> yuan. However, the store where she works has a price of <>,<> to <>,<> models, and the overall impact of the subsidy on the price of the car is limited.

"Although there are subsidies and preferential support, there are not as many people who place orders as people who see cars." Dandan said that her store is still more than a dozen short of the quarterly sales task, and everyone is still rushing the task at the end of the quarter.

Zhongxin Finance noted that Hubei's previous subsidy was relatively large, which attracted widespread attention. A Dongfeng Citroen C21 with an original price of 19,6 yuan, after a comprehensive subsidy of 9,<> yuan from government and enterprises, you can start with a "six discount". According to media reports, the corresponding model was once "snapped up" in Hubei.

This has also raised consumer expectations to some extent. However, in this round of subsidies, the subsidies launched in most regions are more limited than those in Hubei, usually thousands of yuan, and there is a certain gap between consumer psychological expectations.

For example, Chongqing's subsidy policy stipulates that if the price of a naked car is less than 10,1000 yuan, each vehicle will be subsidized by 10,3000 yuan; If the price of a naked car is 2000,8000 yuan or more, the subsidy is <>,<> yuan per vehicle. The amount of automobile consumption coupons launched in Beijing's Shijingshan, Miyun, Pinggu, Fengtai and other districts is between <>,<> yuan and <>,<> yuan.

As a result, consumer responses across the country have also varied considerably.

According to a recent survey by the China Automobile Dealers Association, except for Wuhan, the flow of 4S stores across the country has increased significantly, but the transaction volume has decreased significantly, and some consumers have begun to hold coins for purchase and wait for the price reduction subsidy policy.

The data also reflects the above phenomenon. From March 3 to 1, the passenger car market retailed 19,70 units, down 0% y/y and down 8% m/m. Since the beginning of this year, the cumulative retail sales of passenger cars have reached 4.337 million units, down 9% year-on-year.

Infographic: Salespeople introduce car subsidy policies. Photo by Zhang Jian

Behind the "price war" is inventory pressure

In March, why did various places focus on the "price war" mode of automobile subsidies and price reduction?

In the eyes of industry insiders, the primary reason is that after the withdrawal of the "national subsidy" of new energy vehicles and the halving policy of the purchase tax of fuel vehicles, the overall sales of the automotive industry have declined significantly. According to the China Association of Automobile Manufacturers, vehicle sales from January to February 2023 reached 1.2 million units, down 362.5% y/y.

The decline in automobile sales has further led to a sharp increase in the company's terminal inventory and increased operating pressure. According to the survey results of "automobile dealer inventory" released by the China Automobile Dealers Association, the comprehensive inventory coefficient of automobile dealers in February was 2.1, up 93.7% month-on-month and 2.4% year-on-year, and the inventory level was above the warning line.

"Price is determined by supply and demand, is one of the core adjustment mechanisms of the market economy, and is the main means of survival of the fittest in the market."

Wang Du, assistant president of the China Automobile Dealers Association, wrote that the "price war" in the current wheel vehicle market is only the appearance, which reflects the contradiction between oversupply and insufficient demand in the current automobile market. Market oversupply will inevitably lead to a large amount of inventory backlog, high inventory has become the biggest problem faced by dealers and even OEMs (car companies), which is the deep-seated reason for the "price war" in the current wheel car market.

However, inventory pressure is not the only factor affecting the "price war". The replacement of China VI emission standard models is also one of the important reasons for the "price war".

According to the plan, on July 7, the new emission standard "China VI B" will be implemented, and before that, models using the "China VI A" emission standard are eager to clear their inventory. This replacement process has undoubtedly intensified price competition.

"China's control standards for vehicle pollutant emissions are the fastest upgraded in the world." Cui Dongshu, secretary general of the Passenger Association, once said that China's control of automobile pollutant emissions was basically synchronized with the world, and now it is ahead of the world, which is also one of the embodiments of China's implementation of the "dual carbon" goal.

Infographic: The car is ready to be loaded. Photo by Yin Liqin

Price reduction tide, is it a pro or con?

Some insiders believe that policy subsidies and car price reductions are expected to activate consumption potential and will have a positive impact on automobile consumption.

On the one hand, under the dual stimulation of price reduction and subsidies, consumers can get benefits, which will help stimulate consumers' willingness to buy cars in the short term; On the other hand, news related to car price reductions has repeatedly appeared in hot searches, driving the attention of automobile prices to rise, helping consumers understand market prices and make new car purchase decisions.

The Ministry of Commerce and other departments previously issued the "Several Measures for Invigorating Automobile Circulation and Expanding Automobile Consumption" and pointed out that the automobile industry is a strategic and pillar industry of the national economy. Financial institutions are encouraged to reasonably determine the down payment ratio, loan interest rate, and repayment period under the premise of compliance with laws and regulations and controllable risks, and increase support for automobile consumer credit.

Wang Du believes that at this stage, governments at all levels should make efforts to increase the introduction of hedging policies in the fields of finance, finance, consumption promotion, and industrial chain to cope with the downward pressure of the market. In the long run, it is necessary to create a fair, reasonable and orderly market environment for competition through administrative, legal and economic means, and restore market competition as it is.

However, in the process of continuous release of automobile consumption potential, the "price war" may also bring greater survival pressure to the automotive industry. According to data from the National Bureau of Statistics, in the first two months of 2023, the profit of the automobile manufacturing industry was 414.3 billion yuan, down 41.7% year-on-year; The auto manufacturing margin was 3.2%, down 2.2% year-on-year.

Because the automotive industry has the characteristics of long industrial chain and strong driving force, it can not only affect the upstream steel industry and non-ferrous metal industry, but also affect the downstream insurance and financial services industry. It is foreseeable that with the continuation of the "price war" between car companies, the profits of the automobile manufacturing industry are likely to continue to decline, and the pressure on the profits of the automotive industry is bound to affect other enterprises in the industrial chain to varying degrees.

Therefore, some voices in the industry believe that car companies must compete in an orderly manner, and the "price war" can only be a lose-lose situation in the end. Just as the China Association of Automobile Manufacturers has previously made it clear that reducing prices to deal with inventory and properly recovering costs are normal business measures, but they cannot be reduced to price wars. Price wars don't last long, and value for money is an eternal business rule. (End)