The state of the auto market in the first half of the year: prices keep falling, cars remain unsold | Jianzhi Research

In June this year, the discount rate in the Chinese auto market reached a nearly 3-year high, and the intensified price reduction promotions have led to a peak in sales for major car manufacturers. In June this year, the overall passenger vehicle sales continued to rise month-on-month. The production of passenger vehicles was 2.134 million units, a year-on-year decrease of 2.8% but a month-on-month increase of 6.9%; the retail sales of passenger vehicles were 1.767 million units, a year-on-year decrease of 6.7%, but a month-on-month increase of 3.2%. The sales of new energy vehicles showed a double-digit growth both year-on-year and month-on-month, and the penetration rate of new energy vehicles once again approached the 50% mark. In June, the production of new energy vehicles reached 933,000 units, a year-on-year increase of 26.6% and a month-on-month increase of 5.8%; sales were 856,000 units, a year-on-year increase of 28.6% and a month-on-month increase of 6.4%. The market penetration rate of new energy vehicles remained high at 48.4%, a year-on-year increase of 13.5 percentage points. 1. The median discount rate in the auto market in June hit a 3-year high, with no end in sight for price wars Since the beginning of the year, the automotive industry has been engaged in intense price wars, reaching a climax with the "618 Shopping Festival," where the median discount rate in the market hit a nearly 3-year high. By offering discounts, cash rebates, trade-in rewards, and preferential financing schemes, both traditional car manufacturers like BMW, Toyota, Honda, and Changan Ford, as well as new energy vehicle manufacturers like ZEEKR, Li Auto, Leapmotor, and XPeng, have provided varying degrees of price discounts ranging from 20,000 to 70,000 yuan. Specifically, in June this year, the median discount rate for car models in the auto market reached 5.9%, a year-on-year increase of 1.6 percentage points; the discount amount reached as high as 7,695 yuan, an increase of 1,672 yuan compared to the same period last year. Huawei Finance Research believes that after six months of fermentation, the effectiveness of pure price reductions in driving transactions has somewhat weakened. However, in the current situation where vehicle configurations are highly homogenized and there are no new technological breakthroughs, price reduction for volume remains one of the few effective strategies for car manufacturers. Many new energy vehicle manufacturers participating in this round of price reduction activities have thus achieved record-high delivery volumes. Furthermore, as the sales target assessment point for the first half of this year approaches, the inventory levels of most automobile dealers remain high. In June this year, the inventory warning index for Chinese auto dealers was 62.3%, an increase of 8.3 percentage points year-on-year and 4.1 percentage points month-on-month. In order to achieve the sales targets for the first half of the year, it is not difficult to understand why automobile dealers have chosen to reduce prices to boost sales 2. New Energy Vehicles' Export Heat Cools Down Previously, the overseas market has always been the second growth point for China's new energy vehicle sales, and starting from 2022, the export volume of Chinese new energy vehicles has been maintaining a high growth trend. However, affected by adjustments in electric vehicle tariffs in multiple countries overseas, starting from the second quarter of this year, the month-on-month export volume of Chinese new energy vehicles has continued to decline, reaching a new low for the year in June. Specifically, in June of this year, China's overall passenger car export volume reached 378,000 units, a year-on-year increase of 28%, remaining flat month-on-month. Among them, the export volume of new energy vehicles was 80,000 units, a 15.2% decrease month-on-month, accounting for 21% of the total export volume, a 3 percentage point decrease compared to the same period. Starting from the second quarter of this year, the European Commission (imposing temporary anti-subsidy tariffs of 17.4% to 38.1% on imported electric vehicles from China), Brazil (raising tariffs on electric vehicles to 18%-25%), and the United States (imposing 100% tariffs on Chinese electric vehicles) have all adjusted their import tariffs on Chinese electric vehicles. Although Chinese new energy vehicle companies will not slow down their expansion into overseas markets due to this, the sudden doubling of tariffs in the short term will still disrupt exports. With the changes in tariffs, the export structure of Chinese new energy vehicles may undergo changes, with the proportion of plug-in hybrid models expected to increase. In June, the proportion of pure electric vehicle exports has already dropped to 72.6%. Taking the leading new energy vehicle company BYD as an example, the models that first entered countries such as Japan, Thailand, and Brazil were all pure electric models - the Dolphin, the Sea Lion, and the Yuan PLUS. However, this year, BYD's export models being promoted have switched to plug-in hybrid models - the Song PLUS DMI, as well as the overseas special edition Shark plug-in hybrid pickup truck. 3. Major New Energy Vehicle Companies Achieve Record Sales in June, But Annual Sales Targets Completion Rate is Low In June of this year, both leading new energy vehicle company BYD and emerging carmakers such as Xiaomi, Nio, ZEEKR, and Leapmotor all achieved record-high sales. Even car companies like Li Auto and XPeng, who failed to break sales records, at least achieved a new high for the year, maintaining a high growth trend in sales. However, despite the strong performance of new energy vehicle companies in the first half of the year, the overall annual sales target completion rate for the first half of the year is not satisfactory for most new energy vehicle companies. There are very few new energy vehicle companies that have truly completed more than half of their annual sales targets. Among them, BYD, which has repeatedly achieved record sales, has exceeded its sales target for the first half of the year. By the end of June this year, BYD's annual sales target completion rate was as high as 44.7% Even in the second half of the year, if BYD's monthly sales volume remains at 342,000 units in June without a month-on-month increase, BYD is expected to surpass its annual sales target of 3.6 million units. On the other hand, the annual sales targets of new energy vehicle startups have a wide range, with generally unsatisfactory completion rates. Only ZEEKR, Nio, and Li Auto have completion rates of 30% or above. Nezha Auto and XPeng have sales completion rates below 20%. The closing battle effect of major car companies in June exceeded expectations, to some extent reversing the sales decline in the first half of the year, but the gap between manufacturers remains very clear