"Roll" not winning? BMW bows in China

In the short span of nearly three years, domestic emerging high-end brands have emerged one after another like mushrooms after rain, accompanied by a cloud of price war looming over the entire market due to industry competition. Against this backdrop, the once dominant BBA (BMW, Benz, Audi) in the Chinese market has suffered, joining the price war but still struggling to reverse their decline in the Chinese market. BMW "Backs Down" Recently, media reports have indicated that due to severe losses at stores caused by the price war, BMW (BMWYY.US) will stabilize prices by reducing sales volume starting from July to alleviate operational pressures at stores, officially withdrawing from the practice of "price reduction to maintain market share". In response to this, BMW China told the media that in the second half of the year, BMW will focus on business quality in the Chinese market, supporting dealers to steadily progress. Data shows that as early as 1994, the BMW Group officially entered the Greater China market. In 2003, the BMW Group established a joint venture with Brilliance Auto Group to expand its presence in the Chinese market. Currently, the Chinese market is one of the BMW Group's most important sources of revenue. Facing the relentless price war in the current Chinese automotive market, BMW and other foreign car companies are feeling the impact in the Chinese market. To safeguard sales in the Chinese market, BMW had to reluctantly join the price war. Data shows that compared to a 17.2% discount rate in the Chinese market in 2022, the overall annual discount rate for BMW models in 2023 reached 17.66%, higher than the industry average. However, BMW's sales in China only grew by 4% that year, indicating that BMW's price reductions did not yield significant results. In 2024, BMW continues to participate in the domestic price war. CICC recently stated in a research report that Brilliance BMW's discount in June increased by 3.7 percentage points to 28%; the 5 Series and i5, which were launched in January, already have a 25% discount. The bank estimates that most BMW dealers will operate at a loss in the first half of the year. Although BMW has reduced its sales target for new energy vehicles in the second half of the year, BMW dealers still face significant profit challenges in the latter half of the year. A recent report by the Yiche Research Institute, "2024 Luxury Car Market Insight Report," shows that in 2024, BBA further reduced prices for promotions, with an average discount of up to ten thousand yuan per vehicle. However, Chinese brands will continue to strengthen their presence in the high-end car market, with more and more local high-end products such as Tank 700, Tengshi N9, and Aito M9 entering the market, attracting more middle-class and even wealthy users. While suffering from the impact of the price war, foreign car brands are losing market share to Chinese emerging brands, leading to less than ideal sales for foreign car brands in China. According to data disclosed by the BMW Group, in the first half of 2024, BMW's sales in China were 375,947 units (including BMW and MINI brands), a 4% year-on-year decrease. Therefore, the primary issue facing BMW is not increasing sales volume, but maintaining profitability. Calls Against Price Competition Intensify It's not just BMW that is being affected by the price competition in the Chinese market, many foreign car companies in China are also facing challenges, as the price reduction trend has gradually spread to the main luxury models of foreign brands Since the beginning of this year, BBA has successively joined the army of price reductions, and ultra-luxury car brands such as Rolls-Royce, Porsche, and Maserati have also joined the price reduction trend, with significant promotional efforts. Whether foreign car companies choose to participate in price wars or withdraw from them, there are pros and cons, all due to the fierce competition in the Chinese car market. In fact, not only foreign brands, but many Chinese domestic car brands are also under tremendous competitive pressure, with some companies falling into the dilemma of losing money on every car sold. As for when the price war in the domestic car industry will end, Huachuang Securities recently stated in a research report that the intensity of the industry's price war in the first half of the year exceeded market expectations, and it is currently entering a seasonal rest period. The firm pointed out that although industry price competition is not over, judging from oil-electric prices, joint venture independent prices, and car manufacturers' dealer profit margins, it may be entering the final stage. As irrational competition in the industry becomes increasingly severe, many car companies are calling for an end to the price war and even calling for government intervention to prevent "internal competition." At the 2024 China Automotive Chongqing Forum, the heads of many domestic car companies issued a "anti-internal competition" declaration, calling for healthy industry competition. Zhejiang Geely Holding Group Chairman Li Shufu stated, "Continuing the internal competition is not a solution. Without making money and without benefits, companies cannot survive. Car companies engaging in price wars, while offering discounts is acceptable, sacrificing quality is not!" Geely Holding Group Chairman Li Shufu also stated, "Endless internal competition, blunt price wars, the result is cutting corners, counterfeiting, non-compliant disorderly competition." Facing the challenge of internal competition in the current automotive industry, Geely's Senior Vice President Yang Xueliang stated, "As long as the word 'competition' remains, Chinese cars will not truly go global. He proposed, "Car companies must adhere to the laws of development, respect legal boundaries, adhere to ethical standards," "Car companies should not engage in blunt price wars, but should engage in high-quality price wars, technological warfare, quality warfare, service warfare, brand warfare, and the ethical warfare of enterprises."