Fuel Vehicle Price Cuts are in Full Swing, can NEVs Follow Suit?

SHANGHAI, Mar 21 (SMM) - Will price war in gasoline car market spill over into NEV market?

Since March, in the footsteps of the strongest ever car discount in history launched by Hubei province, the auto market in China ushered in broad-based price cuts. Many provinces and cities like Beijing, Shanghai, Tianjin, Sichuan and Hainan have successively launched various subsidy policies for car purchases, covering dozens of auto brands. SMM has sorted out the preferential measures introduced by some provinces, cities and car companies recently, and elaborated on the effect of the ongoing price war. Local government subsidies are accompanied by price cuts by car companies

Chongqing optimizes its automobile consumption subsidy policy: car replacement policy is cancelled; buying new car is entitled to a maximum subsidy of 3,000 yuan

On March 20, the Chongqing Municipal Commission of Commerce issued the Supplementary Notice on Optimizing the Implementation of Passenger Car Replacement Subsidy Policies, which has optimized and adjusted the current new energy passenger car replacement subsidy policy. From March 20th, old car replacement will no longer be implemented, and consumers will be directly subsidized for purchasing new passenger cars (including new energy vehicles and gasoline vehicles). The total amount of municipal financial subsidies, subsidy standards and methods, reporting channels and procedures will remain unchanged. From 00:00 on March 20, 2023 to 24:00 on June 30, 2023, consumers who buy new passenger vehicles (including new energy vehicles and gasoline vehicles) from automobile sales companies within the jurisdiction of Chongqing, and fulfill their tax payment or declaration obligations and complete the registration procedures in accordance with the law, a municipal financial subsidy of 1,000 yuan will be given to each car whose Manufacturer List Price is less than 100,000 yuan, and a municipal financial subsidy of 3,000 yuan will be given to each car whose Manufacturer List Price is 100,000 yuan or above.

Pinggu District in Beijing offers maximum subsidy of 4,000 yuan for car purchases

Pinggu District, Beijing started issuing the first phase of 2023 auto consumption coupons on March 18. Consumers can enter the "Consumption Map-Pinggu District" WeChat mini-program platform to receive auto consumption coupons, and use them when purchasing cars at 4S auto stores that participate in this activity. According to the rules, consumers who purchase a car with an amount below 100,000 yuan can enjoy a subsidy of 2,000 yuan per car; those who purchase a car with an amount between 100,000 (inclusive) and 200,000 yuan can enjoy a subsidy of 3,000 yuan per car; For vehicles above 200,000 yuan (inclusive), each vehicle can enjoy a subsidy of 4,000 yuan. Auto coupons are used on a first-come-first-served basis until the quota is used up, and unused auto coupons will automatically become invalid.  

Shijingshan District in Beijing will issue 10 million yuan car purchase coupons with a maximum subsidy of 8,000 yuan

On March 15, Shijingshan District, Beijing announced that from March 16 to March 31, it will launch a car purchase discount activity, offering tens of millions of exclusive consumption coupons to consumers who buy cars in Shijingshan District. Specifically, the coupons are issued to consumers who buy cars from car companies participating in the event in Shijingshan District and are at the same time users of the CCB Life APP in Beijing.

Consumers who purchase vehicles below 100,000 yuan (inclusive) to 200,000 yuan can receive a subsidy of 2,000 yuan per vehicle; consumers who purchase vehicles below 200,000 yuan (inclusive) to 500,000 yuan can receive a subsidy 5,000 yuan per vehicle; consumers who purchase vehicles worth more than 500,000 yuan (inclusive) are entitled to subsidy of 8,000 yuan.

Automobile sales promotion activities in Chengdu: the total subsidy is 100 million yuan, and the maximum subsidy is up to 150,000 yuan per car

Starting from March 17, Chengdu launched the "production-sales linkage" car consumption activity in Longquanyi District, with a total subsidy of 100 million yuan and a maximum of 150,000 yuan in subsidies for each vehicle. This consumption promotion event will last until June 30, 2023, and the participating brand models cover pure electric, hybrid, and plug-in vehicles. Individual or corporate consumers that buy designated models from FAW-Volkswagen, FAW Toyota, Volvo, Shenlong Automobile, Dayun Automobile, Lynk & Co, Hongqi at the car dealers in Chengdu, and register the license plate within the specified time limit can obtain a one-time subsidy of 15,000-150,000 yuan for each vehicle, plus the subsidies offered by automakers.

Weihai implemented car sales promotion with a maximum subsidy of 6,000 yuan for purchasing new energy vehicle

The Weihai Municipal Bureau of Commerce and the Municipal Finance Bureau recently issued the Notice on Printing and Distributing the Implementation Plan for Weihai Automobile and Catering Consumption Coupon Activities in 2023, and decided to carry out Weihai Automobile Consumption Promotion Activities. The activity period is from January 1, 2023 to June 30, 2023, with a total amount of 10 million yuan. This will be applied to individual consumers who purchase passenger cars with 7 seats or less at Weihai auto sales companies and register the license plate in Weihai from January 1 to June 30 this year. This includes purchasing new cars and scrapping old cars in exchange for new cars, excluding the purchase of second-hand cars, passenger cars, trucks, special vehicles, etc. This activity takes the form of consumers first grabbing qualification coupons, and then submitting car purchase materials to issue consumption coupons. The issuance of qualification coupons started at 10:00 CST on March 17.

Hefei released a new energy vehicle consumption subsidy policy with a maximum subsidy of 5,000 yuan!

According to the terms and rules of Article 3 of Promoting the Consumption of New Energy Vehicles of Several Policies and Measures of Hefei City Promoting Confidence and Improving the Economy, from February 4 to June 30, 2023, consumers who scrap or sell non-operating passenger vehicles registered in Hefei and meet relevant standards under their own names, and purchase new non-operating new energy passenger vehicles at the automobile sales agencies registered with the Hefei Municipal Market Supervision and Management Department for 50,000 yuan , 100,000, and 200,000 yuan can obtain a financial subsidy of 1,000 yuan, 3,000 yuan, and 5,000 yuan respectively per vehicle.

Car prices in Bengbu City cut across the board

Car companies in Bengbu city have generally adjusted their prices to varying degrees. The specific price cuts depend on the policies of manufacturers and stores. Da Qingfeng, secretary-general of the Bengbu Automobile Sales Industry Chamber of Commerce, said, "The wave of price cuts in Hubei has a certain impact on the current automobile market in Bengbu. Most of the car companies in Bengbu have now lowered their prices, and some models have experienced relatively large price declines. "

The marketing staff of the Cadillac 4S store in Bengbu (Northern Anhui) International Automobile City said that take the CT6 model, for example, the maximum discount can reach 130,000 yuan, for those consumers who are eligible for policies of the store, such as teachers, as well as medical care, financial services staff, builders, etc. The price cuts, while are in normal ranges for most models, can be more significant for the more difficult-to-sell models. For example, models such as PHIDEON, can enjoy a current discount of up to 70,000 yuan.

However, a relevant person in charge of the local Baolifeng Automobile said that the impact of price cuts on luxury car brands is not obvious. For example, the company has not received notice of a significant price cut on the BMW i3 model. There were rumours that BMW i3 could cost only 120,000-180,000 yuan in full payment plus subsidy.

In terms of car companies, according to incomplete statistics from relevant media, hundreds of models from more than 30 car brands, including BYD Dynasty series, Dongfeng Citroen, Honda, Nissan, Geely Automobile, Lexus, Mercedes-Benz, Mazda and FAW-Volkswagen have recently launched various promotions and preferential measures. In addition, Haval H6, the former "generation of magic car", also launched a limited-time subsidy policy on March 19. From March 19 to April 30, a cash discount of 15,000 yuan will be offered. Haval H6S and 2023 H6 National Trendy Edition will not participate this event.

Taking Changan Automobile as an example, following the previous comprehensive subsidy, Changan Automobile once again officially announced to follow up the "subsidy tide” on March 17. CS75 series, UNI-V, Eado PLUS and other key sales models have participated in subsidies. Specifically, the limited-time comprehensive discount of the CS75 series is up to 33,000 yuan, including a direct cash reduction of 10,000 yuan, and a maximum equity subsidy of 23,000 yuan; the limited-time comprehensive discount of UNI-V is up to 22,000 yuan, including a direct cash reduction of 5,000 yuan, and a maximum equity subsidy 17,000 yuan.

In addition, Changan Automobile has launched "buy it now" models. For example, the new CS75 Blue Whale version has a direct cash drop of 30,000 yuan, and the current buy-out price is 83,900 yuan (the daily price is 102,900-113,900 yuan); the buy-out price of Yidong PLUS is 73,900 yuan; and the buy-out price of CS35 PLUS is 78,900 yuan.

It is worth mentioning that Changan Automobile has previously launched the "Ten Billion Car Purchase Season" event. Users who pick up their cars (purchasing any model of Changan passenger cars) between March 1-March 31 can enjoy additional car coupons worth 1,000 yuan. In addition, relevant car consumption subsidies issued before April 30 will be given cash subsidies in accordance with corresponding policy standards.

In addition, according to the latest news, the Tank Mrand of Great Wall Motors announced on the evening of March 18 the launch of a year-round price guarantee policy, promising that all models will have a year-round price guarantee. From now until December 31, 2023, for users who order all models of Tank Brand through the TANK App, Tank Brand promises to actively refund the difference between the old and new suggested retail prices if the official retail price of the purchased model is lowered during the period. Tank Brand stated that the user's car purchase price protection rights cover the following situations: changes in the official suggested retail price; cash relief rights for car purchases provided by the tank brand (excluding government car purchase subsidies and special limited-brand city fuel vehicle index car purchase policies, excluding Tiktok live broadcast, temporary event rights such as specific lottery draws).

On the one hand, the price reduction is carried out by the local government and the car companies. The typical ones are the super-large preferential measures in Hubei, Chengdu and other places. On the other hand, the price reduction measures are initiated by the car companies themselves, including GAC, BYD. Some other car companies adopt "price protection" measures. All these price reductions and promotion methods are essentially beneficial to consumers in order to achieve the purpose of sales promotion and inventory clearance.

The switch of the national standard has little effect in the face of the high inventory of car companies and the overcapacity of fuel vehicles?

When it comes to the vigorous price cuts launched by car companies, the market's analysis of the reasons for it is becoming more and more diverse. Before the wave of price cuts began, the market generally believed that the "National Six A" standard would be switched to the "National Six B" standard on July 1 2023 as the policy table shows that the National Six B standard will be implemented nationwide on July 1, and the National Six A vehicles will not be listed after that. But the fact is not so absolute. According to data from the research report of Haitong Securities, 314,000 National VIA models were produced domestically in 2022, accounting for only 1.7% of the total output.

Therefore, many market players think that the switching of the national standard is not the main driving force for this round of car price cuts. Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, admitted frankly that the main reason for the price cuts was not due to the switch of national standard. In fact, most car companies already have technical preparations for the switching of the national standard. Although some car companies need to digest their inventory in advance in order to cope with the RDE test, but this is by no means the main reason for the price cuts.

It is reported that the high inventory pressure suffered by auto companies and the overcapacity of fuel vehicles are the main reasons for the current auto price war. According to the data, as early as the end of 2022, the China Passenger Car Association stated that due to the weak domestic demand and the international situation, car stocks in China have further increased. Toyota, Volkswagen and other fuel vehicle makers introduced various preferential measures. During the two sessions, Miao Wei, Deputy Director of the Chinese People's Political Consultative Conference Economic Commission, had a positive attitude towards the overcapacity. And he also mentioned that it is necessary to think about how to convert excess fuel vehicles into new energy vehicle production capacity. Therefore, against the background of overcapacity of fuel vehicles and high inventory pressure suffered by auto companies, the tide of price cuts for fuel vehicles is on the rise.

So has this vigorous wave of price cuts played a great role in stimulating sales as expected?

According to a survey conducted by the China Automobile Dealers Association, the number of visitors to 4S stores all over the country except Wuhan has increased significantly recently, but the transactions have decreased sharply. Some consumers hold a wait-and-see sentiment and wait for the subsidy policy of price reduction. According to statistics from the China Automobile Dealers Association, from March 1 to March 12, the passenger car market retailed 414,000 units, a year-on-year decrease of 17%, and a month-on-month drop of 11%. The up-to-date retail sales were 3.09 million units, down 19% YoY. After the large-scale spread of automobile price reduction subsidies, consumers did not wish to buy cars on dips, thus the sales volume did not increase as expected. The China Automobile Dealers Association stated that if the situation is allowed to continue to develop, it will cause great damage to the sustainable and healthy development of the auto industry.

The idea of the Gasgoo Automobile Research Institute also coincides with the above evaluation. Gasgoo Motors said that although the big price cuts can indeed stimulate some consumption, at the same time, the wait-and-see sentiment in the terminal market will be further strengthened. The more price cuts occur, the more consumers want to buy better products at lower prices, so they will be very cautious in choosing the timing of buying.

Crazy price cuts for fuel vehicles may erode some new energy vehicle shares

In the new energy vehicle market, SMM believes that when the consumers hold a strong wait-and-see toward the NEV market, the price reduction of fuel vehicles triggered a demand counterattack, which may squeeze the NEV market share to a certain extent. The high NEV stocks will hardly be digested quickly, weighing on the NEV companies.

Some industry experts also commented before that as more places and car companies follow up with the price cuts of fuel vehicles, it will bring certain pressure to the NEV industry. Except for a few leading NEV companies in China, such as BYD, which can absorb the impact of price cuts through scale and control of battery costs, the ability of other NEV companies to continue to reduce costs and prices is not optimistic. After all, judging from the latest financial report data of car companies, Xiaopeng Motors lost 9.14 billion yuan in 2022, Li Auto suffered a loss of 2.03 billion yuan, and Cyrus, which cooperates with Huawei, lost more than 3.5 billion yuan throughout 2022...

But even so, Chen Shihua, deputy secretary-general of the China Automobile Association, is still very optimistic about the future of the new energy vehicle market. He said that new energy vehicles are undoubtedly the development trend of the automotive industry and have a bright future. China's NEV companies should, on the basis of the achievements they have made, focus more on seizing the opportunities of new technology development and work hard in technology, service and brand power.