The last battle in 2023： the highest price reduction of popular luxury cars exceeded 150,000.
In the last month of 2023, the inventory pressure of automobile dealers eased.
As of December 31st, 2023, the latest issue of "Investigation on the Inventory Early Warning Index of Automobile Dealers in China" released by china automobile dealers association shows that the inventory early warning index of automobile dealers in China was 53.7% in December 2023, down by 4.5 percentage points year-on-year and 6.7 percentage points quarter-on-quarter. The inventory early warning index is above that of threshold, and the automobile circulation industry is still in a recession, but the prosperity has rebounded significantly. This is the lowest month since 2023.
It is worth noting that although the inventory pressure has eased, the terminal price war has increased. The price of American B-class cars dropped to 130,000 yuan, equivalent to the original price of A-class cars; Luxury brands have even introduced a price reduction of more than 100,000 yuan.
"The price is adjusted every month, even once every half month, mainly according to the changes in the market and the price strategy of competing products. In December, many manufacturers officially cut prices, and dealers also made profits out of their own pockets. For 4S stores, it is very important to complete the sales tasks of manufacturers and get rebates. Generally speaking, the amount of rebate can cover the loss of selling cars. " The sales manager of a car 4S shop told reporters that the terminal price war in 2023 almost runs through the whole year, and the competition is fierce. It is easy to take away customers who don’t cut prices.
The price war entered the sprint stage.
When the automobile market entered the fourth quarter of 2023, the automobile industry entered the sprint stage. Since November, 2023, automobile manufacturers have successively announced price cuts, and the market has started a new wave of price cuts. However, the price reduction at that time triggered the wait-and-see mood of some consumers. Although the passenger flow increased significantly, the transaction rate of many 4S stores did not meet expectations. In December, it entered the final sprint stage, and the market demand in the peak season began to be released continuously at the end of the year. According to the report of china automobile dealers association, at present, there are nearly 20 car companies that have announced the reduction of car prices, dealers have also increased limited-time preferential schemes, and local subsidies have been intensively introduced to fully promote car consumption. Driven by the tide of returning home, the superposition of the year-end promotion, passenger flow and sales volume exceeded expectations. It is estimated that the retail volume of passenger car terminals in December will be around 2.45 million, which is basically the same as that in December 2022.
The survey shows that the inventory index decreased in December, while the market demand, average daily sales, employees and operating conditions index increased. At the end of the year, consumers’ demand for cars continued to strengthen, and dealers’ operating conditions improved. Market demand and daily average sales index have entered the boom zone, while the other three sub-indexes are still in the slump zone.
From the inventory index of sub-brand types, the import and luxury, joint venture and independent brand indexes all showed a month-on-month decline in December. Among them, the import and luxury inventory early warning index was 53%, the mainstream joint ventures and independent brands were 54.4% and 53.4% respectively, which was significantly lower than last month. The inventory early warning index in November was 56.6%, 61.1% and 63.5% respectively.
According to the development law of the automobile market, the sales task at the end of the year is relatively heavy, especially in this year’s fierce market competition, dealers have to adopt the strategy of rapidly reducing prices. Among them, luxury car brands have relatively low inventory pressure, but the current preferential strength is unprecedented. According to car home’s website information, in Beijing, the maximum discount for mercedes benz c class is 136,000 yuan, the maximum discount for BMW 3 Series and Audi A4L is around 100,000 yuan, and the maximum discount for Mercedes-Benz E class is around 160,000 yuan. Since 2023, BMW, Mercedes-Benz and Audi have all been reported to make large subsidies to dealers.
On the other hand, at the end of 2023, some manufacturers reduced production, which eased the inventory pressure of dealers to some extent. On November 3rd, FAW Toyota released the production reduction to dealers and lowered the sales target from December 2023 to January 2024. In addition to reducing production, FAW Toyota also launched a new round of promotional activities. Consumers who purchase FAW Toyota models including Corolla, RAV4 Rongfang, Asia Dragon, Grevia, Crown Lu Fang, Lingfang, Ruifang, Asia Lion and Yize from December 1 to 18 can enjoy financial schemes such as direct purchase tax subsidy of 5,000 yuan, replacement subsidy of up to 6,000 yuan and low down payment/zero interest rate.
More than 60% of dealers have not completed the manufacturer’s tasks.
Despite the recovery of automobile consumption in December 2023, there is still a long way to go before the OEM’s assessment targets and expectations for dealers. Near the end of the year, dealers get year-end rebates to achieve the annual task objectives, and intensify the inventory clearance, but the profit pressure is still relatively high. Overall, the operating conditions of dealers in 2023 are not optimistic. According to the survey, 37.4% dealers have completed the annual task, 39.4% dealers have a task completion rate of 70%-90%, and 23.2% dealers still have a task completion rate of less than 70%, which is far from the annual task target.
Under the price war, the profitability of automobile dealers is weakened. "In the past, a 4S shop sold 100 cars a month, which was a big store in the main city, and it could also break even. But now under the price war, the price of new cars is seriously upside down, and it is impossible to make money by selling 3,000 cars a year. " A car brand dealer said that a number of dealer groups have begun to shrink the number of outlets and reduce the number of stores.
Judging from the discount rate of vehicle terminals, according to thinkercar discount data, by the end of November 2023, the discount rate of the whole industry was 12.62%, and the discount rate of fuel vehicles was 14%, much higher than that of new energy vehicles (9.3%). No matter the discount rate of fuel vehicles or new energy vehicles, there is no sign of turning heads in the current trend.
"The decline in consumer purchasing power is the main reason for the price war in the auto market, especially the decline in the purchasing power of low-end consumers. In 2022, the number of self-owned brands of vehicles under 100,000 yuan has dropped significantly. However, many dealers are now in a state of loss and have a high debt ratio. Manufacturers usually put inventory pressure on dealers to promote sales. This can be achieved through various commercial policies, such as manufacturers giving dealers a discount of 3,000 ~ 5,000 yuan or even 10,000 yuan for each car sold, or offering acceptance remittance, implementing a cash refund policy, or offering an interest-free policy. These policies will play a role when dealers purchase goods in large quantities. However, in the case of a downturn in the auto market, many dealers misjudged the prospects of the auto market, making it difficult to make a profit. " In an interview with reporters, the management of an independent car company said that in the past few years, the new car dealers could still make profits after the OEM rebate, but under the tide of large-scale price reduction in 2023, the financial pressure on dealers increased, even if they got the rebate, many dealers also lost money. "Some powerful dealers can make money in after-sales business by relying on the amount of ownership. Generally speaking, the after-sales business brought by car ownership can support the profit of dealers for three years, but in the case of continuous deterioration of the market, dealers will also face great survival pressure."
The overall profitability of dealers in 2023 has not been announced. However, from the first half of 2023, the joint venture brand suffered the most losses. In the first half of 2023, the investigation report on the living conditions of national automobile dealers showed that the overall profitability of luxury/imported brands was relatively good, about one third of dealers lost money, and nearly half of dealers realized profits. The loss-making dealers of joint venture brands and independent brands accounted for 51.3% and 48.0% respectively.
The pressure on joint venture brands is mainly due to the impact of independent new energy vehicles in 2023, and the market share of joint venture brands relying on fuel vehicle business is rapidly shrinking. According to the data of the Federation, the Japanese market share dropped from 24.1% in 2020 to 17.6% in the first half of 2023, with a drop of 6.5%, which was the most obvious decline. The market share of German cars dropped from 25.5% in 2020 to 21.4% in the first half of 2023. American models fell from 9.4% to 8.5%; Korean models dropped from 3.8% to 1.7%.
According to the latest report of Easy Car Research Institute, medium-sized cars have contributed major sales and profits to mainstream joint venture car companies such as Volkswagen, Toyota and Honda, which is similar to the "base camp" of joint venture car companies. Facing the challenges of competing products such as BYD, joint venture car companies have no retreat and can only burn their bridges. In the first three quarters of 2023, although the sales ranking of medium-sized cars was still dominated by Camry, Passat, Magotan and other fuel vehicles, the large-scale price reduction promotion made the vast majority of dealers operating fuel medium-sized cars in a state of losing money and earning money. At the beginning of 2024, BYD may set off a new round of price war focusing on medium-sized and above products, leaving little time for competing products such as Volkswagen, Toyota, Honda and Nissan. This time, it will directly hit the "last fortress" of joint venture car companies.
According to the china automobile dealers association report, looking forward to 2024, dealers believe that the automobile demand this year will continue the growth momentum in the second half of last year, but the competition will be more intense, and they will continue to face the problems of falling new car prices, high inventory pressure, tight funds and low bicycle profits.
