With the explosion of the car market during the “Golden September,” many automakers are fanning the flames, hoping to further increase market enthusiasm.
Recently, new energy vehicle companies, including AITO Wenjie, Zeekr, Li Auto, and others, have joined the ranks of promotions and price reductions. AITO Wenjie not only continues to offer 30,000 yuan car purchasing benefits but also promises to provide subsidies for those who exceed the expected time.
Zeekr, aiming to further boost sales, is offering up to 80,000 yuan in car purchasing benefits. Additionally, several automakers, including Zhiji and Xiaopeng, have launched new models at prices lower than expected.
The automotive consumer market has been accelerating since September, and the last quarter will be a crucial moment for automakers to boost their sales. Industry insiders predict that more companies will join the promotional pricing ranks, potentially triggering the next round of the automotive “price war.”
In the wave of NEV sales, AITO Wenjie undoubtedly receives the most attention. Reporters have recently visited multiple AITO Wenjie stores, which are bustling with crowds looking at and inquiring about cars, especially the revamped M7 model.
According to sales staff, the AITO Wenjie M7 model, after the 33,000 yuan benefit ended during the Mid-Autumn and National Day holidays, is now offering the second round of car purchasing benefits valued at 30,000 yuan (a direct cash discount of 3,000 yuan, with an additional 27,000 yuan optional benefit), which will last until October 31.
Furthermore, AITO Wenjie announced on the 17th a new subsidy standard for delayed M7 deliveries. Those who make a significant payment for the new M7 before November 30, 2023, and experience delivery delays, will receive cash compensation based on the number of delayed days, with a daily subsidy of 200 yuan, up to a maximum of 10,000 yuan.
After AITO Wenjie stirred the market, Zeekr quickly followed suit. On October 16, Zeekr announced that they would be offering limited-time car purchase benefits for their models until December 31. After stacking these benefits, the Zeekr 001 model can enjoy up to 80,000 yuan in limited-time car purchase benefits, Zeekr X can enjoy up to 51,000 yuan, and Zeekr 009 can enjoy up to 16,000 yuan.
This isn’t the first time Zeekr has reduced its prices this year. On August 11, the brand officially announced a price reduction, with the Zeekr 001 model receiving a price cut of 30,000-37,000 yuan, bringing the starting price down to 269,000 yuan. The reason for the price reduction, the company said at the time, was to enhance product competitiveness and compete with other automotive products.
Worth noting is that Li Auto, which has been consistently delivering, has also joined the price-cutting ranks. Importantly, models L7 and L8 from Li Auto directly compete with the AITO Wenjie M7.
According to reporters, Li Auto has rolled out significant discount policies in certain areas, including 10,000 yuan in insurance subsidies, 10,000 yuan in license subsidies, 5,000 yuan in maintenance subsidies, and 6,000 yuan in trade-in subsidies, amounting to a total discount of up to 31,000 yuan. Based on this, the Li Auto L7’s price has fallen below the significant 300,000 yuan mark, and the discounted L8 is also priced close to 300,000 yuan.
Besides direct price reductions, some NEV companies have begun to offer discounts right from the car pricing phase. On October 12, Zhiji LS6, under the SAIC Motor umbrella, was launched, with its introductory pricing roughly 20,000 yuan lower than the pre-sale price announced at the Chengdu Auto Show.
A similar scenario occurred with Xiaopeng Motors. The redesigned Xiaopeng G9 was launched in September at a substantially lower price than the older G9 model. The starting price was reduced by 46,000 yuan, bringing it down to below 300,000 yuan, which was a more significant reduction than expected. The Pro and Max versions, with the same configurations, were reduced by 66,000 and 60,000 yuan, respectively.
It’s essential to note that the companies mentioned above, engaging in promotions or price reductions, are facing significant sales pressure or are facing substantial competitive pressure.
The surge in AITO Wenjie’s popularity stems from the revamped M7’s launch on September 12. This model introduced a 5-seater version with a starting price of 249,800 yuan, a 40,000 yuan reduction from the previous M7 model. This move has revitalized the model. In the past few months, the monthly sales volume of the AITO Wenjie M7 had once fallen to several hundred units, pushing AITO Wenjie to the brink of collapse.
However, on October 15, AITO Wenjie announced that they had received over 60,000 major orders for the new M7 in its first month after launch. The current Siles factory has added production shifts, operating 22 hours a day and running a two-shift system. The price reduction has had an immediate effect.
For Zeekr, the situation is similar. The company delivered a total of 79,000 new cars in the first nine months. Zeekr’s CEO, An Conghui, previously revealed that Zeekr aims to ensure the delivery of 140,000 cars in 2023. By 2024 and 2025, Zeekr plans to introduce four new models and aims to achieve a sales target of 650,000 units supported by eight models by 2025.
Analyzing Zeekr’s current sales, achieving the goal of delivering 140,000 vehicles is not going to be easy. The Zeekr 001, which has the most significant price reduction, is its best-selling model, with a total of 53,000 units sold in the first nine months, accounting for 67.06% of Zeekr’s total sales.
While Li Auto has consistently delivered more than 30,000 units in recent months, they have clearly felt the pressure from AITO Wenjie at their recent autumn strategy meeting. Given the sales impact of the AITO Wenjie M7, Li Auto has chosen a strategy of emphasizing their strengths and downplaying their weaknesses, avoiding the new AITO Wenjie M7.
According to insiders, Li Auto has now discontinued some of their sales pitches, specifically not bringing up the Wenjie M7. “If customers ask about it, just say that Li Auto’s L6 coming out next year will be at the same price point as the Wenjie M7.”
As one of the leading forces in SAIC Group’s transition to the new “Four Modernizations,” Zhiji has targeted the high-end electric market above 300,000 yuan since its establishment. Its first model was the Zhiji L7. However, feedback from the end market suggests that the performance of the Zhiji L7 has been less than ideal, with monthly sales even dropping to the hundreds.
In the first three quarters, Zhiji sold only 15,100 cars, casting a shadow over its future prospects. Meanwhile, Xiaopeng has been in a sales slump since the beginning of the year, only returning to delivering 10,000 units per month in July, which also means they face significant delivery pressure.
“The last quarter is a crucial period for automakers to hit their annual sales targets. Therefore, it’s common to see promotions during this time,” an insider from a new energy vehicle company told reporters. In his view, as the number of models launched this year has increased significantly, more companies will join the ranks of those offering promotions and price cuts.
The Secretary-General of the China Passenger Car Association, Cui Dongshu, also noted that as the effects of consumption-promoting policies accumulate and positive factors in the economy continue to increase, the automotive consumer market began to accelerate from mid-October.
Several automakers plan to launch a slew of new models in the fourth quarter, including new models from BYD, Li Auto, Xiaopeng, AITO, Avita, Lynk & Co, Chery Xingjiyuan, and others.
Will profit margins continue to decline?
The trend of promotions driven by quarterly sales targets has been evident since September. Both fuel and new energy vehicles have increased promotions, releasing purchasing demand.
According to data from the China Association of Automobile Manufacturers, new energy vehicle production and sales reached 879,000 and 904,000 units, respectively, with month-on-month increases of 4.3% and 6.8% and year-on-year increases of 16.1% and 27.7%. From January to September 2023, new energy vehicle production and sales were 6.313 million and 6.278 million units, respectively, with year-on-year increases of 33.7% and 37.5%.
Lang Xuehong, the Deputy Secretary-General of the China Automobile Dealers Association, expects that terminal prices will continue to drop in September and October. Furthermore, this person believes that this year’s “Silver October” car market will not only be very robust but might also outperform “Golden September.”
Against this backdrop, “price for volume” will be one of the measures many companies adopt to maintain competitiveness. According to incomplete statistics, more than 50 domestic car brands and hundreds of models have participated in the price war through manufacturer subsidies or dealer price reductions this year, with discounts typically ranging from 30,000 to 120,000 yuan, an unprecedented intensity.
However, industry insiders believe that while “cutting prices to grant benefits” might allow companies to achieve short-term sales growth and alleviate industry inventory pressure, it cannot sustain companies in the long run. Frequent “price wars” will erode companies’ profit margins.
Taking the price war in the first half of the year as an example, data from Dongwu Securities shows that the fierce price war in the first half did not bring some companies the expected benefits. Tesla, NIO, and Xiaopeng all saw significant drops in their gross profit margins in the first half of the year, with Q1 and Q2 both down about 10% year-on-year. Xiaopeng Motors, in particular, saw a 14.8% year-on-year decline in its Q2 gross profit margin.
The agency pointed out that in Q1 2023, with generally suppressed sales and many discounts, the gross profit margins of various automakers were under pressure; there was a differentiated performance in Q2 gross profit margins. The main reasons for the rise in gross profit margins of companies like Li Auto, GAC, BYD, and Great Wall were the significant effect of sales volume and improved product structure. In contrast, for Xiaopeng, Changan, and other companies, the primary reason for the decline in gross profit margins was increased terminal discounts.