On March 17th, Cui Dongshu, Secretary-General of the China Passenger Car Association, expressed in an article that the current drastic price reduction of new energy vehicles (NEVs) will lead to a situation where NEVs alone will erode the gasoline vehicle market, as gasoline vehicles have already reached a certain promotional bottom line.
Cui Dongshu mentioned that in the past few years, the national passenger car market has witnessed price wars, typically with a promotion growth level of about 4 percentage points higher at the end of each year compared to the previous year. However, in 2024, the price war in the national passenger car market continues to be intense.
It is reported that the current price competition mainly involves directly breaking through the lower limit of the original price, rather than adopting a model of adding features without reducing prices.
As of March 15th, the scale of price reduction for NEVs in 2024 has already reached half of that for the entire year of 2023, which is also an astonishing level relative to historical data.
Cui Dongshu pointed out that the promotion effect of price wars on short-term sales is not actually significant, especially in situations of price instability where consumer hesitation is particularly strong. Therefore, price reductions may lead to an increase in sales for the discounted models themselves.
However, there will be a clear wait-and-see attitude towards other related models, resulting in a situation where those models have to be discounted. If they are not discounted, they may not sell well.
Some companies may withstand the pressure through product strength, but others may have to resort to price reductions, leading to further market stagnation and a cycle where consumers wait for discounts, putting short-term pressure on vehicle sales.
From the perspective of gasoline vehicles, the downward pressure on costs for new energy vehicles and the "same price for oil and electricity" policy pose significant challenges to gasoline vehicle manufacturers. Gasoline vehicle product updates are relatively slow, with a lower level of intelligence, relying more on discounted prices to continuously attract customers.
From the perspective of NEVs, as the price of lithium carbonate declines and battery costs decrease, manufacturing costs have also decreased. With the rapid development of the new energy vehicle market, economies of scale have been achieved, providing more profit margins for NEV products.
