Cailian March 20 (Reporter Liu Yang) The price war in China's passenger car market is expected to remain fierce in 2024.
On March 20, reporters learned from internal sources within Tesla China that Tesla will adjust its prices upward, with the Model Y increasing by RMB 5,000. Also, the current official RMB 8,000 cash insurance subsidy policy and the RMB 10,000 car paint discount policy will expire on March 31.
It has been reported that the actual increase in price from this adjustment could reach RMB 23,000.
Just last week, Tesla North America and Europe officially announced that the Tesla Model Y, currently the world's best-selling model, will see price increases of $1,000 and €2,000 respectively from April 1, equivalent to RMB 7,199 and RMB 15,000.
"Tesla's performance in the United States, Europe, and China, its three major markets, has been unsatisfactory this year, and investors are not seeing the potential for profit." Regarding the reason for the sudden price increase, industry insiders believe that similar situations have occurred before and that this is clearly an attempt to "pressure orders". It is expected that Tesla's sales will see a significant increase in the coming days. "More importantly, Tesla's move has drawn attention to whether the price war will escalate or de-escalate. This phenomenon reflects differences in strategies among companies and the complex competitive landscape in the automotive market."
Since the beginning of the year, with the further increase in the penetration rate and consumer recognition of new energy vehicles in the domestic market, a new round of price competition has been triggered among foreign automakers (including Tesla, SAIC Volkswagen, SAIC General Motors Wuling, and GAC Honda), joint venture automakers, and domestic independent brands led by BYD and Li Auto, in order to further increase sales and seize greater market share.
According to incomplete statistics by reporters, so far, 63 models from 24 new energy vehicle brands have entered the competition.
"2024 is a key year for new energy vehicle companies to gain a foothold, and competition is bound to be fierce." Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), said that as the penetration rate of new energy vehicles increases rapidly and the traditional fuel vehicle market gradually shrinks, the contradiction between the large traditional production capacity and the shrinking fuel vehicle market will inevitably trigger a fierce price war. "The auto industry price war may continue for several years until a new pattern is formed."
CPCA's terminal research data shows that the overall discount rate of the passenger car market in early January this year was about 20.4%. In February, coinciding with the Chinese New Year and Lantern Festival holidays, many automakers further stimulated consumption during the holidays, and the price war intensified. By March, the price war in the auto industry showed a further escalation.
In terms of the price reduction rhythm, the overall price reduction in 2023 was relatively balanced, but the price reduction in February and March 2024 reached an extraordinary level, with 25 models having price reductions in February and 23 models in March. As of March 15, the price reduction scale this year has reached half of the total for the whole year of 2023.
"There is no definite answer to the question of whether the price war will escalate or de-escalate." The aforementioned industry insider believes that different companies have different market positions, product strategies, and cost control capabilities and will therefore adopt different pricing strategies. At the same time, the automotive market is also affected by various factors such as the macroeconomy, policy environment, and consumer demand, which will influence companies' pricing decisions.
In the view of Yin Tongyao, Chairman of Chery, the "price war" puts companies in a passive position, and if automakers do not respond, they may lose market share. However, Yin also admits that the price war is unstoppable. "The price reduction is a competition based on downward pressure, but automakers should still focus on upward competition, which has great potential."
