BBA prices have "broken", who broke the wings of joint venture cars?

"50% off Kai, 60% off Hu, 70% off Bao" has become a catchphrase in the automotive industry. Although many people have observed the internal competition within the new energy vehicle sector, with price wars and continuous promises to consumers of "lower prices without lower quality." However, who could have imagined that the prices of traditional foreign luxury brand cars would be discounted to an unimaginable extent.

01

Foreign luxury cars experiencing a decline in both volume and price

With the continuous development of domestic new energy models and the rise of domestic brands, they have gradually encroached upon the market share of luxury brands, even causing a significant impact on foreign luxury brands including Mercedes-Benz, BMW, Audi, and Porsche. It seems that price reduction has become the only method to attract consumers.

A Cadillac dealership in Harbin recently posted a notice stating, "Buy one, get one free"—consumers who purchase an XT5 or XT6 with a loan at the guide price can receive a free CT4 with the lowest configuration. At the same time, it has been widely circulated online that the price of the BMW i3 pure electric car has plummeted; the 2024 eDrive 35L model, with an official guide price of 353,900 yuan, has been reduced to less than 190,000 yuan, an unprecedented discount.

"The BMW i3 is more than 50% off, and I don't know why. I'm just in charge of selling cars; the boss says to lower the price, so we lower it," said a salesperson at Baocheng Yuexin in Shanghai. June is traditionally a slow month for the car market, and as the Dragon Boat Festival approaches, dealers hope to stimulate consumption through discounts. The reporter found that the discounts on new cars in the store are quite substantial, with the BMW i5 starting at 439,900 yuan and a Dragon Boat Festival discount price of around 310,000 yuan, a reduction of up to 130,000 yuan.

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Meanwhile, Porsche's sales have plummeted this year, with pure electric models facing even greater sales difficulties, leading to a significant drop in car prices and even instances of selling at a loss. News such as the Macan offering a discount of 110,000 yuan, with an entry-level price as low as 460,000 yuan, and the Taycan with a price reduction of 400,000 yuan have been confirmed by media visits to dealerships. In order to meet sales targets, Porsche China has chosen to increase inventory, which undoubtedly brings tremendous financial pressure to dealers, and the conflict between the two parties has also intensified.

Multiple media reports have stated that three Porsche China dealers, due to disagreements over this year's sales targets, have joined forces with several group investors to send a letter to Porsche, demanding that the headquarters compensate or subsidize for recent losses on the sale of new cars.Bearing the big label of "Porsche," this matter quickly escalated. At the end of May, Porsche headquarters sent an investigation team to China to understand the situation. Subsequently, Porsche China and all authorized dealers issued a joint statement, stating that they are "jointly facing several complex issues."

In addition to Porsche, ultra-luxury brands such as Ferrari, Lamborghini, and Bentley have also experienced varying degrees of decline in sales in the Chinese market. In contrast, domestic new energy brands like NIO and Li Auto have seen a continuous increase in sales, which is significant considering that this segment is the core price range of traditional luxury brands in the 300,000-450,000 yuan bracket.

In fact, the price reductions of mainstream joint venture and luxury brands are related to their sales performance in the Chinese market.

Data from the China Association of Automobile Manufacturers (CAAM) shows that in the first four months of this year, the market share of domestic brand passenger cars was 63.5%, an increase of 8.4 percentage points year-on-year, setting a historical high. This means that the market share of joint venture brands is less than 40%; among them, the market share of German and Japanese brands is barely maintaining above 10%, while the market share of American, Korean, and French brands is all in the single digits.

In terms of brand performance, in April of this year, FAW-Volkswagen's retail sales volume declined by 15.6% year-on-year, marking three consecutive months of retail sales decline; in April of this year, Toyota's sales volume in the Chinese market decreased by 27% year-on-year. Zhang Xiaorong, Dean of the Institute of Deep Technology Research, stated that as Chinese brands become more competitive and the market accelerates its transition to new energy vehicles, the market share of multinational car companies in the Chinese automobile market is being squeezed.

03

New Energy Vehicles Open Up Overseas Pathways

In addition to capturing a large share of the domestic market, Chinese products known as the "new three treasures," which include "new energy vehicles, lithium batteries, and photovoltaic products," have shown a rapid growth trend in the export market in recent years.The latest data shows that the export total of the "new three" products in 2023 reached an astonishing 1.06 trillion yuan, not only breaking through the trillion-yuan mark for the first time but also achieving a proud year-on-year growth of 29.9%. This leapfrog growth not only highlights the strong strength of China's manufacturing industry but also sets a new benchmark for China in the global new energy field.

Entering 2024, the performance of China's new energy vehicle industry in the global market is becoming more and more eye-catching.

Taking BYD as an example, it has entered nearly 60 countries such as Germany, Australia, and Japan in the global market. After taking root, it has to go deeper, and BYD has started the expansion of its own channels.

On January 31, BYD signed a preliminary agreement for the purchase of land for a passenger car factory with Hungary, marking a new breakthrough in its localization in Europe. Earlier, it had already chosen to build factories in areas such as Thailand and Uzbekistan. It is not difficult to see that the establishment of its own factories will lay a more stable foundation for the construction of BYD's own production and sales channels.

In the army of new energy vehicle companies going overseas, traditional car companies are in the leading position. In terms of sales, the situation of Geely, BYD, and SAIC's tripartite stand is gradually becoming clear.

SAIC, which made a fortune quietly, was a big winner in the tide of new energy vehicle companies going overseas in 2023. Data shows that the overseas sales of SAIC Group in 2023 were 1.208 million vehicles. Although the official did not disclose the specific sales of new energy vehicles, according to Zhao Aimin, the deputy general manager of SAIC Group, the proportion of new energy vehicles sold overseas is about 24%, that is, about 280,000, which is enough to be proud of all the heroes.

Among them, the performance of the MG brand and the Maxus brand is the most prominent. In the second half of last year, SAIC MG obviously accelerated the speed of new energy transformation and listed "high value" and "globalization" as the development strategy for the next stage. Zhao Aimin revealed that in the next two years, SAIC will also launch 14 new energy models in the overseas market, including high-end new energy vehicle brands such as Zhiji and Feifan, and has also put going overseas on the agenda.

Profit is the biggest driving force for new energy vehicle companies to go overseas. "Due to the high profit margin in the export market, the profit from exporting a new energy vehicle can often be equivalent to the domestic sales of nearly three similar vehicles." It is this tempting prospect that has made all major car companies turn their attention to the overseas market.BYD, Geely, Chery, Changan, and other domestic giants have elevated exports to a core strategic position. Companies are well aware that in overseas markets, price is often one of the most sensitive factors for consumers. In the future, automakers will reduce the prices of exported models by optimizing production costs and improving production efficiency, thereby securing a favorable position in the global new energy vehicle market.

04

Southeast Asia as a Springboard for Going Global

If asked where the first stop for Chinese new energy vehicles going overseas should be, many Chinese automakers would directly answer—Southeast Asia.

The surge of Chinese new energy vehicles in Southeast Asia began in 2022. Firstly, some countries in Southeast Asia are adjacent to China, which gives them a unique geographical advantage. Secondly, the main countries in the region introduced tax incentives for the purchase of new energy vehicles between 2022 and 2023, and also set targets for the number of charging piles and roadmaps for the electrification rate of automobiles. With these dual advantages, Thailand started the fastest, Indonesia has a large market base, and Malaysia and Indonesia have already made preliminary layouts.

In Thailand, new energy pure electric or hybrid models from BYD, Great Wall, MG, GAC Aion, and others have begun to make a name for themselves. EqualOcean's founding partner, Huang Yuanpu, once led a team to Thailand to investigate the current situation of Chinese new energy vehicle brands going overseas. In Thailand, GAC Aion's flagship store is very impressive and spacious, with some models of Aion prominently displayed in the middle of the store for consumers to visit.

In contrast to the gradually increasing new energy export data, in many places in Southeast Asia, the public's understanding of new energy and the local new energy infrastructure are not yet complete.

In reality, some people are not familiar with new energy vehicles and do not have a deep understanding of how to use them and what benefits they can bring. He mentioned a fact that in Cambodia, people who bought electric or new energy vehicles wanted to sell them after using them for a few months.New energy vehicles (NEVs) venturing abroad must not only adapt to local infrastructure such as roads and charging piles but also navigate the complex and ever-changing policy environment in overseas markets, especially in Europe and America, where subsidies and preferential policies for NEVs are highly uncertain. Additionally, potential trade barriers and policy restrictions can impact the export of Chinese NEVs. For instance, the issue of Chinese electric vehicles piling up in German ports reflects the potential trade barriers.

05

In Conclusion: The Internationalization of the Industrial Chain

Looking back at the internationalization journey of global automotive powerhouses, it generally involves a transition from exporting complete vehicles to establishing overseas factories. China's automotive industry is also entering a stage of in-depth development, gradually shifting from "exporting products" to "exporting production capacity + industrial chain."

For complete vehicle manufacturers, exporting production capacity is relatively more economical. In the context of overseas factory establishment, when the capacity utilization rate reaches 50%, the gross profit margin of car companies' overseas factories can turn positive; when the capacity utilization rate exceeds 60%, it can surpass the gross profit margin of domestic sales; when the capacity utilization rate reaches 80%, the gross profit margin significantly leads domestic sales and the scenario of complete vehicle exports, highlighting the economic benefits of overseas factory establishment. In stark contrast, it becomes an inevitable trend for independent NEV manufacturers to choose to export production capacity.

As the production capacity of NEVs continues to expand, to meet the needs of car companies in regions such as North America and Europe, some domestic automotive parts enterprises have gradually begun to globalize and expand their production capacity. On the one hand, establishing factories nearby is beneficial for parts suppliers to quickly respond to local customer needs, while reducing costs such as shipping and tariffs, thereby consolidating the market position of parts enterprises overseas; on the other hand, parts enterprises that set up factories overseas are also expected to achieve rapid growth in overseas business and become an important growth point for performance through paths such as expanding product categories, models, and customers.