Bavarian Motor Works and Mercedes-Benz successively withdraw from price wars.

Following BMW, another brand has decided to withdraw from the price war.

Nowadays, not only can you no longer buy a BMW for 170,000 yuan, but the drastic price cuts of Mercedes-Benz and Audi starting with "1" will also become a thing of the past. The joke that "If you don't work hard, you can only afford a BBA" seems to be fading away.

On July 17th, a Mercedes-Benz salesperson told Wall Street News that they have already received news of an impending price increase, which will start next Monday, although the exact amount of the increase is yet to be determined.

An Audi 4S store salesperson in Shanghai stated that July 19th is the last day for the current pricing, and after that, they will requote, with an expected increase of around 20,000 yuan.

In response to the news of the price increase, salespeople are currently using it as a means to stimulate sales volume. Many Mercedes-Benz and Audi salespeople have immediately sent messages to prospective customers, "BMW has already raised prices, and we will soon follow suit; if you want to order, it's best to do so within this week." The aforementioned Audi salesperson noted, "The foot traffic in the store has increased these past two days."

Advertisement

Of course, the price increase does not mean that the official guide prices have changed, but rather that compared to the discounts at the beginning of the month, the current discounts are smaller, resulting in higher quoted prices.

The collective price increase among the three luxury brands is due to the normalization of price wars, where the marginal effect of price reductions is diminishing. Even with price cuts, sales volume cannot be boosted; instead, it can harm brand value, lead to financial risks, and cause dissatisfaction among dealers.

Taking BMW as an example, from February of this year to early July, its entry-level model, the BMW i3, dropped by about 70,000 yuan. However, in the first half of the year, BMW's sales in China did not increase but decreased. In the first half of the year, BMW's sales volume in the Chinese market was 376,000 units, a year-on-year decline of 4.2%.

The situation for Mercedes-Benz is also one of reduced prices and decreased volume. On July 10th, according to Mercedes-Benz China data, the company delivered over 352,600 new vehicles in the first half of 2024, a 6.5% year-on-year decrease compared to the 377,200 vehicles in the first half of 2023.

Under the pressure of price cuts, the financial conditions of each company have also shown signs of trouble. Looking at the financial reports of the three BBA brands, almost without exception, revenue and profits are declining.The first-quarter report for this year indicates that BMW Group's sales for the first quarter amounted to €36.614 billion, a decrease of 0.6% compared to the same period last year; the EBIT (earnings before interest and taxes) for the first quarter was €4.054 billion, a drop of 24.6% year-on-year.

Mercedes-Benz's profitability is also on the decline. The first-quarter financial report for Mercedes-Benz shows that the sales for the quarter were €35.9 billion, a 4% decrease year-on-year; the net profit was €3 billion, with a year-on-year decrease of 24.6%.

Audi's revenue and profit decline is even more pronounced. In the first quarter of this year, Audi Group's operating revenue was €13.725 billion, a 18.7% decrease year-on-year; the operating profit was €466 million, a 74.3% drop from the €1.816 billion of the same period last year.

More critically, the dealers at the forefront of price wars for the BBA (BMW, Benz, Audi) can no longer afford losses. Frequent price wars over the past year and a half have left dealers in a difficult position. BMW specifically mentioned the need to weather the storm together with dealers in previous responses.

From the perspective of dealers, if the price war does not stop, they will have no choice but to withdraw from the network. A salesperson from Audi lamented: "It's really not sustainable to continue losing money. The entire eastern region has confirmed that there will be a new pricing policy after July 19th."

In the past two years, stories of dealers withdrawing from the network, going bankrupt, or fleeing are not uncommon. Regardless of the methods BBA uses to boost sales in the future, the distribution channel is an essential part, and naturally, a more positive relationship with dealers must be maintained.

At the beginning of the year, a long-standing dealer in the Pearl River Delta region, Guangdong Yongao, went bankrupt, and its more than 80 4S stores closed overnight. Recently, the largest car dealer in the Yancheng area, Senfeng Group, has come to a halt due to funding issues, and this group is also an Audi dealer. At the end of last year, the first Audi 4S store in Nanjing's history also went bankrupt.

Even listed companies have not been spared. In the middle of last year, Pangda Group's stock was delisted, and the company's stock was terminated from the market; this year, Guanghui Automobile also faced delisting due to its share price. Last year, about half of the car dealers faced losses.

However, whether the collective price increase by BBA can put an end to the industry's price war will depend on the changes in sales volume in the coming period, as well as whether domestic brands also follow suit by reducing discount margins. After all, the current luxury car market is no longer solely dictated by BBA. Huawei has fully entered the market, and the prices of various models under HarmonyOS Smart Driving are continuously rising. Among them, the Wenjie M9, with an average price of around 500,000 yuan, has accumulated more than 100,000 large orders, which is challenging BBA's market share.

The industry has reached a critical stage of the elimination round, and inevitably, some companies will be eliminated; no one is willing to give up first.Recently, Yang Xueliang, Senior Vice President of Geely Holding Group, once again criticized the phenomenon of "involution," stating that the result of involution is to lead all parties involved to a common failure, ultimately dying together due to "bleeding out." He believes that as long as the term "involution" is not eliminated, Chinese automobiles will not truly go global.

However, at present, the real "involvers" in the industry have not yet made a move.