Chinese Carmakers Resort to Price Cuts Again

Khodrocar - SAIC-Volkswagen, a Chinese joint venture of Germany's Volkswagen Group, lowered the prices of nine sports utility vehicles on Aug. 1, including fuel and new energy models, by as much as CNY60,000 (USD8,230). More than 10 car firms followed suit with limited-time offers.

New energy vehicle industry leader Li Auto, which previously said it was not considering price cuts, is offering cash subsidies and other incentives such as gifts. The Beijing-based firm has limited-time subsidies on offer at showrooms in various locations, Yicai learned from several of them. 

Li Auto's customers can get a cash subsidy of between CNY15,000 and CNY23,000, with other non-cash incentives, including a Nintendo Switch game console, for those who order an auto.

After the first round of price cuts in the first half, the carmakers that did not lower their prices saw a sharp decline in orders, Sun Shaojun, founder of the Car Fans sales service platform, said to Yicai. So after the industry’s leader launched a new wave of price reductions, others had to follow, Sun added.

But the effect of price cuts still depends on the willingness of consumers to buy. "There is more footfall recently, and orders have increased slightly from the beginning of this month, but the growth in effective orders has not met expectations,” said a salesperson at an independent car brand's 4S store. "The frequency of price cuts has also fortified the wait-and-see approach among consumers.”

Most carmakers still face a tough challenge to meet sales targets set early this year, Zhang Xiang, an auto industry analyst, said to Yicai. NEV market differentiation is intensifying and it is becoming harder for some brands to expand market share, so they are opting for price cuts, Zhang pointed out.

"This year’s price war is bound to last until the end of 2023, or even next year,” Li Xueyong, deputy general manager of Chery Automobile and GMof its marketing firm, said in an interview with Yicai. To survive, firms must pay great regard to production costs, comprehensively shift to NEVs, and actively explore the domestic and international markets, Li noted.

China's passenger vehicle sales had slowed before the latest price-cutting round. Retail car sales stood at 1.8 million units last month, down 2.3 percent from a year earlier and 6.3 percent on June, according to data from the China Passenger Car Association. Some 641,000 NEVs were sold, a 32 percent annual jump, but down 3.6 percent from the previous month.