Acquiring 70,000 BYD, seizing the last stronghold of traditional fuel vehicles.

On February 19, BYD launched the Honor Edition of the BYD Qin Plus at a starting price of 79,800 yuan, aiming to dominate the A-class car market by slashing prices by 20,000 yuan compared to previous models. This move is a bold challenge to joint venture car companies, signaling BYD's determination to expand its market share.

BYD boldly declared that they will no longer show mercy to joint venture fuel cars this year. Around the same time, other new energy vehicles in the same category, such as Wuling Rongguang Plus, Changan Q05 and A05, NIO X, Buick Velite 6, Geely Emgrand L HiP, and Leapmotor T03, also joined the battle by offering discounts or coupons of up to 100,000 yuan.

Feeling betrayed, traditional joint venture fuel car camps are gearing up for a counterattack. Beijing Hyundai launched the slogan "Fuel is stronger than electricity," reducing the price of its A-class sedan Elantra by 24,000 yuan to a starting price of only 75,800 yuan. Following suit, Mazda 3 also debuted with a starting price of 89,900 yuan.

This clash between independent new forces and joint venture fuel brands has intensified the anxiety in the automotive market. The decision to compete in the A-class car segment was made because there is still a significant amount of untapped market space.

Last year, the domestic A-class sedan market had a scale of about 3 million vehicles, dominating half of the passenger car market. However, the penetration rate of new energy vehicles was only 22.5%, with a penetration rate of only 17.2% in the price range of 80,000 to 150,000 yuan, far below the overall market rate of 35.7%.

In the face of last year's sluggish market growth of only 3.4%, car manufacturers are under pressure to increase sales. BYD has set a terrifying target of selling over 4.5 million units this year. According to the China Association of Automobile Manufacturers, the cumulative sales of new energy vehicles in China are expected to reach 11 million units by 2024. This means that BYD alone aims to capture over 40% of the market share.

Cui Dongshu, the Secretary-General of the China Passenger Car Association, believes that BYD's aggressive pricing strategy is aimed at maximizing sales volume. After reaching a historic high of 3 million units last year, all eyes are on whether BYD can continue its growth momentum.

To expand market share, it is crucial to dominate the most important niche markets, and the A-class car market seems to present a golden opportunity for BYD.

Unlike the fiercely competitive market for cars priced above 200,000 yuan, consumers in the 100,000 yuan price range are more price-sensitive, where even a difference of a few thousand yuan can impact their purchasing decisions. Cui Dongshu pointed out that due to the current economic environment, consumers are more cautious when buying cars. Therefore, offering the best value for money is the key to winning over this market segment. Last year, with its price advantage, BYD PLUS sold 434,000 units throughout the year, becoming the best-selling sedan in the domestic market and contributing over 1/10 of BYD's total sales. At the same time, the strong sales of the Qin model caused a year-on-year decline in the annual sales of the three major players in the A-class sedan market - the Corolla, Lang Yi, and Xuan Yi - ranging from 6% to 31%.

BYD has certain advantages compared to joint ventures and other new energy vehicle companies in terms of market penetration.

According to BYD, the price reduction of the Qin model is actually a systematic battle across the entire industry chain, generating economies of scale from sales growth. Cui Dongshu pointed out that car companies usually reduce prices and increase sales volume for A-class cars, while B-class and C-class cars are used to generate profits and offset losses.

Based on BYD's 2023 performance forecast, with a substantial profit cushion of 29-31 billion yuan for the year, it has reserves to outlast and outmaneuver small and medium-sized joint venture car companies.

Beneath the price war initiated by BYD lies a battle for pricing power among car companies, and the trend towards consolidation and reshuffling is inevitable.

At the beginning of the year, Wang Chuanfu stated that the penetration rate of new energy vehicles in a single month in 2024 will increase to 50%. Once this threshold is crossed, whoever controls the pricing power of new energy vehicles will control the pricing power of the entire Chinese car market.

For a long time, the Chinese car market has been dominated by joint venture cars, with Japanese and German brands controlling the pricing power. A-class cars were priced above 100,000 yuan, and joint venture companies were comfortable within their own space.

However, last year, the penetration rate of domestic brands exceeded 50%, indirectly triggering the spark of a price war. Feeling the pressure, joint venture brands launched a counterattack, starting with the Citroen C6 at 120,000 yuan, and now Beijing Hyundai, Mazda, and Buick have followed suit, actively giving up pricing power in China to maintain sales volume.

In the environment where BYD dominates, joint venture car companies are not the only ones resisting; some strong domestic brands with momentum also want a larger share of the market.

After the price reduction of the Qin model, Changan, Wuling, Geely, and NIO all joined forces, posting posters and slogans to lower prices together, trying to show that their products are more attractive than BYD's. In fact, the previous hot sales of A-class new energy vehicles such as Changan Qiyuan A05 and Wuling Xingguang have already taken away part of the market share from the Qin PLUS model.

In January, only over 20,000 units of the Qin PLUS DM-i were sold, causing BYD's overall sales to drop to 201,000 units, surpassed by Geely Group (213,000 units). Changan and Chery are also closely following with a difference of only a few thousand units.

In the chase between joint ventures and domestic brands, gasoline and electric vehicles, it is foreseeable that the car market price war in 2024 will continue to escalate, with industry reshuffling following closely.

"This year is a critical year for new energy vehicle companies to establish themselves, and competition is bound to be fierce." Cui Dongshu pointed out that scale determines costs and the survival status of companies, with most manufacturers prioritizing market share and unable to avoid price wars.

This is a systematic battle involving supply chain, cost control, operational efficiency, and strategic planning. In the end, only comprehensive giants can win the enduring battle through the selection process of these intense battles, and the "survivors" will be the kings.