Can't buy a BMW for 170,000 RMB anymore

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

After a year and a half of price wars, BMW has decided to withdraw.

According to channel sources, BMW will stabilize prices by reducing sales volume to alleviate the operational pressure on stores. In response to this, BMW China stated to Wall Street News on July 12 that in the second half of the year, it will focus on business quality in the Chinese market and support dealers to steadily develop.

This means that BMW will no longer continue to "trade volume for price" and will shift its focus to operational quality. Buying a BMW i3 for 170,000 RMB will become history.

Prior to this, BMW had been continuously trading volume for price in terminal sales. In early June, "BMW's drastic price cuts" became a hot topic. At that time, the official guidance price for the BMW i3 of 353,900 RMB could be purchased for around 170,000 RMB at some dealerships, a price that the BMW new car had never been sold at in the past few years.

Starting from 2023, BMW, along with other brands, became involved in price wars. Last year, the BMW i3 had long-term discounts of around 100,000 RMB. However, this year, the price cuts were even greater, involving more models, and even BMW's traditionally price-stable gasoline cars were affected. This has damaged BMW's brand value.

At the beginning of the price war, BMW still tasted the sweetness of trading volume for price. In 2023, the BMW Group delivered 825,000 new cars in the Chinese market, a year-on-year increase of 4.2%.

By this year, the effectiveness of trading volume for price is diminishing, as price cuts can only to some extent mitigate the decline in sales volume, but cannot change the trend of declining sales.

In the first half of the year, BMW Group's global sales volume was 1.2134 million units, a slight decrease of 0.1% year-on-year. MINI sales were 114,100 units, a year-on-year decrease of 18.7%; while sales in the Chinese market were 376,000 units, a year-on-year decrease of 4.2%, a decline that was balanced by the growth in sales of pure electric vehicle models.

The decline in BMW's sales is just a microcosm of the overall contraction of the gasoline car market. In the first half of this year, the penetration rate of new energy vehicles continued to advance, accounting for a significant portion, while overall gasoline car sales decreased by 13% year-on-year.

Although luxury gasoline cars should be less affected, according to analysis from J.D. Power, from 2021 to the first five months of this year, the market share of luxury gasoline cars decreased from 15% to 13%, as a result of trading volume for price.

As the price war continues, dealers are the first to be hurt.

In late May, conflicts between Porsche China and its dealers erupted. In order to meet sales targets, Porsche China pressured dealers to take on more inventory, adding to the impact of the price war. Now, dealers are facing financial pressure due to the inventory pressure, directly pressuring Porsche headquarters.

This move also "alarmed" BMW. BMW took the initiative to offer dealers a range of substantial subsidies and relief policies, providing a series of support measures including dealer care, used car sales, dealer training, and financing.

In the past two years, while OEMs have been complaining, dealers, as the front line of the price war, are facing a worrying survival situation. According to the China Automobile Dealers Association's 2023 National Automobile Dealer Survival Status Survey report, only 27.3% of dealers achieved their annual sales targets in 2023, and the proportion of dealers operating at a loss was 43.5% Now BMW has decided to withdraw from the price war. In addition to putting pressure on dealers, trading price for volume will inevitably affect its proud profit margin as a luxury brand. Last year, BMW's net profit fell by more than 30% year-on-year.

This year, the downward trend continues. The first quarter report for this year shows that BMW Group's first-quarter sales were 36.614 billion euros, a year-on-year decrease of 0.6%; first-quarter EBIT was 4.054 billion euros, a year-on-year decrease of 24.6%.

In addition to financial pressure, as a luxury brand, continuous price reductions will also harm brand value and hinder future development.

It's not just BMW, the industry has long been suffering from price wars. Many car companies have been hurt in the past year and a half. In June, the industry has been discussing how to break free from the price war, but there is no definitive answer yet. Now, BMW has taken the lead in making its choice.

Withdrawing from the price war does not mean lying down.

BMW has stated that at the Chengdu Auto Show next month, it will showcase the domestic debut of several mid-term facelift and next-generation models, hoping to steadily promote business development with strong corporate determination, more attractive products, and continuous improvement in service quality.

For many more brands, facing the shadow of the price war, they also need to find new strategies to deal with it