BMW, Mercedes-Benz successively withdraw from price war

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

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

Now, not only can you not buy a BMW for 170,000 yuan, but Mercedes-Benz's drastic price cuts and Audi starting with the number "1" will also become a thing of the past. The joke "if you don't work hard, you can only drive a BBA" seems to be a thing of the past.

On July 17th, a Mercedes-Benz salesperson told Wall Street News that they have received news of a price increase. Prices will go up starting next Monday, but the exact increase is not yet determined.

A salesperson at an Audi 4S store in Shanghai stated that July 19th is the last day of the current pricing, and prices are expected to increase by around 20,000 yuan.

Regarding the news of price increases, salespeople are currently using it as a means to stimulate sales. Many Mercedes-Benz and Audi salespeople have immediately informed potential customers, saying, "BMW has already raised prices, we will also raise prices soon, so it's best to make a purchase within this week." The Audi salesperson mentioned above said, "The foot traffic in the store has increased in the past few days."

Of course, a price increase does not mean that the official guidance price has changed, but rather that compared to the discounts at the beginning of the month, the current discounts are smaller and the prices are higher.

The collective price increase of the three major luxury brands is because the price war has become the norm, and the marginal effects of price cuts are disappearing. Even with price cuts, sales cannot be boosted, but instead can harm brand value, bring financial risks, and also lead to dissatisfaction among dealers.

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

Mercedes-Benz's situation is also that prices have dropped, and sales have also decreased. 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% decrease compared to the first half of 2023 when 377,200 vehicles were delivered.

Under price cuts, the financial situation of each company is also showing signs of trouble. Looking at the financial reports of the BBA trio, almost all of their income and profits are declining.

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

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

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

More critically, the dealers at the forefront of the price war of the BBAs really can't afford to lose anymore. Over the past year and a half, frequent price wars have left dealers in a difficult position. BMW particularly emphasized in a previous response that they must weather the storm together with the dealers From the perspective of dealers, if the price war does not stop, they can only withdraw from the network. A salesperson from the aforementioned Audi dealership lamented: "We really can't afford to lose anymore. The entire eastern region has confirmed a new pricing policy after July 19."

In the past two years, stories of dealers withdrawing, closing down, and running away have been common. Regardless of how the BBA brands boost sales in the future, channels are essential, and maintaining a more positive relationship with dealers is naturally crucial.

At the beginning of the year, a well-established dealer in the Pearl River Delta region, Guangdong Yongao, collapsed, with over 80 4S stores under its name closing overnight. Recently, the largest car dealer in Yancheng, Senfeng Group, stopped operations due to financial 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 closed down.

Even listed companies have not been spared. Last year, Pangda Group delisted its stock, and the company's shares were suspended from trading. This year, Guanghui Auto is also facing delisting. Last year, around half of the car dealers were incurring losses.

However, whether the collective price increase of BBA brands can end the industry's price war remains to be seen in the coming period, depending on changes in sales volume and whether independent brands will also follow suit by reducing discounts. After all, the luxury car market is no longer solely dominated by BBA brands. With Huawei fully entering the market and the prices of vehicles under the Hongmeng Zhixing brand continuously rising, including the Aito M9 with an average price of around 500,000 RMB accumulating over 100,000 pre-orders, it is challenging BBA's market share.

The industry has reached a crucial stage of elimination, and inevitably, some companies will be eliminated, as no one is willing to give up first.

Recently, Yang Xueliang, Senior Vice President of Geely Holding Group, once again criticized the trend of internal competition, stating that the result of internal competition is that all parties involved will collectively move towards failure and ultimately die together due to blood loss. He believes that as long as the word "competition" remains, Chinese cars will not truly go global.

However, the true kings of competition in the industry have yet to make a move