Why did BMW take the lead in exiting the price war?

Wallstreetcn
2024.07.23 01:25
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BMW is exiting the price war in China, making electrification the main driver of growth to build a strong brand value. BMW's strategy is to adapt to the dynamic environment, enhance potential, and achieve profitable growth through technological openness and hydrogen energy. The brand's core "FREUDE" represents joy, freedom, and self-realization, which has been in existence for 60 years. BMW is considered a company with a clear strategy, well-positioned brand, and ranks in the top ten globally. The BMW Group owns four strong brands: BMW, MINI, Rolls-Royce Motor Cars Ltd, and BMW Motorrad, each with a unique positioning

BMW's first exit from the price war in China surprised us, but looking back, BMW held an investor and analyst day on July 15th, where some viewpoints are still worth our attention.

BMW CEO Oliver Zipse emphasized the high level of regulation and technological complexity in the automotive industry. BMW Group's strategy is to adapt to the dynamic environment, achieve profitable growth, make electromobility the main driver of growth, become a leader in the field of electric vehicles, and enhance BMW's potential through technology openness and hydrogen energy.

In simple terms, for luxury brands expanding from China to global markets, following the trend in price wars is not significant. Starting from Mercedes-Benz, focusing on the brand as the core and addressing technological deficiencies is crucial. When there are shortcomings in product strength, forcefully pursuing sales growth is not sustainable.

BMW's Brand Strategy

Running parallel to the price war is brand value. The higher the intensity of the price war, the higher the sales may go, but the permanent decline in brand value.

Looking at the BMW Group, its core assets include four strong brands, namely BMW, MINI, Rolls-Royce Motor Cars Ltd, and BMW Motorrad. Brand establishment is based on trust in quality, consistency, and innovation, providing clear customer benefits. The brand portfolio strategy ensures that each brand has a unique positioning.

Brand Core "FREUDE": The BMW brand has a strong, emotional, and humanized brand core "FREUDE" (Joy), which has existed for 60 years. "FREUDE" is not just happiness or joy, but also embodies freedom and self-realization, covering moments big and small in life.

The BMW brand ranks in the top ten globally and is considered a company with a clear strategy. The well-positioned BMW brand performs excellently in different segmented markets and drive systems. Its flexibility enables it to succeed in fluctuating markets

  • MINI brand is characterized by "Uplifting," bringing customers a positive and uplifting experience;
  • Rolls-Royce Motor Cars brand focuses on "Inspiring Greatness," providing customers with the ultimate luxury experience;
  • BMW Motorrad brand slogan is "Make Life a Ride," catering to the needs of motorcycle enthusiasts.

To achieve profitable growth, BMW's goal is to strengthen the brand core and increase investment in two strategic areas: exclusivity/leadership and intelligent connected vehicle technology.

By focusing on details, carefully selecting partners, and providing customized products and services to enhance brand exclusivity and leadership. In terms of technical magic/intelligent connectivity, meeting customer needs by creating attractive experiences, transforming business models, and enhancing customer connections.

2024, BMW globally delivered 1.096 million vehicles, including 179,600 pure electric vehicles.

In essence, it is challenging to seek profits by expanding scale, especially with the fluctuations in Tesla's brand during the electrification transformation, which also puts pressure on BMW. Therefore, making choices around the continuous development of the brand is necessary. BMW Group has comprehensive advantages in strategy, finance, and brand, with strategies that can adapt to a complex industry environment, seizing opportunities in electrification, hydrogen energy, autonomous driving, and digitalization.

BMW needs to continue telling the brand's story.

Balancing Challenges and Benefits

From the terminal data perspective, as of July 14th, Huachen BMW sold 338,800 units at the terminal, a year-on-year decrease of 4.6%, achieved on the basis of participating in price wars.

BMW 3 Series L: Cumulative sales of 81,300 units, a year-on-year increase of 15.81%, a key player in price wars.

BMW 5 Series L: Sales of 41,600 units, a year-on-year decrease of 36.00%, the exterior design after the facelift is indeed hard to describe.

BMW X3: Sales of 59,800 units, a year-on-year decrease of 4.47%, a key player in price reduction.

BMW X5: Cumulative sales of 48,600 units, a slight decrease of 1.46%, facing significant pressure after the launch of Aito M9.

BMW X1: Sales of 49,700 units, a year-on-year increase of 34.74%, a key player in price wars.

Electric Vehicle Situation

BMW i3: Sales of 30,500 units, a year-on-year increase of 34.15%, a key player in price wars.

BMW iX3: Sales of 18,100 units, a year-on-year decrease of 18.60%, facing fierce competition, with average price reductions.

BMW iX1: Sales of 2,800 units, poor sales performance.

The biggest challenge for the BMW Group, as we have seen in the Chinese market, is the entry of new forces, with Huawei and Xiaomi entering the market, posing some challenges to BMW's product strength in China. The rapid development of technological innovation requires the group to continuously increase research and development investment to maintain a leading position in the technology field. After spending this money, they need to keep up with the pace of other players, improve brand competitiveness, and product differentiation.

Before the technology and product strength are improved, blindly using price means to boost product sales is not effective. These localization efforts in China have brought some effects to BMW, but in terms of overall product strength, it has not returned to its original leading position.