Domestic Car Brands Target the Premium Market (AI Translation)
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文|财新周刊 余聪
By Caixin Weekly's Yu Cong
在中国汽车市场,传统豪华汽车品牌BBA(梅赛德斯-奔驰、宝马、奥迪)正面临围攻之势,越来越多的中国车企对这三家所在的30万元以上豪华车市场发起冲锋。
In China's automotive market, traditional luxury car brands BBA (Mercedes-Benz, BMW, and Audi) are facing increasing competition as more Chinese car manufacturers are launching offensives in the over 300,000 yuan luxury car segment.
长期以来,BBA在中国车市是豪华汽车的代名词。汽车市场以价格段划分,通常10万至20万元区间为主流大众市场,20万至30万元为中高端市场,30万元以上则被视为豪华车市场。按照全国乘用车市场信息联席会(下称“乘联会”)数据,2024年前七个月,大众市场、中高端市场、豪华车市场分别占整体车市销量的50%、17.2%、15.1%。豪华车价格高、利润空间大,是主流车企心驰神往的市场高地。
For a long time, BBA has been synonymous with luxury cars in the Chinese auto market. The automotive market is typically divided by price segments: the mainstream mass market ranges from 100,000 to 200,000 yuan, the mid-to-high-end market from 200,000 to 300,000 yuan, and anything above 300,000 yuan is considered the luxury car market. According to data from the China Passenger Car Association (CPCA), in the first seven months of 2024, the mass market, mid-to-high-end market, and luxury car market accounted for 50%, 17.2%, and 15.1% of total car sales respectively. Due to their high prices and substantial profit margins, luxury cars represent a coveted market segment for major automakers.
2024年8月20日,比亚迪(002594.SZ)旗下高端品牌腾势推出Z9GT和Z9两款新车型,预售价约34万元起。该车型首次搭载了可实现三电机独立驱动与后轮双电机独立转向的技术平台“易三方”,比亚迪董事长王传福在发布会中称:“未来我们有信心、也有能力与全球汽车巨头同台竞技。”
On August 20, 2024, BYD Co. (002594.SZ) launched two new models under its high-end brand Denza—Z9 GT and Z9—with starting pre-sale prices of approximately 340,000 yuan. This model is the first to feature the "Yi Sanfang" technology platform, which enables independent three-motor drive and rear-wheel dual-motor independent steering. At the launch event, BYD Chairman Wang Chuanfu stated, “We are confident and capable of competing alongside global automotive giants in the future.”
- DIGEST HUB
- Traditional luxury car brands BMW, Mercedes-Benz, and Audi (BBA) face increasing competition in China from domestic manufacturers like BYD, Huawei, Nio, and Li Auto, especially in the luxury segment (over 300,000 yuan).
- BBA's sales in China have declined in early 2024 due to fierce market price wars and competition from domestic new energy vehicles (NEVs), leading to severe financial and operational challenges for dealerships.
- BBA is enhancing local R&D efforts and adjusting strategies to combat competition, but Chinese brands are rapidly improving, challenging BBA's market dominance with innovative features and competitive pricing.
In China's booming automotive market, traditional luxury car brands Mercedes-Benz, BMW, and Audi (collectively known as BBA) are experiencing heightened competition from domestic manufacturers who are entering the high-end market segment aggressively. In 2024, luxury cars constitute 15.1% of total car sales in China, presenting a lucrative market for automakers [para. 1].
BYD, a notable Chinese car manufacturer, unleashed two high-end models in 2024 under its Denza sub-brand, both priced above 300,000 yuan. Concurrently, a collaboration between Huawei and BAIC resulted in the launch of the Xingjie S9, directly competing with high-end European models like the BMW 7 Series and Audi A8 [para. 2][para. 3]. Other Chinese manufacturers like Nio and Li Auto have also publicly targeted BBA as their primary competitors [para. 3].
BBA has faced declining sales amid this competitive landscape. In the first half of 2024, BMW, Mercedes-Benz, and Audi all recorded sales drops in China by 4.3%, 9%, and 2% respectively [para. 4]. The major driver behind this downturn is the chaotic market pricing and intense price wars, leading to substantial discounts; for example, the BMW i3's price dropped by nearly 50% from the official price [para. 4][para. 5]. These price wars have eroded brand image and led to substantial losses for dealers [para. 5].
In response to the fierce competition, BBA started adjusting their sales strategies in 2024, focusing on maintaining business quality over volume. This shift includes reducing sales targets to alleviate pressure on dealers [para. 6][para. 7]. Industry expert Li Yanwei suggests that an oversupply of luxury cars exacerbates the volatility of prices and recommends that BBA lower their production targets [para. 7].
New energy vehicles (NEVs) have dramatically altered the automotive landscape. The market share for NEVs in China has surged from 13.4% in 2021 to over 35% in the first half of 2024, challenging the stronghold of traditional gasoline-powered cars [para. 10]. BBA struggled to compete, particularly with their higher-priced NEV products, against more affordable and increasingly popular domestic offerings [para. 11].
Chinese automakers, although temporarily losing money to gain market share, are successfully releasing high-spec, low-priced vehicles. Companies like Leapmotor and XPeng have seen significant growth by offering features traditionally reserved for luxury cars at much lower prices [para. 13][para. 14].
BBA has also been slow to adapt to advancements in intelligent driving technologies. Their new models lag behind those of Tesla, Nio, and XPeng in offering advanced driver assistance features [para. 15]. Intelligence in vehicles has become crucial, and Chinese brands are setting the market’s pace [para. 16].
BBA is not entirely passive; they are ramping up local research, development, and strategic partnerships. BMW, for instance, invests in its local production facilities and R&D centers, developing models specifically for the Chinese market [para. 19]. Audi is similarly enhancing its local production and technological capabilities [para. 20]. Mercedes-Benz focuses on new, high-tech models incorporating advanced driving assistance systems and localized R&D efforts [para. 21][para. 22].
While BBA remains market leaders in terms of brand cachet and profitability globally, their footing in China is shaky amid rapid advancements and competitive pricing strategies by domestic manufacturers. Analysts predict that the market will undergo significant consolidation, drastically reducing the number of brands by 2030 [para. 27].
In conclusion, BBA faces an uncertain future in China's evolving auto market. The market’s shift towards NEVs and intelligent features, driven aggressively by local brands, has presented formidable challenges to these traditional luxury giants [para. 28]. Effective adaptation and localization strategies may be crucial for BBA to reclaim their dominance in China’s high-end automotive market.
- Mercedes-Benz
梅赛德斯-奔驰 - Mercedes-Benz is facing pressure in China's luxury car market, with its sales in China down 9% to 341,500 units in the first half of 2024. The company is enhancing its local R&D and launching new models like the pure electric G-Class and a long-wheelbase GLC plug-in hybrid SUV, aiming to balance supply and demand. Despite challenges, Mercedes continues to invest in electric and smart-tech developments for the Chinese market.
- BMW
宝马 - The article highlights BMW's challenges in China's luxury car market, noting a 4.3% year-on-year sales decline in the first half of 2024. BMW aims to adjust sales strategies, reducing sales targets to alleviate dealer pressure. They plan substantial local investments, including a 20 billion RMB upgrade to their Shenyang plant and expanding local R&D capabilities. New models like the hybrid 7th-gen M5 and Neue Klasse platform vehicles are part of their strategy to regain market share.
- Audi
奥迪 - Audi is facing decreasing sales in China, with a year-on-year drop of 2% in the first half of 2024. The brand plans to introduce new models like the A5L and Q6L e-tron, and is focusing on local research and development to better cater to the Chinese market. Additionally, Audi is involved in a collaborative effort with SAIC to develop a new intelligent digital platform tailored for China.
- BYD
比亚迪 - In China's auto market, BYD launched two new high-end models under its premium brand Denza, the Z9GT and Z9, with prices starting at around ¥340,000. These models feature the "Easy Three" platform, capable of tri-motor independent drive and rear-wheel dual-motor independent steering. BYD Chairman Wang Chuanfu expressed confidence in competing with global automotive giants.
- Huawei Device Co., Ltd.
华为终端有限公司 - Huawei Device Co., Ltd. collaborated with BAIC to launch the first model, the Xpeng S9, with an entry price of RMB 399,800. Huawei's Terminal Co. Ltd. Chairman Richard Yu stated the S9 targets D-segment cars like the BMW 7 Series and Audi A8, which typically start at over RMB 800,000.
- BAIC Group
北汽 - BAIC Group partnered with Huawei to launch the Jihu S9, starting at 399,800 RMB. This vehicle targets the D-class luxury segment, competing with models like the BMW 7 Series and Audi A8.
- NIO Inc.
蔚来汽车 - NIO Inc. (09866.HK/NYSE: NIO) has been actively targeting BMW, Mercedes-Benz, and Audi as competitors, aiming to capture market share. In July 2024, NIO claimed the top spot in the high-end electric vehicle market priced above 300,000 RMB. They have introduced promotional campaigns, like a zero-cost exchange program for BMW, Mercedes, and Audi users to switch to NIO vehicles.
- Li Auto
理想汽车 - Li Auto is a Chinese electric vehicle manufacturer that has successfully penetrated the high-end market. In July 2024, Li Auto delivered 51,000 new cars, surpassing BBA in sales. The company focuses on family users, offering large, well-equipped vehicles with cost-effective extended-range electric powertrains. Despite achieving profitability in Q2 2024, Li Auto still faces challenges, having encountered a loss of 580 million yuan in Q1 2024.
- Xiaomi Auto
小米汽车 - Xiaomi Auto, entering the competitive field, posted a gross margin of 15.4% for its smart electric vehicles in Q2 2024 but faced an adjusted net loss of 1.8 billion yuan. With 27,000 vehicles delivered in that period, the estimated loss per vehicle exceeds 60,000 yuan. Xiaomi Group founder Lei Jun acknowledged this is still their investment phase.
- XPeng Motors
小鹏汽车 - XPeng Motors launched the Mona 03 model on August 27, 2024, with a starting price of 119,800 yuan, lower than the expected 140,000 yuan. XPeng's Q2 2024 revenue increased by 60.2% to 8.11 billion yuan, but they still reported a net loss of 1.28 billion yuan, a 54.3% reduction year-over-year.
- Leapmotor
零跑汽车 - Leapmotor specializes in high-value, low-cost electric vehicles. In the first half of 2024, the company delivered 86,000 cars, a 94.8% increase year-over-year, surpassing the overall electric vehicle market growth. The Leapmotor C10 model, launched in March 2024, starts at 128,800 RMB and features advanced technology like the Qualcomm 8295 chip, which is also found in luxury models like the Mercedes-Benz E-Class.
- Geely Auto
吉利汽车 - In 2016, Geely Auto launched its high-end brand Lynk & Co, and Great Wall Motors (02333.HK) introduced the premium SUV brand WEY. However, both failed to achieve market success.
- Great Wall Motors
长城汽车 - Great Wall Motors launched the luxury SUV brand Wey in 2016 during its first round of efforts to enter the high-end market. However, it did not achieve significant market success at that time.
- SAIC Motor
上汽集团 - SAIC Motor has collaborated with Audi to develop a new intelligent digital platform tailored for the Chinese market, expected to launch in 2025. This platform aims to meet local consumer needs, reflecting SAIC's strategy to enhance its market position through innovation and strategic partnerships.
- 1988:
- Audi entered China.
- Before 2021:
- German luxury automobile manufacturers did not view Chinese domestic brands as competitors.
- 2019:
- Mercedes-Benz launched its domestically produced all-electric vehicle EQC and Audi released its electric model e-tron.
- By 2016:
- Domestic brands began their first attempts to break into the high-end market with limited success.
- End of 2020:
- BMW introduced the domestically produced iX3.
- 2021:
- Market penetration of new energy vehicles exceeded 10% for the first time, reaching 13.4%.
- 2022:
- The market share of new energy vehicles (NEVs) in China reached approximately 25%.
- Since the beginning of 2023:
- The Chinese automotive market has been engulfed in a fierce price war.
- 2023:
- BMW delivered nearly 100,000 pure electric vehicles in China, and sales of Audi's pure electric e-tron series reached 31,000 units.
- By 2023:
- The market share of new energy vehicles rose to 31.7%.
- End of 2023:
- Mercedes-Benz launched a new E-Class equipped with L2+ advanced driving assistance systems.
- In the first half of 2024:
- BMW delivered 376,300 vehicles in China, Mercedes-Benz saw its sales drop to 341,500 vehicles, and Audi's sales reaching 322,000 vehicles in China.
- In the first half of 2024:
- Leapmotor delivered 86,600 vehicles, marking a 94.8% year-on-year increase, outperforming the overall new energy vehicle market.
- By the first half of 2024:
- The market share of new energy vehicles had already surpassed 35%.
- May 2024:
- SAIC Motor Corporation Limited and Audi signed a cooperation agreement to jointly develop a new intelligent digital platform tailored for the Chinese market.
- June 2024:
- NIO introduced a specialized promotional campaign called the 'Zero-Cost Switch to NIO for BBA' initiative.
- In mid-July 2024:
- BMW announced that it was reducing its sales targets to alleviate operational pressure on its stores and dealers.
- July 2024:
- Li Auto delivered 51,000 new cars, setting a historical record and surpassing BBA for the first time.
- In the first seven months of 2024:
- The mass market, mid-to-high-end market, and luxury car market accounted for 50%, 17.2%, and 15.1% of total car sales respectively.
- In the first seven months of 2024:
- The terminal discount rate for Audi approached 30%, BMW reached 25%, and Mercedes-Benz was close to 20%.
- Half a month before August 20, 2024:
- Huawei and BAIC launched the Xingjie S9.
- August 20, 2024:
- BYD Co. (002594.SZ) launched two new models under its high-end brand Denza—Z9 GT and Z9.
- In the second quarter of 2024:
- Xiaomi's smart electric vehicle and other innovative businesses had a gross margin of 15.4%, with an adjusted net loss reaching 1.8 billion yuan.
- By the third quarter of 2024:
- Everyone started contemplating whether the current production and sales plans needed adjustment.
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