Domestic Car Brands Target the Premium Market (AI Translation)

【周刊提前读】自主汽车品牌冲击高端市场 BBA如何应对？

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.