BMW “no price reduction” behind: sales off-season, new energy are cutting concessions

In the first half of 2024, BMW (including MINI and Rolls-Royce) delivered 1,123,300 new vehicles globally, a decline of 0.1% year-on-year. However, the BMW brand achieved growth of 2.3%.

In China, combined BMW and MINI sales fell 4.2% year-on-year, despite BMW’s continued increased investment. Among them, the decline in the second quarter of this year reached 4.7%, showing widening momentum.

Price cuts and promotions can not bring sales, BMW from July began to turn to “reduce the volume to protect the price”, that is, no longer through price cuts to stimulate sales, but to prioritize the preservation of profits.

BMW Brilliance CEO Dai Hesuan responded that the price is determined by the dealer as an independent business entity, BMW will maintain intensive discussions with upstream and downstream partners to see how a sustainable business model to ensure that all partners can earn enough money to survive into the future. He repeatedly emphasized the “sustainability of the business model”.

Subsequently, brands such as Toyota and Volkswagen followed BMW’s pricing strategy one after another, and some 4S stores of Audi and Mercedes-Benz also adopted the price increase strategy. At the same time, the power plant reporter found through visits to the domestic new energy brands such as Azure, Ideal, preferential policies and discounts have also changed, in fact, some shrinkage. In a traditional off-season for automobile sales, the promotional strategies of automobile companies have undergone subtle changes.

Data from the China Association of Automobile Manufacturers (CAAM) shows that in the first half of this year, sales of passenger cars in China increased by 6.3 percent year-on-year. Obviously, the price cut not only did not bring corresponding sales growth, but also correspondingly offset BMW’s efforts to ease pressure on dealers.

In May of this year, in between Porsche dealers in China jointly pressuring Porsche’s headquarters because of pressured inventories, BMW suddenly sent a letter to all dealer stores, offering subsidies and reductions such as a 3 percent price discount and a lower APR for late payment defaults to BMW’s 4S stores, aiming to alleviate the pressure on dealers.

“If only subsidies and reductions are given to dealers, but the sales volume cannot continue to maintain growth, dealers will still face great pressure. The prerequisite for price preservation is volume reduction, and only by lowering the pressure on dealers’ sales volume will it be possible to push them to maintain profit margins through price hikes, plus subsidies to ensure a healthy cash flow for dealers.” A senior salesman who used to work as a store manager at a BMW 4S store in Yizhuang, Beijing, said.

An Audi distribution channel source revealed that on top of the slight drop in June, the wholesale retail target for July continues to fall by about 15% YoY, and is expected to fall by 10% on a quarterly basis as a whole. “I’ve heard that BMW’s mandate dropped by 15% in June alone, and its annual wholesale retail mandate in July has also dropped by 15%, loosening up the dealerships in terms of sales volume. The rebate threshold is also lower and the related assessment has been removed.” He said.

“In the past two years, BMW has learned a lot of new marketing methods and made a lot of new attempts in the Chinese market, but it is difficult to return to the good old days. This time, the volume reduction and price protection is the most realistic approach for BMW at the moment to ensure the viability of the channel.” An automotive industry source familiar with BMW said.

One of the backgrounds of BMW’s volume reduction and price guarantee is that the promotional rights of the new forces are also gradually retreating. Power Plant learned through field visits, including Ideal, Azure, these and BBA have competitors, the sales rights and interests have been retired.

In the case of Ideal, for example, the promotional entitlement for the Ideal L6 was cut directly in half from the initial roughly 20,000 RMB at the end of the first sales period, and there is only a 5,000 RMB purchase entitlement package for non-Beijing-licensed out-of-country purchases, as well as sales entitlements for the Ideal L7, 8, and 9, and Ideal will also cancel the home charging pile freebie policy on all three models starting in August.

Starting July 22, some of Azera’s current car offers will also be reduced by anywhere from 3,000-5,000 yuan, but some models, such as the 7 series sedans and SUVs, will remain unchanged. However, an Azalea source said that the sales policy is not set in stone and will be adjusted at any time according to the market situation, and does not rule out the reduction of discounts for other models.

Azalea has always been to BBA as a competitor, the third quarter of last year, Azalea released data show that as much as 48% of the additional trade-in owners were originally BBA brand owners, some of the second-generation technology platform models and even as high as 56%. In April of this year, Azalea launched the “1 billion fuel car replacement subsidy” is mainly to convert high-end brand users, including BBA.

The substitution effect of new energy vehicles on fuel models is increasing. Industry statistics show that the penetration rate of new energy vehicles will exceed 40% for the first time in 2023. Data from the passenger association show that in the first six months of this year, sales of fuel models decreased by 13% year-on-year, and new energy vehicles increased by 33.1% year-on-year, with the penetration rate of new energy vehicles growing to 48.4% in June.