Chinese Automotive Associations Call for End to Price War
On March 22, the China Association of Automotive Manufacturers (CAAM) urged for an immediate end to the price war in the Chinese auto market following a succession of car price reductions and sales promotions earlier this month. This request is aimed at ensuring healthy and stable growth of the industry throughout the remainder of the year.
Previously, state-owned automaker Dongfeng Motor launched a sales promotion in China’s Hubei Province. Subsequently, Changan Automobile provided a cash subsidy of 22,000 yuan ($3,216) for its best-selling model, the Deep Blue SL0. BYD launched a special limited-time marketing campaign for its Song Plus and Seal models. Beijing Hyundai also launched a limited-time subsidy program for all vehicle models. However, some car companies chose not to follow suit, including Li Auto, Leapmotor, Lynk & Co, NETA, and Denza.
According to CAAM, automobile production and sales were severely impacted in the fourth quarter of last year, particularly following the national COVID19 outbreak in December. As a result, the automobile industry experienced a significant drop in sales volume in January and February, prompting many car makers to take various measures to reduce inventory.
However, the association discovered that subsidy policies mostly covered old vehicles models or those with poor sales performance. These models were already available for purchase at relatively low prices before the promotional period. Advertisements exaggerated the extent of those price reductions, potentially misleading consumers.
Despite the rapid development of electric vehicles, fuel-powered vehicles are also upgrading their technology to meet the changing demands of the market. In the future, both types of vehicles will coexist and meet various consumer needs together.
The China Automobile Dealers Association has previously cautioned that subsidies introduced by Dongfeng Motor were only applicable to brands in Hubei, not to non-locally produced brands. According to the association’s investigation, store traffic in areas across the country, excluding Hubei’s capital of Wuhan, has recently increased significantly. However, transaction volume has decreased as consumers hold off on purchasing in anticipation of additional price reductions and subsidies.
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The association’s statistics indicate that the retail sales volume of passenger cars in the Chinese market was 414,000 units from March 1 to 12, a 17% decrease from last year and an 11% decrease from the previous month. Cumulative retail sales since the beginning of the year have reached 3.094 million vehicles, a 19% decrease from last year. As a result, the association has urged for the discontinuation of such subsidies as they could potentially jeopardize the sustainability and health of the automobile industry.