It's still too early for the price war to end


Since November last year, the price of lithium carbonate has plummeted all the way, and Tesla has announced a price reduction for all domestic models, officially launching a new energy vehicle price war.


At the beginning of 2023, Tesla once again strengthened its price reduction efforts, while multiple new energy brands, including Xiaopeng and Zero Run, quickly followed up; In early March, with Dongfeng Group's large-scale price reduction promotion as a key node, the price war in the Chinese car market accelerated from new energy vehicles to gasoline vehicles. In just a few days, in mid March, a group of mainstream car companies such as Geely, Volkswagen, and Hyundai followed up and strengthened the price war;


In early April, the price war escalated again, infiltrating the new car industry from the sales model, with most new cars choosing to go on the market at a low price, and some new energy models even lower than the same level of fuel vehicles;


But with the stabilization of lithium carbonate prices after the May Day holiday and Tesla's two price hikes, the price war for new energy vehicles seems to be coming to an end?


It is still too early to talk about the end of the price war.


The rise in lithium carbonate prices is only a reflection of the periodic market trend, and fundamentally, the sustained outbreak of this new energy vehicle price war is more affected by supply and demand.


The "Inventory Warning Index Survey of Chinese Automobile Dealers" released by the China Automobile Distribution Association shows that in April of this year, the inventory warning index of Chinese automobile dealerships was 60.4%, exceeding the 50% boom and bust line.


In addition, the country will officially implement the National VI B policy on July 1st, and car companies need to dispose of old standard models in inventory before this node. In other words, today's crazy price cuts and huge profit concessions of "divine cars" are mostly inventory cars that have accumulated for a long time.


Moreover, competition between new energy vehicles and fuel vehicles is fierce, spreading from coil performance and coil technology to coil prices.


As the new forces of car manufacturing enter the automotive market with electric vehicles, transforming cars into a cheaper, more technologically advanced, and more popular new consumer product, the sales moat established over the past few decades for gasoline powered cars is gradually being destroyed.


However, although new energy vehicles are still maintaining growth, they have also passed the stage of rapid development and the growth rate has slowed down.


Therefore, with the established market size, both traditional car companies that have been severely crushed and new car manufacturing forces with declining growth rates have embarked on the old path of "exchanging price for quantity", squeezing each other's market. Knowing that a serious price war is like drinking poison to quench thirst, but "not hitting the south wall and not turning back", it is probably because China's automotive industry has embarked on an inevitable path of industry integration and clearance.


After the brutal growth of exchanging market for technology, the keyword of China's automotive industry has changed from "growth" to "differentiation".


According to data, there were 222 car brands in the Chinese automotive market in 2019, the highest in the world; By 2022, although the overall number decreased by 75, it still ranked first in the world.


Among them, only about 30 companies have good sales. Moreover, the top 15 car companies in terms of brand sales account for 70% of the total domestic car sales, while the car companies ranked 15-30 account for the vast majority of the remaining 30% market share. Many end of the line brands are now basically non-existent!