Audi Follows Suit! Price Cut of 170,000 Yuan

The recent fluctuations within the automotive sector of China have sparked a new wave of aggressive price competition, often referred to as a “price war.” Major automotive manufacturers are rolling out promotional strategies such as “zero-interest car loans” and “flat pricing,” which aim to distinguish themselves in a crowded marketplace while capturing greater market shareThis newly invigorated approach has made notable impacts across various brands and their offerings.

Consider the recent offerings from AudiA dealer in Shanghai has revealed that all models of the Audi Q7 are now available at fixed pricing, with certain editions such as the 45 TFSI quattro Sline Black Warrior being priced as low as 459,900 RMBThis is echoed by a dealer in Beijing, who notes that the entire Audi Q7 range in the region enjoys a significant price cut of approximately 170,000 RMB, with the base price of the 55 TFSI quattro Sline sports model dropping to around 530,000 RMBHowever, it is important to highlight that to take full advantage of these substantial savings, buyers must opt for financing rather than making a full cash purchaseFor instance, if the 45 TFSI quattro Sline Black Warrior is bought outright, the price jumps to 510,000 RMBSuch stipulations are key in understanding the mechanics of this market shift.

This trend isn’t isolated to AudiThe concept of fixed pricing has been gaining traction across the automotive market since the beginning of this yearBeijing Hyundai, for example, introduced a “flat price” promotion for several of its models, with discounts peaking at 42,000 RMBFollowing closely is GAC Toyota, which has employed a similar approach for its SUV models, including the newly positioned Fenglanda, which now starts at less than 100,000 RMBFurthermore, the GAC Toyota electric vehicle, the BZ3X, has entered the market with a price range between 100,000 and 200,000 RMB.

The rationale behind these widespread price reductions can largely be attributed to the pressures exerted by the burgeoning electric vehicle market

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On February 5, Tesla made headlines by unveiling an attractive incentive plan for its Model 3 series, which allowed for up to 8,000 RMB worth of limited-time insurance subsidies, along with the option for a 5-year, zero-interest loan packageThis strategic move significantly lowers the cost of ownership while enhancing the market appealOn the same day, XPeng Motors announced similar offers for cars like the XPeng X9, G9, P7i, and G6, characterized by an enticing “5-Year, No Interest, No Down Payment” model that eliminates financial barriers for a broad array of buyersConcurrently, SAIC's IM brand introduced a shockingly low starting price of 189,000 RMB for its L6 model, manifesting yet another example of an effort to attract customers through compelling pricing.

Not to be outdone, BYD has launched its “Universal Smart Driving Battle.” On February 10, BYD announced that all its models priced between 100,000 and 200,000 RMB would be equipped with an advanced smart driving system known as the “God’s Eye.” Additionally, most models below this price bracket will also incorporate this intelligent system, marking a significant push towards advancing their technological edge.

The chairman of XPeng Motors, He Xiaopeng, emphasizes the role of stringent cost control and the phenomenon of homogenization among models as factors leading to intensified competitionHe predicts the ignition of a full-blown price war starting January 2025, a period he describes as a critical elimination race for the automotive industry stretching from 2025 to 2027.

Market analysts suggest that the ongoing price war is not merely a short-term strategy for competition in 2024; rather, it represents the beginning of a larger paradigm shift throughout the entirety of the automotive sectorUnlike previous conflicts, the anticipated “war” of 2025 will prioritize reducing consumer financial burdensMajor manufacturers are expected to continue presenting attractive financing options—such as zero-interest loans and low down payments—thereby distributing the high costs of vehicle ownership over extended periods to appeal to younger demographics and budget-conscious buyers.

Data from the China Automobile Dealers Association reveals alarming statistics, with dealers reporting a maximum inventory-to-sales ratio of -22.8% as of August 2024. This represents a troubling uptick of 10.7 percentage points year-on-year