The Decline of Luxury Brands in the Chinese Market

Recently, a netizen shared the new car invoice, happily buying a BMW i3 with a landing price of approximately $28,500, while the listed price of this luxury brand pure electric sedan, which was originally $53,000, has now seen a discount equivalent to almost 50%.

The BMW i3 is currently BMW's best-selling pure electric vehicle, with monthly sales fluctuating between 4,000 and 6,000 units. With such sales figures, in the Chinese pure electric vehicle market, it has basically ranked beyond the 30th place.

Consecutive price cuts on the BMW i3 seem to be stripping it of its luxury brand halo and becoming a generic electric vehicle.

Recently, luxury brands in the Chinese market have been reducing prices frequently with various actions, but with little effect. The naked car price of the Cadillac CT4, which is priced between $33,000 and $40,000, is now less than $21,000; Porsche's main model in the Chinese market, the Macan, and its new energy models, the pure electric Macan and Taycan, have terminal price cuts ranging from $12,000 to $30,000. Due to the terminal price reduction, the profit margins of dealers have shrunk significantly and even suffered losses. Not long ago, there was also a Porsche dealer's rebellion against the headquarters.

In Porsche's sales slowdown in China, with the BMW i3 purchasable for around $28,500 and the Cadillac CT4 obtainable happily for $21,000, from super luxury to second-tier luxury, the Chinese market is starting to experience sluggishness.

Is it that luxury brands are not doing well, or that the luxury car market is not doing well?

Regarding this round of price cuts for the BMW i3, a BMW dealer told Pinjia that the almost 50% discount at the terminal is partly due to the impact from Xiaomi.

With the launch of the Xiaomi SU7, the pricing in the pure electric sedan market has begun a new round of involution. Many new car launches have even directly set their starting price in the range of $30,000, aiming to seize the blank area of Xiaomi's pricing. Meanwhile, established players like the Model 3 in the pure electric market are also seeing their market share decline steadily.

Of course, looking at BMW's market base in the gasoline vehicle market, the pure electric sedan market where the i3 operates is not its main battlefield. Then, why does BMW still promote significant price cuts for the i3?

The price cut of the i3 comes from the brand's own promotion on one hand.保全 ing the i3 is equivalent to safeguarding BMW's footing in the Chinese electric vehicle market.

There is also another important reason. When the target customers of luxury brands are being lost, BMW has no choice but to play the card of cost-effectiveness.

Recently, the Porsche dealer's rebellion incident has uncovered the tip of the iceberg of the plight of the luxury car market. Porsche, which has been selling well in the Chinese market, has seen a 40.1% year-on-year decline in sales in the first quarter of thi s year in the Chinese market, which directly led to a significant reduction in Porsche's revenue and profits in the first quarter.

And the biggest reason for the decline in Porsche's sales in the Chinese market is not the lack of success in electrification but the loss of its original middle-class target customers.

This has led to a structural change in the Chinese luxury car market.

First, looking at the entire base of the luxury car market, in the first 4 months of this year, the market share of luxury cars was 13.4%, which did not show a significant decline compared to 2021, 2022, and 2023.

That is to say, The market大盘 of the luxury car market is still there.

Looking further, in the first 4 months of this year, the new energy vehicle markets in the range of $30,000 - $40,000 and $20,000 - $30,000 and above $40,000 are the three subdivided markets with the highest growth rates in the new energy vehicle market. The year-on-year growth rates of these three subdivided markets in the first 4 months of this year are 68.3%, 47.6%, and 34.4% respectively. The incremental volume created by these three subdivided markets in the first 4 months is close to 280,000 units.

So, This incremental volume of 280,000 units means that the momentum of luxury new energy vehicles is getting stronger and eating up a lot of the market share of fuel vehicle luxury cars.

According to the data of 4S insurance of Dongchedi in April, among the top 10 models in the 200,000-level and above in April, only Audi Q5L from traditional luxury brands was on the list, while M7 and M9 from Li Auto and L7 from Ideal Auto performed stably and became the new main forces in the SUV market.

In the first quarter of this year in the Chinese market, BMW and Mercedes-Benz, which have always been strong, both saw their sales decline, and the year-on-year decline in sales in the first quarter was 3.8% and 10.4% respectively. At the same time, BMW and Mercedes-Benz's terminals have also been significantly discounted, including the new Mercedes-Benz E-Class, a main model that was just launched at the end of last year.

According to Sun Shaojun, the founder of Chefans, BMW has sent letters to all dealer stores, stating that in view of the major market background and the huge impact brought by domestic brands, BMW decides to offer a number of significant subsidy reduction and exemption measures to BMW 4S stores.

This can be seen that when the traditional luxury brand market is under attack, BMW also begins to worry that an event similar to the Porsche manufacturer relationship will be staged in its channels, thereby intensifying the crisis.

From the start of new forces like Weilai and Xiaopeng frequently declaring war on BBA to the new energy vehicle market of luxury from a blue ocean to a red ocean, the battlefield of the luxury car has also been quietly shifting, and now BBA seems to have been excluded from the battlefie ld.

Ideal and Huawei are competing for the championship of the midsize and large SUV market. The Xiaomi SU7 allows the pure electric coupe to have a new pricing logic. Some luxury brand dealers complain that nowadays there are内卷s in products, prices, and traffic, as well as insufficient consumption and downgrades, all of which have brought significant impacts to the traditional luxury car market.

And the so-called loss of middle-class target groups may also represent a true shift in the demand of the Chinese luxury car market:

From the aspiration for traditional luxury, dignity, and decency to the demand transfer of redefining high-end and luxury with intelligent driving and intelligent cabin technologies.

This is lethal to BBA: The added value of the brand halo to the market is not unchangeable, and it is imperative to polish the brand again.

This article is from WeChat public account: Pinjia (ID: Ping-Drive), author: Dong Nan