Dongfeng Department and Hubei government introduced the automobile subsidy policy, which triggered a price war that swept the national automobile market. According to incomplete statistics, more than 40 brands have launched preferential activities. Recently, eight brands, such as Ideal, Zero Run, Nezha and Link, have successively launched the "90-day price protection policy", which has become a "counter-current" in the price reduction tide of car companies.
The "guaranteed price agreement" generally stipulates that the user will buy the brand's products in a limited short time. If the price of the products is reduced within 90 days, the brand will voluntarily return the difference.
Ideal is the first car company to announce the "insurance agreement" in this price war. As early as March 2nd, Li Xiang publicly stated that "price reduction can't improve his sales" and responded to netizens' "Ideal won't reduce prices" in Weibo. Subsequently, on March 1 1, the insurance agreement was ideally formally launched.
Leaflet displayed at Yintai Retail Center in the west of Hangzhou, Li (Source: Caijing)
The confidence of the ideal "guaranteed price" lies in the stability of its product sales first. According to the sales data of high-end SUVs in February1-released by the Association, the ideal fourth and sixth places L9 and L8 are not far from BMW X5 and Audi Q5L, which basically continue the steady growth trend, so the ideal has no pressure on sales, and the ideal adopts the mode of "ordering first and then producing", and there is no inventory problem.
The sales data of high-end SUV from June 5438 to February 2023 released by the Association.
In addition, the ideal positioning is in the high-end market. The cheapest starting price of L7 is 3,654,380+0.98 million yuan, and the target consumers will not care too much about the preferential margin of tens of thousands. The price reduction has a great impact on the brand image, which is exactly what needs to be shaped and maintained in the ideal development. Similar to the ideal, there are high-end brands such as Audi and Porsche. Based on the consideration of brand image, they didn't go with the flow.
However, it should be noted that the ideal L8 has been upgraded and optimized on the basis of Li ONE, but the starting price is lower than Li ONE. This is actually a disguised means of price reduction, but it has little impact on the brand image.
This year, Zero Run lowered the prices of four models by releasing a new model. The main feature is "extreme cost performance", so there may be no profit to be compressed now.
The benefits of the "insurance agreement" are obvious, which is equivalent to giving consumers a "reassurance" without worrying about the decline in the value of the car in the short term. Moreover, it can enhance consumers' confidence in the brand and increase brand goodwill. Of course, car companies have to face the fierce competition brought about by the price reduction of other brands, and they have to bear the risk of falling sales and market share.
Waving a double-edged sword
Other brands with crazy price cuts are mostly discounted fuel models. This year, the exemption policy of fuel vehicle purchase tax was cancelled, and new energy vehicles cut prices one after another to strive for "the same price of oil and electricity", which led to a sharp decline in the sales of fuel vehicles of many car companies. In order to adapt to the new national six B emission standards to be implemented in July this year, car companies need to focus on solving the inventory backlog problem.
After all, price reduction is a double-edged sword. Although it can stimulate sales growth in the short term, it will lower the overall image of the brand and weaken the brand premium effect. What's more, it will reduce the rate of product preservation, which is a concern of many consumers when buying a car. After all, "if you buy a car today, you will drop 90 thousand tomorrow", and no one wants to suffer this loss. Tesla's sharp price reduction in June this year (5438+ 10) caused many car owners' dissatisfaction, and even launched a rights protest, which had a great impact on brand reputation.
The relationship between price reduction and price protection is essentially a "zero sum game". The price reduction of car companies will inevitably lead to a decline in the rate of product preservation. To maintain the market transaction value of products, it is necessary to stabilize product prices. Specifically, in the price war, whether car companies are loyal to existing car owners, maintain their brand image, stick to the price position to resist the surging wave of price reduction, or pay close attention to solving the inventory problem and retake the seized market highland with "price" as a weapon needs to be comprehensively considered in combination with subjective and objective factors.
Price reduction or insured price?
So in the long run, which is a healthier and lasting strategic choice, price reduction or price protection?
Price is one of the four elements of marketing, so timely price reduction by car companies within a reasonable range is not only conducive to enhancing the competitiveness of products and eliminating some competitors, but also giving profits to consumers, which is a normal and common means of market competition. However, if the profit rate of products is completely ignored and the price of products is lowered without a bottom line, the brand image may collapse, and if many car companies do so at the same time, the whole industry may face a devastating disaster.
In this price war, the price reduction of Dongfeng seems outrageous, but in fact it also includes half of government subsidies, and joint venture brands also have some room for profit reduction. After many car companies participate, the impact on brand image is also minimal. After a month of preferential activities, the car price will return to the normal level, so this price war is far from as bad as expected.
And how long can the ideal of choosing insured price last?
Ideal has maintained a high gross profit margin of about 20% in the past year, and its clear positioning has made it stand firm in the market. So in the long run, even if it insists on the existing high pricing strategy, there will still be some loyal consumers willing to pay the bill.
Car companies that take cost-effective routes such as zero running may not be very optimistic. There is still a period of time before the implementation of Country Six B in July. In order to clear up the inventory, many car companies will inevitably lower their prices. Car companies such as Zero Run and Nezha have implemented the "insurance agreement" for three months, and it is expected that they will suffer more and more fierce sales shocks and have a hard time. Pull the time further. Recently, Tesla announced that the manufacturing cost of the next generation model will be reduced by 50%. Under the condition that Tesla's current gross profit margin remains at a high level of 30%, there will be more room for price reduction. It is estimated that the product price range of RMB 654.38+0.5-0.25 million will be further lowered. Then, new forces that rely on cost performance, such as zero running, may face a serious survival crisis.
But then again, price is just a way of competition. The most fundamental thing is to make products that can satisfy consumers, respond to consumers' demand and pain points for cars under the rapid development of the times, and vigorously develop new energy technologies under the circumstance that consumers are increasingly demanding environmental protection and economy, just like Wuling once shouted the slogan, "We will produce what people need." Consumer recognition and trust is always the key to brand longevity.
Author: Lei Bai
This article comes from ZAKER automobile, the author of easy car number, and the copyright belongs to the author. Please contact the author for any form of reprint. The content only represents the author's point of view and has nothing to do with the car reform.