Automotive News   |   Automotive News Europe   |   Autoweek   |   Automobilwoche

Automotive News China Newsletter
Register our free newsletter, sent each Monday and Thursday

     Automakers   Suppliers   Auto Show   Comment   Car Cutaway   Newsletters   Press Releases   Chinese Version   Register for Newsletter
  Contact Us:   Editorial   Advertising   Subscription Information   |   About Us   Media Kit
Home >> Comment Email this story   Print this story
 
 
COMMENT
How China's price war engulfed foreign automakers
Yang Jian | 2016/8/26

SHANGHAI -- Until recently, foreign automakers were reluctant to cut prices in China, a strategy that Chinese brands routinely use to win market share. 

Backed by high brand recognition and technology, most global brands have made higher profits per vehicle in China than in other markets for a long time. 

But that's changing. Despite a stagnating economy, China's auto sales continue to grow. To sustain that growth this year, foreign carmakers have repeatedly slashed prices.

Even Honda and Toyota, which emphasize profit margins more than their global peers do, are no exception. 

Take the Toyota Yaris. In 2008, the subcompact debuted in China at a starting price of 92,000 yuan ($14,150). Last year, the freshened Yaris was still priced at 87,800 yuan and higher. But this month the redesigned Yaris' starting price was lowered to 69,800 yuan.

Another example is the Honda Greiz compact sedan. Last October, Honda introduced it with a starting price of 79,800 yuan. Now, Chinese shoppers can expect a discount up to 23,900 yuan.

Other mass-market brands also are offering steep discounts. In the first half of this year, per-vehicle discounts on mass-market nameplates averaged 9,303 yuan, up from 7,316 yuan in 2014, according to J.D. Power.

Thanks to heavy discounts, virtually every major foreign mass-market brand has several models selling for less than 80,000 yuan. At such a price, these models are competing head-on with Chinese brands. 

While the mass-market brands seek to win market share with competitively priced products, a price war also is brewing among luxury marques. 

In the first six months, per-vehicle discounts on luxury nameplates in China averaged 33,468 yuan, nearly double the amount in 2014, J.D. Power noted in a report.

A few years ago, luxury-car buyers typically were business owners and senior company executives. But thanks to dramatic price cuts, middle-class families and midlevel managers now can afford compact luxury sedans and crossovers.

All segments of China's car market are price-sensitive, and this year's sales results prove it.

In the first seven months, light-vehicle deliveries rose 11 percent to 12.6 million vehicles. Most analysts agree that the market got a big boost from Beijing's 50 percent reduction of the purchase tax on vehicles with engine sizes of 1.6 liters and smaller.

That tax incentive is due to expire at year end, and China's vehicle sales likely will lose steam. 

If so, the price war among automakers will grow even fiercer. The days when foreign brands could freely jack up prices in China will soon be gone.

Pictured: Yang Jian is managing editor of Automotive News China.



Related Stories
  • Changan Auto cuts new-vehicle prices to revive sales
  •     --Published:2017/30/5
     
  • SUV prices continue to fall despite strong sales in August
  •     --Published:2015/29/9
     
  • SUV, microvan prices continue to decline in July
  •     --Published:2015/21/8
     
  • SUV prices fall in June as low-priced Chinese models gain ground
  •     --Published:2015/28/7
     
  • Great Wall cuts price of top-selling sedan more than 10%
  •     --Published:2015/30/6
     
  • Association warns price war in China will spread to local brands
  •     --Published:2015/19/6
     
  • Great Wall price cuts may trigger deeper SUV discounts across industry, analysts warn
  •     --Published:2015/18/6
     
  • Ford trims output as market slows, pricing pressure builds
  •     --Published:2015/22/5
     
  • Mercedes fined 350 million yuan by Jiangsu province for pricing monopoly
  •     --Published:2015/24/4
     
  • BMW cuts output, prices in China to address 'new normal'
  •     --Published:2015/20/4
     
  • China's SUV prices fall 2% in January as models proliferate
  •     --Published:2015/17/2
     
  • SUV prices continue to fall in October
  •     --Published:2014/25/11
     
  • Made-in-China SUV prices drop 2% in August as inventories surge
  •     --Published:2014/19/9
       
     
     

    Our Newsletter Editions
    Automotive News China produces two email newsletters each week. You can sort your news by the articles highlighted in each of our newsletters here.

    Select your newsletter     

     
     

    Automotive News China
    Room 1303, Building 2, Lane 99, South Hongcao Road,
    Shanghai 200233
    Telephone: 86-139-1851-5816
    Fax: 86-21-6495-0895
     
    Home | Help Center | About Us | RSS
    Entire contents © Crain Communications, Inc.
    Use of editorial content without permission is strictly prohibited. All Rights Reserved.
    ICP06057291