Traditional luxury car brands cut prices as competition heats up

Traditional luxury car brands, including BMW, Audi, Mercedes-Benz and Porsche, are facing severe competition in China where independent NEV brands are achieving unprecedented sales.

From January to May this year, luxury car sales plummeted, with the rate of decline of many in double-digits. The sales of nearly half of the traditional luxury brands fell by more than 30 percent.

In the first quarter of this year, sales of Mercedes-Benz in China fell 12 percent year on year. It then cut prices of its several models, with discounts of up to 60 percent for some models.

Audi and BMW have also joined the wagon of price-cutting promotions. Many pure electric cars have even been reduced by 50 percent to attract customers.

At the same time, Porsche is facing its own serious sales Waterloo, with China one of the few markets showing a year-on-year sales decline.

In the first quarter of this year, Porsche's global deliveries cut 4 percent to 77,640 units, while in the Chinese market, its deliveries slumped 24 percent to just 16,340 vehicles, according to official data.

"With the growing trend of domestic independent brands, independent luxury models are gradually taking control of the luxury market," said Zhang Xiang, a visiting professor at the Yellow River Institute of Science and Technology.

He said traditional luxury brands were facing more severe market tests these days with the abrupt change of electrification and intelligent transformation in the Chinese market.

A Porsche dealer in Shenzhen, in Guangdong Province, revealed that its Macan model is currently on sale, with a minimum starting price of only 448,000 yuan (US$61,532) after discount. The guide price of this Porsche SUV is 578,000 to 8.58 million yuan.

In many provinces, including Shandong, Hubei, Jiangxi, Fujian, Zhejiang, and Jiangsu, the Macan's price has dropped below 500,000 yuan.

Sales of the Macan, Porsche's least expensive SUV and its second bestseller, and the Taycan, its only all-electric sports car, have been dismal so far this year.

The discounted prices have also triggered a series of chain reactions, including a drop in gross profit margins and huge pressure on used car dealers, who have difficulty in selling second-hand luxury cars.

Before the emergence of Chinese NEV brands, the ultra-luxury market was monopolized by foreign brands, but these brands accounted for a very low percentage of the premium new-energy market, with most models still being converted from oil to electricity.

In terms of intelligence and electrification, the Chinese market has the most complete supply chain by the advantage of early layout, and even newcomers can quickly establish an advantage.

According to the retail ranking list of passenger cars above 500,000 yuan in May released by Dongchedi, a domestic car information platform, Aito's M9 model, a high-end smart car brand model jointly developed by Seres and Huawei, took first place with 16,462 units, which is more than twice the sales of the BMW X5.

"In the era of electrification, the gap has been narrowed between luxury brands and new-emerged NEV brands, so more Chinese consumers are unwilling to pay a high premium price for the traditional luxury brand," said Zhu Fang, minister of China's automotive strategy and policy research center for industrial policy research department.