China, Tesla and the end of incentives: is the price war likely to become a perfect storm?
In China, the price war initiated by Tesla and the end of government incentives is causing a huge amount of unsold. And the dealers (but also the manufacturers) run for cover
In China, dealers no longer know where to park cars waiting to be sold. For the simple reason that users don't want them at the moment. This is why they are coming to devise all kinds of incentives and discounts in order to dispose of a little "warehouse stock", which in the case of cars not only require a lot of space, but also maintenance. The reason? The combination of the end of the incentives arranged until a few months ago by the Chinese government to encourage the purchase of electric cars and Tesla's increasingly aggressive pricing policies, which after losing the productivity challenge in 2022 with a local brand ( BYD produced 1,857,379 cars while Elon Musk's house, due to the numerous stop'n'gos also to upgrade the Shanghai lines, stopped at 710,865 electric vehicles) intends to gain market share by revising its own price lists. Even at the cost of unleashing a price war that it is not known what effects it will have on the car market in China.
WHAT DEALERS DO TO DISPOSE OF
And what is the consequence of all this? The end of government incentives, as expected, has led to a sharp slowdown in demand, after years of galloping, while Tesla policies have practically blocked the purchase of non-electric vehicles, which therefore remain unsold and gather dust.
According to local media reports, in an attempt to remedy the problem, builders, retailers and in some cases even local authorities are making up for the lack of state incentives by preparing parallel campaigns in which tax credits are offered, but also insurance policies at preferential prices, optional free and strong price discounts which in some cases have reached the equivalent of our 14 thousand euros.
PRICE WAR BREAKS OUT IN CHINA
The price war unleashed by Tesla came alive with the entry into the arena of Byd, Chinese manufacturer number 1 (and that it wants to remain) which announced a discount of 6,888 yuan (934 euros) on the Song Plus. Of the same magnitude or almost the cuts by Faw who, like Byd, introduced forward discounts until March 31st. In this case, the cars and vans of the Hongqi, Jiefang and Bestune brands and the joint ventures with Volkswagen and Toyota are affected and the discounts can reach up to 37,000 yuan (4,950 euros). Similar cuts also for Chery, which reach 31,000 yuan (just over 4,100 euros) on the range of the homonymous brand and the Exeed, Jetour and Chery New Energy brands.
WHAT'S HAPPENING TO THE CHINESE CAR MARKET?
But analysts are concerned about the slowdown in demand, which was in the air but not at this level, fearing that the consequences go beyond the difficulty of handling high levels of inventory and could strongly affect an auto market and a industry that until now have been "doped" by state incentives.
For instance, nearly 2.17 million passenger cars were sold through retail channels in December 2022, an increase of 3% from a year earlier, according to the China Passenger Car Association. From January to December, 20.54 million passenger cars were sold, an increase of 1.9% over the previous year.
The car purchase tax reduction policy has contributed massively to vehicle sales since its launch in June, the association said. The policy halved the purchase tax for passenger cars below 300,000 yuan (about US$43,103) with an engine capacity of less than 2 liters purchased between June 1 and December 31, 2022. The tax, usually equal to 10% of a vehicle's list price, has been reduced to 5%. Even this latest intervention, after an initial boost, however, is no longer able to push the Chinese to go to the showrooms. And now?
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/cina-tesla-fine-incentivi-guerra-dei-prezzi/ on Sun, 19 Mar 2023 06:48:58 +0000.