In May of this year, the discount efforts on automobiles, especially new energy vehicles, which lasted more than a year, saw a rare decrease, contrary to the trend of expanding discounts in the previous four months.

However, automobile sales and inventory have not cooled down as a result. Will the price war come to an end?

In May of this year, the sales of passenger vehicles as a whole showed a significant month-on-month increase. The overall output of passenger vehicles was 1.997 million units, a year-on-year increase of 0.3% and a month-on-month increase of 0.9%; the total retail sales of passenger vehicles was 1.71 million units, a year-on-year decrease of 1.9%, but a significant month-on-month increase of 11.4%.

Despite the decrease in the discount efforts on new energy vehicles, their sales still show a trend of year-on-year and month-on-month growth, and the penetration rate is close to 50%.

In May, the output of new energy vehicles reached 881,000 units, an increase of 31% year-on-year and 9.9% month-on-month; their sales were 804,000 units, an increase of 38.5% year-on-year and 18.7% month-on-month. The market penetration rate of new energy vehicles remains high, reaching 47%, an increase of 14 percentage points year-on-year.

1. In May, the discount efforts on automobiles decreased for the first time, and the price war temporarily came to an end.

Since January last year, domestic new energy vehicle companies have been caught in an increasingly fierce price war, with the number of promotion models and discount efforts constantly hitting new highs.

The monthly comprehensive promotion rate of new energy passenger vehicles has risen from 2.4% in early last year to 12.8% in April this year, and the number of promotion models has also increased from dozens to nearly 100.

However, despite the significant price cuts by terminal enterprises, automobile sales and overall inventory levels have not continued to improve, and the transaction conversion effect brought about by price declines has become weaker. Therefore, the intensity of price cuts by new energy vehicle companies began to decline.

In May of this year, the comprehensive promotion rate of new energy passenger vehicles fell for the first time to 9.7%, a month-on-month decrease of 3.1 percentage points and a year-on-year growth rate of 3.5 percentage points.

The number of discounted vehicle models has also decreased by 9 year-on-year and 44 month-on-month, returning to the level of early last year. This indicates that the wave of price cuts in new energy vehicles has temporarily ended.

Huaxia Insights believes that the main reason is that the price war has reached the cost line. In addition, there were no major star car companies reducing prices in May, or new players entering to drive price reductions and follow-up effects. Reference to earlier cases such as Tesla, BYD, Xiaomi and Wjen, etc., will trigger the effect of price reduction and follow-up effects.

Despite the decrease in discount efforts, automobile inventory pressure has not increased synchronously. In May, the inventory warning index for Chinese automobile dealers was 58.2%, a month-on-month decrease of 1.2 percentage points.

Huawen Insights believes that the main reason is the promotion effect brought about by the new car releases in the auto show and the launch of the "Action Plan for Boosting Consumption of Commodities by Trading-in Used Items", which was reflected in the sharp increase in automobile orders in May, especially around the May Day holiday.

In addition, the weakening of the price-cutting efforts by new energy vehicle companies has also led many hesitant consumers to make a purchase.

In June, automobile orders were successfully converted to sales. It is expected that the subsequent launch of new energy vehicles, such as the promotion of new vehicles to rural areas (with 99 models selected this year) and hot new models such as the Xiaopeng Mona, Wjen M7 Ultra, and Changan Shenlan G318, which will all be launched in June, will further stimulate consumer enthusiasm in the automobile market.

2. The completion rate of annual sales targets for major automobile companies is uneven.

In May of this year, most major new energy vehicle companies basically achieved their highest sales of the year so far, but the overall month-on-month growth rate was not high. The new energy vehicle companies with the highest month-on-month sales growth rate are still those with large promotion efforts around April.

Specifically, GAC Aion, Ideal and NIO took the top three spots in terms of month-on-month sales growth rate, with month-on-month growth rates of 43%, 36% and 32%, respectively.

Among them, Ideal gave a significant price cut to its entire line of models in mid-April (the L series was cut by 14,000 to 20,000 yuan, and the MEGA was cut by 30,000 yuan), and launched the low-priced L6 model. GAC Aion cut the prices of its AION Y Plus, AION S MAX and AION V Plus models by 10,000 yuan in late April. The new promotion activity from Nio, which indirectly reduced the price by 70,000 yuan, will end at the end of May.

At the beginning of this year, major electric vehicle companies set their full-year sales targets for 2024. Now, more than half of the time has passed, and the performance of major car companies in achieving these targets is mixed. Currently, the head electric vehicle companies have relatively few problems achieving their goals, but the performance of new automakers is not satisfactory.

Although the first half of the year has traditionally been a slow season for the automobile market, accounting for much smaller sales than the second half of the year, the proportion of sales in the first five months should be at least 30% or more. Taking BYD, a leading automaker, as an example, its full-year sales target is 3 million vehicles. As of May of this year, BYD's completion rate has reached 35.28%.

Even if BYD's monthly sales in the upcoming peak season remain at the same level as in May (332,000 vehicles), it is enough to break through the 3.6 million vehicle sales. Moreover, BYD's monthly sales have been maintaining a growth trend on a month-on-month basis.

The full-year sales targets of new automakers are mostly concentrated between 200,000 and 300,000 vehicles, with overall completion rates hovering below 30%. Only Li Auto, Nio, and Leapmotor are barely close to the passing line, while the completion rates of some seriously failed companies such as Xiaopeng and NIO have not even reached 15%, far from the target level.

However, new automakers have some "killer weapons" to use in the second half of the year. For example, Xiaopeng has a new brand Mona that is aimed at enterprise customers with stable orders, while Nio has a second brand called Ledao that focuses on the mass market. These are mainly aimed at increasing sales and are expected to help new automakers achieve their sales targets.

In summary, the completion rate of leading automakers in the sales target competition in the first half of this year is quite commendable, while new automakers are slightly falling behind and need to rely on the peak season in the second half of the year to achieve their full-year sales targets.

Editor/new