On July 1st, China announced on Weibo that it was launching a limited-time car purchasing preferential policy. It offers multiple preferential activities such as a '5-year 0% interest' promotion and low-interest car purchases, targeting the main car models Model 3 and Model Y. Compared to the standard annual rate of 2.5%, customers can save more than 20,000 yuan in interest. The activities end on July 31st.$Tesla (TSLA.US)$According to statistics, the price reduction trend in the auto industry has eased since May. Tesla, for instance, has not lowered its prices directly this time, but has implemented disguised price cuts by offering promotions such as '5-year 0% interest'. This may be an expression of a cooling-down of the price war in the auto industry.

Tesla is putting sales pressure on through its competition strategy of 'reducing prices to promote sales' in the Chinese market. In the first quarter of 2024, Tesla's retail sales in China were 132,400, a decrease of 3.64% YoY. In April, Tesla initiated a large-scale price reduction, reducing the prices of all series of Model 3/Y/S/X by RMB14,000. At the same time, it introduced a '0 down payment' or '0% interest for a limited time' policy for designated models of Model Y.

Tesla has put sales pressure on again by offering a big promotion. According to its official Weibo account, in July it will provide consumers with 'three-fold benefits' for purchasing cars. Firstly, it offers a highest 5-year 0% interest and low-interest promotion for standard range versions of Model 3/Y, at a minimum daily expense of RMB85. Secondly, it offers the highest 5-year 0% interest and low-interest promotions for long-range all-wheel-drive versions of Model 3/Y, at a minimum daily expense of RMB107. Thirdly, the annual rate of the limited-time low-interest promotion in July has been lowered to 0.5% (equivalent to a minimum annual interest rate of 0.93%).

At present, Tesla has formed a competition strategy of 'reducing prices to promote sales' in the Chinese market. In the first quarter of 2024, Tesla's retail sales in China were 132,400, a decrease of 3.64% YoY. In April, Tesla initiated a large-scale price reduction, reducing the prices of all series of Model 3/Y/S/X by RMB14,000. At the same time, it introduced a '0 down payment' or '0% interest for a limited time' policy for designated models of Model Y.

It is understood that in this promotional activity, a down payment of 79,900 yuan can choose the "5-year zero interest" plan: Model 3 RWD lowest daily supply is 85 yuan, the long-range all-wheel drive version is from 107 yuan; Model Y RWD is as low as 95 yuan per day, and the long-range all-wheel drive version is as low as 118 yuan per day. Compared with the standard annual interest rate of 2.5% before, the interest on Model Y can be saved up to more than RMB 26,000.

However, the sales driving effect of the price reduction has a certain delayed effect. In April, when Tesla launched a large-scale promotion, its sales in China still declined significantly. According to the data of the China Passenger Car Association (CPCA), Tesla's sales in China in April 2024 were about 31,400 units, a decrease of 21.4% YoY. It was not until May that Tesla's sales in China rebounded to 55,000 units, an increase of 29.9% YoY. Overall, in the first five months of 2024, Tesla sold about 219,100 new cars in China, a decrease of 0.4% YoY.

The number of Tesla's employees is resonating with its sales pressure. In April 2024, Musk reportedly sent an internal email to reveal that Tesla plans to lay off more than 10% of its global employees to reduce costs and increase productivity. The sales and service department in China became a heavily affected area with a layoff ratio exceeding 10%. However, recently, with the recovery of Tesla's sales situation in China, Tesla launched a process to recall previously laid-off employees. The main departments are sales and other related personnel.

Apart from the new energy vehicle sector, Tesla is also betting on the field of humanoid robots. At the Tesla shareholder meeting in 2023, Musk stated that the demand for humanoid robots in the future might exceed 10 billion units, far beyond the number of new energy vehicles. According to a research report from Wanlian Securities, the long-term value of Tesla in the future may come from Optimus humanoid robots. Humanoid robots are expected to become a new disruptive product after 3C and new energy vehicles.

The price war in the auto industry has gradually cooled. According to statistics from Secretary General Cui Dongshu of the China Passenger Car Association (CPCA), in May 2024 only 10 models were reduced in price, and the scale of price reduction was smaller than that in the same period of 2023. In January, 29 models were reduced in price, and 49 models were reduced in price in February. In April, the number of car models that reduced prices was as high as 54. Analyst Cui Dongshu believed that the fact that the number of car models reducing prices fell to 10 in May reflected the temporary end of the price reduction trend. With the sharp reduction in price-reduced car models in May, the market is gradually returning to the normalized competitive situation of promotion-driven growth. Overall, in the first five months of 2024, the total scale of price reduction of autos has exceeded 90% of that in the whole of 2023 and has surpassed that in 2022. The bulk of price reduction applies to new energy vehicles such as electric and plug-in hybrid vehicles, and there are fewer reductions for fossil-fuel vehicles.

On July 1st, China announced on Weibo that it was launching a limited-time car purchasing preferential policy. It offers multiple preferential activities such as a '5-year 0% interest' promotion and low-interest car purchases, targeting the main car models Model 3 and Model Y. Compared to the standard annual rate of 2.5%, customers can save more than 20,000 yuan in interest. The activities end on July 31st.

According to statistics, the price reduction trend in the auto industry has eased since May. Tesla, for instance, has not lowered its prices directly this time, but has implemented disguised price cuts by offering promotions such as '5-year 0% interest'. This may be an expression of a cooling-down of the price war in the auto industry.

On June 30th, Huawei announced that it was launching a special offer for the high-end function package of HUAWEI ADS (Qiankun Intelligent Driving System). A one-time purchase of the ADS high-end function package that costs RMB36,000 normally is now adjusted to RMB30,000, a saving of RMB6,000 compared to the original price. The promotion started on July 1st and will end on December 31st, 2024.

Currently, Huawei is quickly expanding its circle of 'friends' in the field of intelligent driving. Apart from vehicles under the HONOR Intelligent Tour brand, several other brands, such as Avatar, Lantu, and Trumpchi, have recently announced that they will carry the Huawei Qiankun ADS 3.0 system.

The price war in the auto industry has gradually cooled. According to statistics from Secretary General Cui Dongshu of the China Passenger Car Association (CPCA), in May 2024 only 10 models were reduced in price, and the scale of price reduction was smaller than that in the same period of 2023. In January, 29 models were reduced in price, and 49 models were reduced in price in February. In April, the number of car models that reduced prices was as high as 54. Analyst Cui Dongshu believed that the fact that the number of car models reducing prices fell to 10 in May reflected the temporary end of the price reduction trend. With the sharp reduction in price-reduced car models in May, the market is gradually returning to the normalized competitive situation of promotion-driven growth. Overall, in the first five months of 2024, the total scale of price reduction of autos has exceeded 90% of that in the whole of 2023 and has surpassed that in 2022. The bulk of price reduction applies to new energy vehicles such as electric and plug-in hybrid vehicles, and there are fewer reductions for fossil-fuel vehicles.

According to statistics from Secretary General Cui Dongshu of the China Passenger Car Association (CPCA), in May 2024 only 10 models were reduced in price, and the scale of price reduction was smaller than that in the same period of 2023. In January, 29 models were reduced in price, and 49 models were reduced in price in February. In April, the number of car models that reduced prices was as high as 54. Analyst Cui Dongshu believed that the fact that the number of car models reducing prices fell to 10 in May reflected the temporary end of the price reduction trend. With the sharp reduction in price-reduced car models in May, the market is gradually returning to the normalized competitive situation of promotion-driven growth. Overall, in the first five months of 2024, the total scale of price reduction of autos has exceeded 90% of that in the whole of 2023 and has surpassed that in 2022. The bulk of price reduction applies to new energy vehicles such as electric and plug-in hybrid vehicles, and there are fewer reductions for fossil-fuel vehicles.

However, some believe that the automobile price war will be the theme throughout the year, with many joint venture cars choosing to slash prices under sales pressure. Recently, the topic of "Rolls-Royce dealerships slashing prices by 1.11 million yuan" and "70% off Porsche, 50% off BBA" frequently appeared on hot searches. From June 28th to June 30th, GAC Honda launched the 628 Carnival Car Buying Festival. The guide price for the GAC Honda Accord, which starts at 197,800 yuan, has been reduced by up to 50,000 yuan (including trade-in subsidies), and the price starts at 147,800 yuan after discount.

According to the research report by Kaiyuan Securities, the market share of independent brand passenger vehicles in May reached 57.5%, hitting a new historical high. It is expected that this is related to the market share of independent brand new energy vehicles grabbing from joint venture brands' fuel vehicles. The proportion of sales of Japanese and German cars decreased slightly month-on-month. In terms of Japanese cars, the cost-effectiveness of low fuel consumption has gradually been surpassed by independent new energy vehicles, and the limited room for price cuts to maintain profits has led to a significant decline in sales. As for German cars, sales of FAW-Volkswagen, SAIC Volkswagen, and others have also declined significantly.

A research report by Ping An Securities indicates that the background of the whole vehicle industry in 2024 is concentration of top players and price wars. The dynamic of the top players in the entire vehicle industry determines the value distribution of the automobile industry chain. The increase in the concentration of the entire vehicle will make the self-research boundaries of the main engine factory more clear. In addition, the difficulty of financing has increased, and the probability of the winning of automotive parts black horses has significantly decreased, giving already listed stock players stronger competitive advantages.

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