Recently, Dongfeng Motor's crazy price reduction in Hubei Province was originally thought to be just a promotion by Dongfeng alone, but unexpectedly, it brought a "Dongfeng" price reduction to the entire automotive industry. Dongfeng's price reduction has become the starting gun for a new round of price war among automotive companies.

| It's rolled up! Unprecedented industry shock

Earlier this month, on March 1st, on Tesla's investor event day, Musk's statement "Tesla's goal is to have more people assemble the next generation of cars at the same time, reducing assembly costs by 50%" may have spooked some domestic car companies!

On March 7th, Hubei Dongfeng announced a high-profile price reduction. Dongfeng Citroen C6, which was originally priced at more than 210000 yuan, was subsidized with 90000 yuan for promotion. The subsidized naked car price was less than 130000 yuan, and the subsidized small off-road Citroen C3-XR, which was originally priced at more than 110000 yuan, was only priced at over 50000 yuan!

On March 10th, Toyota 4S store "buy one get one free"! A promotional poster that reads "Buy bz4x and give it away to Vecchi" was posted online, and was signed as the Toyota 4S store of Shenzhen Zhongsheng Minkang, attracting attention. The 4S store claims that buying the bZ4X can give a free ride to Vich. "You can choose between 'free ride to Vich' and 'direct reduction of 60000 yuan', and you can also enjoy it with a foreign account."

Since Tesla significantly reduced prices at the beginning of the year, there have been continuous car companies following up on price reductions in the domestic new energy vehicle market. The government and enterprise subsidies started in Hubei mainly focus on fuel vehicles. As a result, the automotive market has entered an unprecedented white-hot war of price cuts since March, with widespread repercussions.

This leads to the question: What problems have been encountered in the automotive market?

The implementation of the most stringent emission standards in the 6th national standard B is imminent

On March 8th, the latest sales data released by the Passenger Car Federation showed that in February 2023, the retail sales of domestic passenger car market reached 1.39 million units, a year-on-year increase of 10.4% and a month-on-month increase of 7.5%. In January-February, 2.679 million vehicles were retailed, a year-on-year decrease of 19.8%.

The reason why automobile companies and the government provide comprehensive preferential subsidies is that automobile manufacturers have produced a large number of products, but the demand side has been weak due to factors such as slow economic growth and declining income of ordinary consumers, resulting in a large backlog of products.

The sales volume of joint venture vehicles held in January and February is intended to help auto companies consume inventory. On the other hand, this round of promotion is also aimed at clearing inventory for the replacement of vehicles with national emission standards.

China gradually implemented the six national standards in stages and regions from July 1, 2019. Its six national standards have been fully implemented on July 1, 2021, while the more stringent six national standards will be fully implemented on July 1, 2023.

Compared with country 6 a, country 6 b's emission standards require further reductions in carbon monoxide, non methane hydrocarbons, nitrogen oxides, etc., with hydrocarbons and non methane total hydrocarbons reduced by about 50% compared to country 6 a.

Car companies that have previously transitioned to the "National Six Year A" emission standard must increase inventory clearance efforts before July 1, and price concessions are one of the most effective means.

| The price war has started in an all-round way, and the auto stocks are very injured

When the Dongfeng Motor family announced the price cut, A-shares also applauded and cheered for it. As soon as the news of the full series of price cuts in Dongfeng Motor came out, the stock price of Dongfeng Motor (600006.sh) quickly rose and closed the trading limit after the opening of the day. However, a few days later, when more than 30 car brands began to reduce prices, the painting style immediately changed!

From the perspective of the A-share market, auto stocks led the decline, with the worst decline in the entire vehicle market, with Great Wall Motors (601633. sh) falling below the limit, Dongfeng Motors falling by more than 7%, Jianghuai Motors falling by more than 6% (600418. sh), Chang'an Motors (000625. sz) falling by more than 5%, and BYD (002594. sz) falling by more than 5%.

In addition to the sharp drop in the share price of finished vehicles, the share prices of those parts manufacturers that are most closely connected to finished vehicle companies also fell sharply today. Dolly Technology (001311. sz), which specializes in automotive stamping parts and related molds, fell more than 8%, Huamao Technology (603306. sh), which produces automotive airbag fabrics, fell more than 7%, Lizhong Group, which produces aluminum alloy wheels, fell more than 6%, and Bertelli (603596. sh), which specializes in automotive brake systems, fell more than 6%.

The signals released by domestic car price cuts may include the following aspects:

Fierce competition in the automotive market: Due to fierce competition in the automotive market and weak market demand, automotive manufacturers have adopted significant price reduction strategies in order to attract more consumers. This indicates that the current supply exceeds demand in the automotive market, and automotive manufacturers are competing for market share to provide consumers with more competitive products and prices.

Downward pressure on the economy: The reduction in car prices also reflects the impact of the current downward pressure on the economy. The economy is slowing and consumers' purchasing power is declining. Therefore, automobile manufacturers are attracting consumers by reducing prices, increasing sales, and responding to the downward pressure of the economy.

Car consumption upgrading: In recent years, consumers have increasingly high requirements for car quality and performance, and the competition between high-end brands and luxury models in the market is becoming increasingly fierce. In order to attract consumers, automobile manufacturers have reduced prices to improve their competitiveness and seize more market share.