Fitch: Global Automakers Drive Towards Crossroads of Price War in CN

　　Fitch Ratings believed multinational carmakers may need to re-examine their pricing strategies in China as the market's transition to electric vehicles accelerates, making it difficult for them to retain market share by simply continuing to increase discounts.

　　In July 2024, leading German luxury car brands reportedly instructed dealers to cut retail discounts to help defend brand value and profitability. This may lead to a contraction of sales volume for luxury brands and consolidation of luxury car dealers, but will help stabilise prices in the medium term. Some mainstream joint venture brands are also considering following this strategy, but it could result in irreversible market share losses - Chinese EV brands are rushing to capture market share before the joint ventures are able to offer a competitive EV product.

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　　China's EV market share reached a record 46.6% of all cars in 2Q24, powered by a 64% YoY hike in plug-in hybrid electric vehicles (PHEVs) and a 16% YoY rise in battery electric vehicles (BEVs). In contrast, sales of conventional internal combustion engine vehicles (ICEVs) declined by a whopping 23%, despite average dealer discounts climbing to a record high of more than 20%.

　　Meanwhile, Chinese carmakers and parts suppliers have become more determined in their overseas strategies. China's BEV exports fell 11% YoY in 2Q24, driven by rising trade barriers and weakening demand. Still, this was offset by a 133% surge in PHEV exports, coupled with a steady 39% increase in ICEV exports.

　　The European Union's recent announcement of high import tariffs on Chinese-made electric vehicles is likely to accelerate the pace of cooperation between the Chinese and European automotive industries, with Chinese automakers and battery manufacturers currently expanding their production capacity in Europe.

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