Author | Nie Yiyao
The three German luxury brands BBA are destined to not continue their glory in the new energy vehicle market dominated by fuel vehicles.
If BBA had illusions before, the reality of being battered by the market now will undoubtedly make them clear-minded. Otherwise, there would not have been such a large price reduction promotion, but even with the promotion, the sales volume is still completely crushed by Tesla and independent brands.
When BBA entered the field of electric vehicle development, they were not too late. Judging from the three companies’ foresight and technical strength, they should continue to lead the development of new energy vehicles instead of the current situation where electric vehicles are failing miserably.
So what is the reason for the current dilemma faced by BBA’s electric vehicles, and where is the root cause? Can the dilemma of BBA’s rapid lag in the new energy vehicle market still be resolved?
Lowering the price leads to lower sales
Just last month, Mercedes-Benz announced price adjustments for the recommended retail prices of its new all-electric EQE, all-electric EQS, and new AMG EQS 53 models.
This so-called adjustment means a price reduction: the Mercedes-Benz EQE is now reduced by 50,000 yuan, with a price range of around 400,000 yuan; the Mercedes-Benz EQS is now reduced by 237,600 yuan, with a starting price of 845,000 yuan, down from the previous 1.0796 million yuan；the AMG EQS 53 is now reduced by 198,600 yuan, with a starting price of 1.547 million yuan, down from the previous 1.7456 million yuan.
Mercedes-Benz is not alone in its price reductions, with its German counterparts right beside it.
Although BMW has not officially announced any price reductions, the discounted prices offered in 4S stores are an indisputable fact. On a certain vertical automobile website, various BMW dealerships are offering discounts of 99,000 yuan for the BMW iX3, with a starting price of 300,900 yuan; 112,000 yuan off for the BMW iX, with a starting price of 634,900 yuan; 61,900 yuan off for the BMW i3, with a starting price of 288,000 yuan.
Even more shocking is that some car owners have shared that they bought a BMW i3 for less than 250,000 yuan. On November 29th, a blogger posted on social media that the “BMW i3 is fully paid and it only costs 250,000 yuan”. On December 1st, another blogger said, “The price of slightly more than 220,000 yuan for the i3 is really worth it.” A 4S dealership in Beijing stated, “The lowest price for the i3 is 246,000 yuan, and financing is interest-free.”“`
Audi is not idle. Recently, a banner “Audi also has pure electric new energy” was hung on the exterior wall of an Audi 4S dealership, reflecting both the eagerness for attention and the sense of loss.
Also with dealer discounts, the Audi e-tron showed a direct discount of RMB 100,000 to 1.298 million yuan on a certain car vertical website, with a starting price of 437,400 yuan. At the same time, Audi’s new energy vehicles such as the A6L and A8 have also been discounted by 60,000 to 130,000 yuan.
However, despite such price reductions, especially with the BMW iX3 and i3 both reduced to under 300,000 yuan, sales are still being comprehensively suppressed within the same price range by Tesla and domestic independent brands. It can only be said that brands like BBA are undoubtedly struggling in the Chinese new energy vehicle market.
Data on compulsory traffic insurance and new car license sales for November 2022 shows that for new energy vehicles with premiums of over 400,000 yuan, the top five in terms of new insurance sales are ideal L9 (9,139 units), NIO ET7 (2,857 units), NIO ES7 (2,576 units), NIO ES6 (2,250 units), and Mercedes-Benz EQ series (1,683 units).
For new energy vehicles with premiums between 300,000 and 400,000 yuan, the top five for new insurance sales are Tesla Model Y (52,020 units), Jidu 001 (10,886 units), Tesla Model 3 (10,050 units), ideal L8 (5,921 units), and WENJIE M7 (4,149 units).
Even with discounts, sales of BMW iX3 and i3 only reached 2,559 units and 3,291 units respectively, and the iX was even worse. The Audi e-tron sold only in double digits, and the sales of the Q4 e-tron and Q5 e-tron in November were only 575 and 132 units respectively. Although the Mercedes-Benz EQ series has barely made it into the top five for premiums exceeding 400,000 yuan, compared with ideal and NIO, it is clearly struggling.
In June of this year, Li Xiang, CEO of Ideal, wrote on Weibo, “The main SUV models of BBA after domestic production are expected to be sold for less than 500,000 yuan at the fastest by the end of next year and at the latest by the end of 2024.”
“`
The moment the statement was made, it caused a public outcry with some people mocking Li Xiang’s wishful thinking. According to them, BBA had a strong foothold in China’s high-end traditional fuel car market, occupying 75% of the luxury car market share.
However, what was not expected was that Li Xiang’s statement seemed to begin to come true within half a year, starting with electric cars. With the increase in new energy vehicle growth momentum this year, which is eating into fuel vehicle increment at an accelerating pace, the foundation of BBA is also being dislodged.
In November this year, domestic sales of new energy vehicles reached 786,000 units, an increase of 72.3% year-on-year, setting a new historical record. The penetration rate also reached 33.8%, which exceeded people’s expected growth rate.
From January to November this year, the cumulative sales of new energy vehicles in China surpassed 6 million units, with a penetration rate of up to 25%, achieving the target of “new energy vehicles’ penetration rate reaching 25% in 2025” in the “Development Plan for the New Energy Vehicle Industry (2021-2035)” promulgated by the State Council three years ahead of schedule.
Now, turning back to BBA, their market performance has been lackluster, seemingly being titled further away from the surging new energy wave.
BBA’s brand premium is malfunctioning
For a long time, BBA’s brand premium capability in the traditional fuel vehicle market has been impressive. According to investment platforms that have performed financial data analysis of vehicular enterprises in Q3 2022, the average profit per vehicle for Mercedes-Benz can reach $7469 (approximately RMB 52,000), BMW approximately $4747 (approximately RMB 33,000), and Audi approximately $3428 (approximately RMB 24,000).
Such a high brand premium capability means that consumers believe that it is worth spending more money to buy BBA brands. However, it appears that consumers believe it is only worthwhile doing so for BBA’s fuel-powered cars.
For electric cars, new carmakers such as Tesla and NIO have built a new value space based on the three-electrical technology, intelligentization level, service, and design that differ from traditional fuel cars. In this new value space, BBA’s position has been subverted. By trying to graft the pricing system of fuel-powered cars onto electric models, BBA is undoubtedly subjected to market attacks, in other words, consumers believe that it is not worth spending more money to buy BBA’s electric cars.
This is the truth behind the poor sales of BBA’s electric cars: overpriced vehicles that customers do not consider to be worth the money.
Will BBA’s proactively lowering the price of their electric cars make consumers perceive their value and buy them? Not necessarily. Pricing is only one factor that reflects brand premium capabilities, which also depend significantly on three other factors: brand recognition, the number of similar-branded products in the current market, and brand added value.
Firstly, with regard to brand recognition, BBA’s electric cars are undoubtedly not as well-known as their gasoline counterparts, nor are they as well-known as brands such as Tesla, NIO, IDEAL, ECARX, and WEY, let alone GAC-NE.
That is why there was a scene where an Audi dealer hung a banner on the exterior wall of the 4S store shouting, “Audi also has pure electric new energy.”
Speaking of the number of similar-branded products in the current market, there are way too many. China is already at the forefront of the global new-energy vehicle market, gathering the largest number of brands, most advanced technologies, most leading intelligentization levels, and most complete industrial chains of new-energy vehicles.
In such a forefront, the 300,000 to 500,000 yuan price range where BBA’s “lifeline” lies has already been crowded out by new forces and independent brands that raced to the high-end market through the new-energy track. Moreover, each of them is putting every effort and enthusiasm into it.
BBA is hesitant and slow to take action on electrification transformation because it is unable to eliminate the interests of the gasoline car market. The so-called “gasoline-to-electricity” derived from the performance and luxury features transplanted from gasoline cars or other electric vehicle products conceptually similar to “gasoline-to-electricity” weaken the fundamental attributes and trends of electrification and intelligentization of electric vehicles, making them even more mediocre and clueless among many competitors.
Finally, with regard to brand added value reflection, BBA’s electric cars have been increasingly losing their aura. In October this year, a Mercedes-Benz EQC owner shared on a short video platform his experience of being ridiculed by others for purchasing the Mercedes-Benz EQC, hoping to hear netizens plead his case, but instead he was mocked by them.It is obvious that buying an electric car from BBA not only fails to enhance one’s face like buying a fuel-powered car from BBA, but also might lead to ridicule as a “fool.”
At present, BBA’s electric cars seem to have reached a difficult crossroads. What will BBA do next? What is the right approach? Perhaps we can analyze it from the root of the debate between fuel-powered cars and electric cars.
Electric or Fuel-Powered? Essentially, It’s Replacement
In 1972, two orange pure electric cars appeared at the marathon of the 20th Munich Olympic Games. It was the BMW 1602 Elektro-Antrieb pure electric car with a 12V lead-acid battery and a range of 30 km.
This non-mass-produced pure electric car was the beginning of BMW’s journey of pure electric cars. Since then, BMW has not interrupted its research and development of electric cars. In 1991, it launched its first mass-produced model for road use, the E1, which is also often regarded as the precursor of the BMW i3.
Mercedes-Benz’s electric cars also started quite early. At the Hanover Industrial Fair in 1990, Mercedes-Benz exhibited an electric vehicle, the 190E Elektro. This car has two 16 kW electric motors and uses a sodium-nickel chloride battery pack with a range of 110 km.
In fact, as an outstanding high-end brand in the field of fuel-powered cars, BBA has the first-mover advantage in electric car research and development, thanks to its forward-looking ideas and technological advantages. So, why has it fallen behind today?
When we look at all of this from a higher perspective, we might understand that BBA’s lag in electric cars is a determined inevitability, just like Volkswagen and Toyota transformed from fuel-powered car dominators to electric car followers.
Although fuel-powered cars and electric cars appear to be different forms of cars in terms of energy sources and driving forms, they are fundamentally different.
Fuel-powered cars belong to the traditional mechanical processing and manufacturing industry, while electric cars are an excellent extension carrier of semiconductor and information communication networks. The ultimate form of electric cars is intelligent cars, which Huawei describes as “four-wheeled computers.”
Due to the different transmission paths of driving control and braking control between fuel-powered cars and electric cars, fuel-powered cars cannot possess the longitudinal control freedom and smoothness of electric cars. Compared with electric cars, there would be a delay in response to the automatic driving algorithm of intelligent cars. In advanced automatic driving, delay is a fatal flaw.
The reason why hundred-year-old fuel-powered cars encounter the revolution of the “new four modernizations” of cars is essentially to transform cars from traditional mechanical processing and manufacturing industry to the semiconductor and information communication network industry. This will be the process that will overturn electric cars and replace fuel-powered cars in the global automobile industry.The pioneers of this change are undoubtedly China and the United States.
In history, Germany’s Mercedes-Benz invented the automobile, and the United States popularized it. Therefore, the United States once occupied a place in the global automobile market with Europe.
It wasn’t until the mid to late 1980s that Japanese and Korean automakers rapidly rose and gradually conquered the North American market with European automakers, defeating the US automobile industry, causing the proportion of the US automobile manufacturing industry in GDP to drop from 3% to less than 1%. This laid the groundwork for the US later to guide the transformation of the automobile industry using semiconductors and the information and communication internet to once again lead automobile development.
For China, automobiles are regarded as the jewel of our country’s civil industrial crown, accounting for a high proportion of our GDP, and approaching nearly 10% in recent years.
However, due to the late start and weak foundation, China’s domestic automobile has always been suppressed by joint venture brands and multinational companies, with the label of “low-end manufacturing.”
China dreams of achieving a “leapfrog” in the automobile industry, which has laid a good foundation for China to take advantage of the excellent opportunity of the “new four modernizations” of the automobile industry to achieve the “overtaking maneuver”.
The same demands of China and the United States have created excellent conditions for the rapid rise and development of China-US new automakers such as Tesla and NIO.
In contrast, European and Japanese and Korean automakers, who earn a lot of money in the field of fuel vehicles, naturally do not want to give up their interests and influence. Another reason is that in the previous round of information and communication internet industry competition, Europe and Japan were already defeated, so they were more hesitant and hesitant on the electrification transformation. Because who would be willing to sacrifice existing interests and reform themselves?
This explains why BMW and Mercedes-Benz were involved in electric vehicles earlier but acted slowly until they fell behind in the wave of electrification.
Some people say that Japan and Korea are actively developing hydrogen energy? Isn’t hydrogen energy the real new energy?
This does not grasp the essence of the problem. The essence of hydrogen energy is still an extension of the mechanical processing manufacturing industry, and the path that Japan and Korea actively choose will only extend their advantages. Moreover, Japan and Korea block hydrogen energy patents, which further pushes China and the United States towards the electrification revolution.
At present, the US’s continued suppression of Chinese semiconductors also illustrates the rapid process of China’s automobile electrification and intelligence, which has seriously threatened the US’s sense of security. Ultimately, the US fears China’s leadership in this round of automobile revolution, and losing its leadership again.# Back to the Topic of BBA’s Development of Electric Cars
When it comes to choosing between electric and fuel-powered cars, BBA faces a difficult decision. From the experience of Diess, the former CEO of the Volkswagen Group, it seems unlikely that established European carmakers will go all in on electric cars. They have no correct answer when faced with such a dilemma, and can only continue to pursue both legs of the race – electric and fuel-powered cars – with caution and trepidation.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.