Zhongtong Finance App learned that Cui Dongshu, the Secretary-General of the China Passenger Car Association, wrote that the price war in the second half of the year may slow down. After intense competition in the first half of the year, the market may gradually form a new price equilibrium point. In the past two years, the intensification of the price war in the auto market has strong causes on both the supply side and the demand side. The expansion of the car scrappage subsidy and the doubling of the subsidy are major bullish factors, which doubled the subsidy for passenger vehicles. As a long-term measure, it is recommended to adjust the current range of personal income tax deductions and increase the tax exemption for car purchases, and family vehicle purchases should be included in the deduction range.

1. The supply-side incentives for the price war; 2. The consumer-side incentives for the price war; 3. The impact of the price war on the automotive circulation ecology; 4. Not all consumers are price sensitive; 5. The significance of the scrapping and renewal of passenger vehicles.

A. Brought by the low PPI; B. The significant decline in battery costs; C. The increase in scale of production and sales.

In June 2024, the producer price index for industrial output decreased by 0.8% year-on-year, a decrease of 0.6 percentage points from the previous month, and the chain ratio changed from an increase of 0.2% the previous month to a decrease of 0.2%; The purchasing price index for industrial producers dropped by 0.5% year-on-year and rose by 0.1% month-on-month. In the first half of the year, the producer price of industrial producers decreased by 2.1% compared with the same period last year, and the purchase price of industrial producers decreased by 2.6%.

The new energy vehicles ranked among the top five passenger vehicle models in the market in June, and the recognition of new energy is relatively high. The performance of traditional fuel vehicle models is not strong in the domestic market.

The consumer-side incentives for the price war are mainly due to insufficient consumer confidence and low expectations, resulting in a downward shift in the demand curve. A new car can only be listed at a low price to meet the market sales expectations.

Among the passenger car models with wholesale sales exceeding 20,000 units in June, new energy vehicles rank among the top 5 in overall passenger car sales, with high market recognition, and mainstay models of gasoline-fueled passenger vehicles have not performed well domestically.

The impact of the price war on the automotive circulation ecology is that the Chinese auto industry is experiencing both prosperity and adversity. On the one hand, the annual production and sales volume has surpassed 30 million vehicles, setting a historical record, but on the other hand, 4S stores are closing on a large scale, with an average of 2,000 closures every year. This is also the pain of the price war and industrial transformation. However, the speed is too fast, and many investors cannot accept it. The current crisis in the circulation of automotive companies is very serious. The recent delisting of Guanqi Automotive is also a deep manifestation of the change in the market structure. At its peak, Guanqi Automotive's total market value once exceeded 130 billion yuan. Today, its market value is less than 6.5 billion yuan, which has shrunk by more than 95%. It is worth mentioning that in order to avoid being delisted, Guanqi Automotive has been actively self-rescuing, and even regards the control of the company as a secondary matter.

The intensification of the price war has brought deep pressure on the circulation system. Part of the price competition has seriously deviated from normal market behavior. The main cause of the consumer-side incentives for the price war is that consumers' confidence and expectations in income have led to a downward shift in the demand curve. New cars can only be listed at a low price to meet market sales expectations.

The perception index for income in the first quarter of 2024 was 48.0%, an increase of 0.8 percentage points from the previous quarter. Among them, 13.2% of residents believed that their income had 'increased', 69.6% of residents believed that their income was 'basically unchanged', and 17.3% of residents believed that their income had 'decreased'. The confidence index for income was 47.0%, which was basically the same as the previous quarter.

Tradition car companies have difficulty regaining market share through intensive price promotions. A stable mentality is necessary to achieve reasonable production and sales goals.

As the impact of new energy on traditional vehicles, especially on the competitiveness of traditional vehicle companies, has led to a significant deviation from normal market behavior in the promotional price war, manufacturers are seeking to achieve task indicators such as GDP and tax contribution in the background of declining product competitiveness, leading to deep pressure on the circulation system. Part of the price competition has seriously deviated from normal market behavior.

But with the impact of new energy on traditional cars, especially the competition of traditional car companies, huge promotions have deviated from normal trends. Under the background of declining product strength, manufacturers vigorously pursues production, tax contribution and other target indicators. The malignant sales price war has brought deep pressure on the circulation system, and some price competition has seriously deviated from normal market behavior and price promotions.

The current technological change in the auto market has led to a focus on product feature differentiation among consumers. The product power and new charm indicators brought by new energy vehicles are impossible for traditional vehicles to achieve. Some car companies suffer great losses and poor effects by solving product demand changes through price wars. Car companies should respond to prices on their main products, leading to price wars.

The current car market is undergoing rapid technological changes. Consumers pay attention to the differentiation of product features when selecting products, and the product strength and new charm indicators brought by new energy vehicles are something traditional cars cannot achieve.

Given the lack of user participation in FSD by Tesla in the United States and the dilemma of intelligentization, electric drive is the future. The competition between fuel vehicles and new energy vehicles still has a long time to go. Traditional automotive companies face great difficulties in regaining market share through price wars. A stable mentality is necessary to achieve reasonable production and sales goals.

The significance of the scrapping and renewal of passenger vehicles is important.

Traditional vehicle companies face great difficulties in regaining market share through intensive price promotions. A stable mentality is necessary to achieve reasonable production and sales goals, which can lead to smooth adjustments of the company.

The significance of the scrapping and renewal of passenger vehicles is important.

Several measures to support large-scale equipment upgrades and consumer product trade-ins were announced on the 25th. The document proposes to coordinate and arrange around 300 billion yuan of ultra-long-term special national debt funds to support large-scale equipment upgrades and consumer product trade-ins.

Policy clarification: (viii) Increase the subsidy standard for scrapping and replacing automobiles. Based on the Implementation Rules for Subsidies for Scrapping and Replacing Automobiles (Shangxiaohui [2024] No. 75), personal consumers who scrap national III and below emission standard fuel passenger vehicles or new energy passenger vehicles registered before April 30, 2018 (inclusive) and purchase new energy passenger vehicles included in the Catalogue of New Energy Automobile Models Eligible for Exemption from Vehicle Purchase Tax or 2.0-liter and below displacement fuel passenger vehicles, the subsidy standard is increased to 0.02 million yuan for the purchase of new energy passenger vehicles and 0.015 million yuan for the purchase of 2.0-liter and below displacement fuel passenger vehicles.

6. The easing of price wars is conducive to the industry's smooth transformation.

Some manufacturers have realized that the price war is not sustainable, but no one will take the initiative to withdraw because there is no system to control the policy steps of each company, so the early stage of the price war will continue. A slowdown in the price war may occur in the second half of the year. After the fierce competition in the first half of the year, the market may gradually form a new price equilibrium point.

Continuing losses on individual cars for automobile manufacturers is not a long-term strategy. After a round of price wars, automobile manufacturers may reassess their pricing strategies and seek more stable profit models. At present, the quickest way to reduce inventory is to reduce production and stabilize the system.

The state's policy of promoting old-for-new sales has a good boosting effect on the automobile market. If the future policy of buying a car to offset personal income tax is implemented, the effect should be even better.