Introduction
In a move to boost sales amid a downturn, BMW has announced a significant price reduction for its pure electric flagship model, the i7. The German automaker, which had previously attempted to increase profit margins through price hikes, is now facing the reality of a market that is not receptive to its strategies. The decision to restart the price war is aimed at capturing a market window and achieving this year’s sales targets.
Background
The i7, BMW’s top-tier electric vehicle, has seen its prices slashed by up to 38% in various 4S stores across China. The highest reduction has reached 555,000 yuan (approximately $77,000), bringing the price of the 2023 model xDrive60L from 1.459 million yuan to 663,400 yuan, and the eDrive50L from 949,000 yuan to 663,400 yuan. This drastic markdown is a clear attempt to stimulate demand and reverse the trend of declining sales.
Market Response and Sales Impact
BMW’s previous strategy of raising prices to increase profit margins was met with resistance from the market, leading to a significant drop in sales. In August, BMW sold 34,846 new vehicles, a decrease of 42% compared to the same period last year, resulting in a loss of over 20,000 units. This situation has forced the company to reconsider its approach and return to a price war strategy.
Executive Comments and Company’s Stance
BMW’s Group President and CEO for Greater China, Mr. Xiang, had previously expressed concerns about the current price war, stating that it was unhealthy and unsustainable for automakers, consumers, and dealerships alike. Despite this, the company has now reversed its stance and is allowing greater flexibility for dealerships to set their own retail prices based on market conditions.
Conclusion
The return to a price war strategy by BMW reflects the company’s determination to meet its sales targets in a highly competitive market. The significant price cuts for the i7 are a clear indication of the urgency to boost sales and regain market share. While this strategy may provide short-term relief, the long-term sustainability of such measures remains a concern, especially considering the executives’ previous warnings about the negative impact of such practices.
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