The battle commences as soon as the new year dawns! Tesla takes the lead with a bold move.

On February 5, Tesla China unveiled significant incentives: from now until February 28, all Model 3 variants will enjoy a limited-time insurance subsidy of 8,000 yuan, bringing the lowest post-subsidy price down to just 227,500 yuan. Additionally, car buyers can avail themselves of a 5-year interest-free loan policy and exclusive charging privileges.

This marks the most robust incentive package in Model 3's history, instantly igniting the market. Shortly after, Xiaopeng, NIO, IM Motors, and GAC Toyota followed suit with their own promotions.

Notably, Xiaopeng's X9 became the first model in the industry to offer a 0-down payment + 5-year interest-free policy, with a maximum interest subsidy of up to 57,000 yuan. IM Motors' L6 saw its starting price drop to 189,900 yuan, a reduction of approximately 30,000 yuan from its May 2024 launch price. GAC Toyota's Fenglanda boldly proclaimed "drive home for 89,800 yuan," while Wildlander experienced a direct price reduction of 44,000 yuan, coupled with 0-down payment and a lifetime warranty on three major components.

Amidst the thick smoke and haze, fierce confrontations loom large.

Price War Heats Up Across the Board

Looking back at 2024, "price war" emerged as the buzzword in the automotive market. From BYD firing the opening salvo with price reductions early in the year, to traditional luxury brands like BMW, Audi, and Mercedes-Benz experiencing price fluctuations mid-year, to major automakers launching another round of "price for volume" promotions at year-end, virtually no automaker remained unscathed by this competitive fervor.

With the continuous rollout of new models from major brands, competition in the automotive market is poised to intensify further in 2025. Immediately following the Spring Festival holiday, the "price war" in the automotive market significantly escalated.

It's worth noting that there has been a notable shift in promotional tactics this year. Initially, automakers' pricing strategies largely enticed consumers through cash incentives or direct price cuts. Nowadays, however, automakers are transitioning to more sophisticated financial incentives, introducing sales policies such as interest-free loans and zero down payments.

According to industry analysts, this shift reflects automakers' evolution from a straightforward price war to optimizing consumer thresholds for car purchases.

By binding users through financial solutions spanning 5-7 years, automakers lock in profit margins for subsequent charging, maintenance, and OTA upgrades. By passing on interest subsidy costs to financial companies, automakers exchange accounts receivable for immediate cash flow, a more dignified approach than clearing inventory through price reductions.

More crucially, this incentive is not directly reflected in the price but conceals the price advantage through loans, services, etc., thereby avoiding making existing users feel betrayed while still offering substantial benefits to new users.

Elimination Rounds Grow Fiercer

For consumers, this "incentive feast" presents an excellent opportunity for car purchases; for the industry, it signifies an acceleration of the elimination process.

The logic behind the price war is that leading brands reduce prices to seize market share or clear inventory, forcing competitors to follow suit and reduce prices, thereby disrupting their capital chains. From another perspective, this represents the survival of the fittest in the new energy vehicle industry.

According to statistics from the China Passenger Car Association, 227 models experienced price reductions throughout 2024. Notably, new energy vehicles saw particularly significant price reductions, with an average price drop of 18,000 yuan and a reduction rate of up to 9.2%. Conventional fuel vehicles witnessed an average price reduction of 13,000 yuan, with a reduction rate of 6.8%. Overall, the average price reduction for new vehicles in the passenger car market was 16,000 yuan, reflecting a reduction rate of 8.3%.

Currently, only three new energy vehicle companies have achieved annual profitability: Tesla, BYD, and Li Auto. After 2023, Tesla's gross margin for its automotive sales business has remained below 20%, with figures of 25.6%, 16.4%, and 13.2% for 2022-2024, respectively.

China Merchants Bank predicts in its research report that BYD's gross margin will decline to 20.6% quarter-on-quarter in the fourth quarter of 2024, while Li Auto's gross margin will improve slightly to 21.7% due to an increased proportion of mid-to-high-end models, placing it above other players.

Experts from the China Association of Automobile Manufacturers stated that to restore a healthy market competition environment, 70% of automobile companies need to be eliminated in the next 3 to 5 years. There is also a view that due to automobiles' significance to the national economy, it is unlikely to witness a scenario where only four or five mainstream brands remain, akin to the mobile phone industry.

A consensus within the industry is that elimination rounds will grow fiercer, with future market share further concentrating among leading automakers.

The Dawn of Intelligentization

An Qingheng, director of the China Automotive Industry Consulting Committee, remarked, "The next 3-5 years will mark a turning point in the competition among new energy vehicle companies."

During this period, competition among enterprises in technology, products, and delivery capabilities will intensify. All enterprises that survive and thrive possess their core technologies, which will become crucial leverage for them in market competition.

In 2025, intelligent driving will become a rigid demand. One reason is the enhanced intelligent driving experience. Due to the rapid development of large AI models, high-level intelligent driving, also known as urban NOA, is accelerating its adoption. Since last year, leading automakers have continuously promoted the implementation of urban NOA and accelerated the deployment of "end-to-end" autonomous driving and "parking spot to parking spot" intelligent navigation.

A more fundamental reason is that high-level intelligent driving is now being integrated into affordable models. Previously, high-level intelligent driving was primarily reserved for high-end models priced above 300,000 yuan, but it will soon become prevalent in models priced below 200,000 yuan, with the price of models equipped with high-level intelligent driving dropping to the 130,000-150,000 yuan range.

Judging from the intelligent driving plans of major automakers, the focus of competition among automakers in 2025 has shifted to the intelligent driving arena. BYD will hold an intelligent strategy conference on February 10 to unveil its high-level intelligent driving system "Sky God's Eye" and plans to deploy intelligent driving technology to more entry-level models, including Seagull, the new Qin PLUS, and the new Yuan PLUS.

Additionally, Chery aims to mass-produce several models equipped with high-level intelligent driving by 2025, while Great Wall plans to achieve a penetration rate of over 40% for high-level autonomous driving pre-installation by 2025.

In the opinion of industry insiders, the spiraling escalation of price wars and technology wars essentially represents a reshaping of the automotive landscape and a redistribution of interests. The replacement of fuel vehicles by new energy vehicles, the challenges faced by traditional joint venture automakers, and the rise of domestic brands' market share are inevitable trends. As for how to divide the internal market share of domestic brands and their respective rankings, 2025 presents a critical window period.