European automotive industry faces price war

Xinhua News Agency report on March 2 (reporter Guo Shaowu) In 2010, major automakers in Europe delivered their first satisfactory answer since the economic crisis, and their business performance has generally improved. However, in the face of a still weak economic environment and a gradually saturated market after the withdrawal of government stimulus policies, some major auto manufacturers in Europe have adopted price reduction promotion strategies in order to ensure market share and business growth, and a new round of price war will be difficult to avoid.

Germany’s largest automaker, the German Volkswagen Group, took the lead in price cuts. The group released the new Passat in the European market in November 2010, which is 675 Euros lower than the previous version. In addition, Italy's Fiat is cutting prices on the French market for several models, while the French company Renault's Creo also reduced the price in the UK market.

The European market is the main sales market for French automotive manufacturing. According to the latest annual reports of Renault and PSA Peugeot Citroën, two French automakers, in 2010, the sales volume of the two groups in the European market accounted for 63% and 61% of their global sales, respectively.

As major car dealers will work hard to maintain market share and consolidate market positions, the price war in the European car market is imminent. Jean-Marc Garères, brand director of the Peugeot Citroen Group, pointed out that the average selling price of cars in the European market fell by 2.2% in 2009 compared with 2009. It is expected that the average selling price of cars in the European market will fall further by 1% in the previous year.

In 2010, despite the support of sales promotion strategies and government subsidy policies and other factors, the European auto industry achieved good sales results, but some auto companies still have poor profitability. Taking French car dealers as an example, the sales of Renault and PSA Peugeot Citroën last year set a new record, but the operating margins of the two companies were only 1.1% and 1.5%. Arnold Elingerst, analyst at Credit Suisse, believes that the price war in the European automotive industry will make the industry situation in 2011 more difficult. In addition, rising raw material prices in the international market have also increased the cost of European automakers.

In response to price wars, the European automotive industry has developed different strategies. Renemer Group sales manager Genem Stall said that Renault will reduce the negative impact of price cuts on corporate profits by increasing its share of the premium passenger car market through its brand strategy. The head of PSA Peugeot Citroen said that the group will launch high-end models in various market segments to enhance profitability, and through the cooperation with China Changan Automobile Group, it will launch low-cost models and use online sales channels to strengthen sales in the European market. In addition, the European automotive industry has strengthened its business in emerging markets to increase profitability and compensate for losses in the European market.