The recent landscape of the automobile market has sparked considerable reflection among industry stakeholders. Once proud contenders in the segment of second-tier luxury brands, companies like Lincoln and Infiniti are now grappling with a significant transformation brought about by the influx of domestic electric vehicle (EV) brands. The sales figures for 2024 signal alarming trends, with these iconic brands witnessing a sharp decline in market share, highlighting a dramatic shift in the competitive dynamics of the Chinese automotive market.
A crisis in sales has underscored a pressing dilemma
As we analyze the sales data for November 2024, Lincoln's performance reveals a stark reality: a mere 4,251 units were sold, marking a staggering drop of 37.2% year-on-year. This performance pales in comparison to more established players like BMW, Mercedes-Benz, and Audi, leaving Lincoln defenseless against the surging domestic electric competitors such as NIO, XPeng, and Li Auto. What once labeled Lincoln as a second-tier luxury brand is now a rapid descent towards market irrelevance.
Infiniti appears to be in an even more precarious situation. In a desperate attempt to recover sales, the brand has implemented drastic price reductions. The QX50 was slashed from 350,000 yuan to 199,800 yuan, and the Q50L saw its price plummet from 264,800 yuan to 172,100 yuan. Nevertheless, despite these efforts, Infiniti's accumulated sales for the first eleven months only reached 2,132 units—a staggering year-on-year decline of 62.23%. The drastic measures taken in such a short period reflect the diminishing appeal of brands that once thrived on their luxury cache.
Market dynamics and the "dimensionality reduction" by BBA
The plight of second-tier luxury brands is further compounded by the aggressive strategies employed by the top-tier brands known as BBA (BMW, Benz, Audi). These giants have initiated a fierce price war to capture market share, with the BMW 3 Series now starting at 230,000 yuan, while the Audi Q5L has dropped by 150,000 yuan. In such a landscape, consumers are naturally drawn to the stronger brand influence and comprehensive product offerings of the BBA, overshadowing the appeal of the struggling second-tier luxury brands like Lincoln and Cadillac. While certain niches may still recognize their presence, the overall brand power and product offering of these brands falter in comparison.
The "reverse dimensionality reduction" from domestic new energy brands
The rise of domestic EV brands plays a crucial role in the declining market share of these once-prominent luxury brands. Companies like NIO, Li Auto, and XPeng have made substantial strides in innovation, product strength, and consumer service. Notably, NIO's unique battery swapping stations and complimentary charging services have alleviated concerns over range anxiety, while community-building efforts have fostered a dedicated consumer base. Li Auto's L7 and L8 models have emerged as popular choices among middle-class families, thanks to their impressive price-to-performance ratios and advanced features.
Unlike traditional gasoline vehicles, domestic EV brands have excelled not only in enhancing product performance but also in areas of intelligence, technology, and overall user experience. Many second-tier luxury brand vehicles struggle to compete with domestic brands in terms of technological innovation, feature richness, and cost-effectiveness. More than just meeting the price-performance expectations, these domestic EV brands have cultivated consumer loyalty through innovative services that resonate with consumers.
Navigating an awkward position
The position of second-tier luxury brands becomes increasingly precarious in light of BBA's aggressive pricing and the ascendancy of domestic EV brands. These brands previously attracted consumers primarily through luxury feel and brand equity, but in the current era of new energy vehicles, such elements are losing their magnetic pull. Modern Chinese consumers are more focused on aspects like vehicle performance, technological integration, and value for money.
For instance, the Volvo EX90 comes with a starting price of 568,300 yuan, a figure at which a consumer could easily opt for domestic models such as the AITO M9 or Li L9. These domestic models not only offer superior performance and technological features but are also more accessible price-wise. While brands like Volvo still boast an aura of luxury and brand influence, consumer choices have undergone a fundamental shift. Market conditions reveal that second-tier luxury brands frequently exhibit weaknesses, lacking the brand recognition required to compete with BBA while attempting a mass-market approach without the scale necessary to leverage pricing advantages. The future for these brands is fraught with uncertainty.
Seeking pathways for survival and growth
In the face of fierce competition, second-tier luxury brands must adopt effective strategies to maintain their presence in the Chinese market. Firstly, an increase in investment in the new energy sector is essential, aligning with trends toward electrification and intelligent technology, and rolling out electric or hybrid models that meet market demands—relying solely on traditional gasoline vehicles is no longer viable.
Secondly, these brands must revisit their pricing strategies. By implementing reasonable pricing and marketing techniques, they can shatter barriers in competition, thereby attracting mid-range consumers. For instance, launching entry-level electric vehicles can expand market share while building a more robust product matrix.
Finally, enhancing product intelligence will be crucial. Competition in the EV realm extends beyond just power systems and range; it increasingly revolves around technological innovation and user experience. If second-tier luxury brands cannot innovate in areas such as connectivity and smart technology, they will struggle to attract the younger consumer demographic.
A review of the 2024 sales data clearly shows a downward trend in the market share of second-tier luxury brands. The combination of aggressive pricing from BBA and the ascendance of domestic new energy vehicles imposes immense pressure on these brands. In this transformative era, if second-tier luxury brands do not adapt and reposition themselves promptly, they risk being left behind in an unforgiving market. Consumers are increasingly inclined towards products that offer value for money while addressing their specific needs. The future automotive market will favor those who can secure a foothold in the realms of intelligence and electrification, emerging as leaders in the evolving industry landscape.