After North and South Volkswagen jointly reduced their prices, the market remained relatively calm. However, the storm was already brewing. Large-scale price cuts in the automotive industry are not far off. In recent days, price reductions have once again become the most prominent news in the sector. Rumors of new price cuts have been linked to Guangzhou Honda. On June 28, the *Jinghua Times* reported that the Guangzhou Honda Accord was being offered at different discount rates in some Beijing markets. The next day, Guangzhou Honda denied the report, stating that the price cuts in certain regions were unrelated to the company and that no official price reduction would occur. Despite the denial, many consumers remain skeptical. The era of high profit margins for car sales is long gone. The auto market has been in a downturn for over two years, and even significant price cuts haven't been enough to attract more buyers. FAW-Volkswagen and Shanghai Volkswagen had previously cut prices on June 16, followed by Dongfeng Citroen. Despite these moves, the market response was weak, with dealers reporting little change in customer traffic. Consumers feel that the price cuts still fall short of their expectations. The case of the two Volkswagen joint ventures highlights this sentiment. Their joint price cuts were widely criticized as “loud thunder, little rain,” since dealers had already been offering discounts before the official announcement. As a result, the market reaction was muted. This situation reflects a broader trend: manufacturers are cutting prices, but not enough to truly stimulate demand. Many believe that there's still room for further price reductions. Reports suggest that major automakers can still lower prices on mid-size and even mid-to-high-end vehicles without significantly impacting their profits. This indicates that current prices are not yet at the bottom, and consumers still expect more. Small manufacturers, however, face an uncertain future. As larger companies continue to slash prices, they will likely raise the bar for entry into the industry, pushing smaller players out. In the past two years, the market share of the top ten Chinese automakers has not increased but actually declined, indicating a growing number of entrants. If big manufacturers keep lowering prices, only those with strong brand recognition and scale will survive. Meanwhile, smaller firms—especially those producing just one model—are struggling. The recent joint price cuts by North and South Volkswagen may seem like a minor event, but it signals a bigger shift. With more large-scale price reductions coming, the market will likely become more competitive. Major manufacturers, with their economies of scale and cost advantages, will dominate, leaving smaller players unable to compete and eventually exiting the market. This process, while painful for some, could ultimately benefit consumers and the industry as a whole. It represents true market competition, which helps drive innovation and efficiency. The government has also played a role by raising industry entry barriers, protecting large companies and discouraging smaller ones from entering if they can’t sustain profitability. Beyond price cuts, other strategies could help revive the market. For example, reviving personal car financing could boost sales. However, China’s lack of a robust consumer credit system has made banks hesitant. A recent 100 billion yuan bad debt in auto loans has led to stricter lending policies, reducing credit-based car sales to less than a quarter of last year’s levels. To address this, some manufacturers are partnering with banks to offer credit support. Beijing Hyundai and CITIC Industrial Bank, Shenzhen Development Bank and Volvo, and BMW Brilliance and China Merchants Bank have all entered into such agreements. These partnerships provide a safer environment for banks and help stimulate sales. Looking ahead, the auto market is expected to rebound in the second half of the year, driven by multiple factors. While investment growth has slowed, and exports have had limited impact, stimulating consumption remains a key strategy for maintaining economic stability. This bodes well for both car manufacturers and consumers, who may soon see improved credit options and a better purchasing environment. In summary, the auto market is undergoing a transformation. Price cuts are here to stay, but so are new opportunities. As the industry evolves, it’s clear that only those who adapt will survive and thrive.

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