At the moment, the car market is in a deep slump, with auto sales declining sharply and industry experts scrambling to understand the causes and find solutions. Why are people not buying cars? Are prices still too high? Recently, a reporter interviewed Sun Yong, the deputy general manager of Nanjing Fiat and former director of the Ministry of Commerce. In a straightforward manner, he stated, “The current auto market is facing a crisis of price confidence.” Sun Yong, who is known for his bold pricing strategies, recently appeared at Sichuan University Sports Center for a Fiat Cup kickoff event. Despite the recent turbulence in the auto market, Sun remained calm and composed. When the reporter approached him by the court, he spoke with a sense of concern and helplessness: “Domestic cars are currently experiencing a loss of consumer trust in pricing. Only through collaboration between manufacturers, media, and consumers can we revive the market.” He explained that frequent price cuts have led to a situation where consumers no longer believe that prices will stay stable. As a result, cars that don’t see price reductions struggle to sell, while those that do are often seen as temporary promotions. The real problem isn’t that cars aren’t selling—it’s the widespread distrust in the market. In May this year, the Chinese auto market experienced a sharp downturn, triggering a wave of price cuts across the industry. Sun was among the first to predict this turning point. He recalled that sales began to decline as early as April, especially in the last days before the May Day holiday. Companies were preparing for the "Golden Week" but instead faced what he called the "Black May." After the holiday, the market was left exposed, and everyone was shocked. Unfortunately, promotional campaigns and financial incentives had already been exhausted. By mid-May, Sun realized that the “Red May” of previous years might turn into a “Black May” this time, marking a key inflection point in the Chinese auto market. According to Sun, the main cause was the exposure of supply-demand imbalances under national macro-control. Some argue that changing macro-environmental factors caused the downturn, but Sun insisted that even without such control, the market would eventually hit a turning point. Volkswagen North and South, along with Shenlong, cut prices, leading to a full-blown price war. Many believe the price war stems from high profits in the auto industry. However, Sun has a different view. He emphasizes that the fundamental factor behind price changes is supply and demand. After three consecutive years of rapid growth, the market has started to slow down. Cities like Beijing, Guangzhou, Shenzhen, and Chengdu, which were early adopters of private car ownership, have seen slower growth this year. Meanwhile, second-tier cities haven't fully caught up. This imbalance has intensified the price war, especially in March and April, leaving consumers confused and hesitant. Many are holding off on purchases, and banks have tightened loan approvals, making it harder for consumers to finance cars. This further suppresses demand. The price-confidence crisis is essentially the result of repeated price cuts, leading to a market slowdown. Sun told reporters that price adjustments can help balance supply and demand. Lowering prices brings them closer to consumer purchasing power, which should stimulate demand. However, frequent price cuts have made consumers wary, fearing that prices will drop further. Some media reports suggest that the auto industry enjoys huge profits, which only adds to the skepticism. Consumers now believe that current prices are not the lowest, and they expect further drops. One customer recently said, “I had long expected Shanghai Volkswagen to cut prices. I was right, and so were many others—this price isn’t the bottom line.” Is there really a huge profit margin in China’s auto industry? Sun acknowledged that the industry’s profit rate is higher than other sectors, but some reports exaggerating it to 28% are misleading. He pointed out that models priced around 100,000 yuan have very thin margins. For example, Nanjing Fiat’s models had already aligned with international prices after an early-year price cut. Models above 150,000 yuan are more profitable. Overall, Sun believes current car prices are relatively reasonable. To restore consumer confidence, he suggests that manufacturers, media, and consumers must work together. He expects companies like Shanghai GM, FAW-Volkswagen, and Shanghai Volkswagen to continue adjusting their strategies, though he doesn’t anticipate too many followers in the short term. Nanjing Fiat won’t follow the price-cutting trend, and Toyota also confirmed no plans to lower prices. FAW Cars announced that the Mazda 6 series will be “once-priced for three years.” Many manufacturers are revising their sales plans, controlling inventory, and reducing production—steps that help rebalance the market. Sun is optimistic that within one or two months, car prices will stabilize. Stabilizing prices requires joint efforts from all parties. Consumers still have demand, and in the long run, China remains the world’s largest potential automotive market. Once prices stabilize, confidence will return. However, the “blowout” sales seen in September this year will likely never happen again. (Zhang Guohong) Sichuan News Net – Chengdu Business News

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