The price war has no future, the sales stimulus has failed, and the technical war can only come out of the vicious cycle

On May 12, McKinsey released the 2026 China Automotive Consumer Insights Report. Although the price war has attracted consumers, it has also delayed the decision of some people to buy cars, which makes people feel the fear of "depreciation after buying a car". The two almost offset. The price war has no great effect on the sales boost of car companies, and the price war has no future, because each round of price reduction will bring a new round of consumption wait-and-see, only the technical war, which brings value competition to consumers, can get out of this vicious circle. The price war makes car prices cheap to attract consumers, while delaying car purchase decisions. Both offset the McKinsey survey shows that 22.1% of consumers believe that the price war has a positive impact on car purchase decisions, and 19.2% of consumers believe that the price war suppresses or delays car purchase decisions. McKinsey Global Managing Partner Fang Yinliang said that the balance between the two is only 2.9% of consumers who believe that the price war between car companies has a positive effect. The price war will cause consumers to worry about "depreciation of the car as soon as it is bought". Fang Yinliang, who generates discounts for late purchases, mentioned that luxury car consumers are especially worried that the price reduction of car companies will lead to greater losses, so they postpone the purchase decision. The role of price wars is limited, and car companies' profits will suffer as a result. At this stage, car companies need to change their thinking and move towards technological competition. New technologies are translating into perceived value and are the accelerators that drive consumer car purchases. In 2025, the proportion of consumers who believe that new technologies promote car purchase decisions is 31%, an increase of nearly 8 percentage points compared to 2024. The proportion of consumers who believe that technological updates delay car purchases too quickly has dropped from 12.5% in 2024 to 10.3%. At present, the domestic automobile market is in a phased trough, but demand is still weakening in the Chinese automobile market in the short term, but it does not mean that demand collapses. The average annual sales volume of passenger cars in China will remain at about 24 million vehicles from 2026 to 2035. In the first four months of 2026, domestic passenger car retail sales fell by 18.5% year-on-year to 5.64 million units, and the market situation did not fundamentally improve in May. From May 1 to 10, domestic passenger car retail sales fell by 21% year-on-year to 407,000 units. The short-term fluctuation of the automobile market is affected by many factors. In fact, the performance of the Chinese automobile market is not bad. Guan Mingyu, senior managing partner of McKinsey Global and head of the automobile consulting business in China, believes that the short-term fluctuation of the automobile market is affected by many factors, but in fact, the performance of the Chinese automobile market is not poor. China's domestic car sales in 2025 have surpassed the pre-COVID-19 level in 2019, and the rest of the world's major economies have generally not recovered to this level. Enterprises should remain confident in the future, and the supporting factors of the domestic market have not fundamentally changed. The Chinese auto market has entered a stage of demand-led swaps. At the same time, the number of Chinese driver's license holders, the proportion of middle- and high-income households, and the proportion of high-income households have continued to grow, which means that the ability of Chinese consumers to buy cars has continued to improve. Guan Mingyu believes that all kinds of positive factors will eventually translate into actual car sales. It is now a stock market. It can be understood that price war is the main means. However, it is undeniable that China's automobile market has entered a low-growth cycle, which means that domestic car companies will mainly compete fiercely in the stock market. Price wars are one of the main ways for car companies to compete. McKinsey judges that after several years of hard work, the stimulating effect of price wars on demand has been significantly weakened. There is no future in the price war, and each round of price cuts will bring a new round of consumption wait-and-see McKinsey mentioned that the proportion of consumers who believe that new technologies have a positive impact on car purchases is as high as 20.7%. He believes that the price war has no future, and each round of price reduction will bring a new round of consumption wait-and-see, and car companies can only reduce prices again. Only value competition can break the above vicious circle, and changes in the way of competition may be the first in the field of luxury cars. Chinese luxury car consumers are most concerned about whether the technology is leading. They believe that assisted driving and intelligent cockpit agents are indispensable configurations. They have a strong interest in special driving modes such as "crab row" and "in-situ turnaround". Unique powertrain architectures such as four-motor layout are also important factors of concern for consumers. In fact, since 2026, the key new products released by domestic car companies have appeared in large-scale vehicles, and these models have all taken advanced technology as their main selling point. Short reviews of car companies to reduce prices and promotions, consumers instead hold coins to buy. The more ferocious the price war in 2025, the more consumers look forward to the start of the year in 2026. Therefore, when hundreds of new energy models dazzle consumers, homogeneous products and designs have long been difficult to arouse people's desire to buy. Car companies turn around as soon as possible to provide higher value. In addition, the market has a view that there is limited space in the domestic luxury large car market, and new products have been "surplus". However, the overall price of new products of domestic car companies is significantly lower than that of traditional luxury brand models. This will expand the luxury car market space. A large number of new products will also stimulate new demand. It is too early to judge the "excess" of large vehicles.