Why are car companies beginning to focus on launching B-segment sedans by the end of 2023?
Suddenly, there are many new luxury cars for household use, such as Zhi Jie S7, Ji Ke 007, Yin He E8, and Xiao Mi SU7
The Three Advantages of Domestic B-Class Cars
There are three major advantages to choosing B-class cars.
- Winning It All
The world belongs to B-class cars.
B-class cars often represent brand image.
Let’s take an example.
BYD used to be known for producing cars in the A-class segment, giving people the impression of cars priced under 100,000 yuan. It was also derisively called the “butcher” because of its low prices.
For many years, BYD couldn’t escape the curse of that wicked homophonic pun, and its annual sales remained below 500,000 vehicles.
However, since the success of the BYD Han, the brand image of BYD has improved dramatically, with sales reaching over 200,000 vehicles.
The success of the Han has also helped boost the popularity of BYD’s cars in the 100,000 to 200,000 yuan price range.
Take the popular BYD Dolphin, for example.
On August 13, 2021, the pre-sale of the BYD Dolphin began, offering four models with pre-sale prices ranging from 96,800 yuan to 124,800 yuan.
As soon as the prices were announced, there was a chorus of criticism: “BYD is really daring! Selling an A-class car at a higher price than a joint venture car.”
But what happened in reality? How many people were proven wrong?
As soon as this car was released, models like the Honda Fit and the Volkswagen Polo became unsellable.
This is all thanks to the success of the BYD Han, the anchoring effect of its pricing, and the exquisite quality of the Dolphin, which unexpectedly became popular.
Even more interestingly, the evil homophonic pun associated with BYD has disappeared.
- Making Profits with Satisfaction
As the saying goes, “Conquering the B-class car market means conquering the world.”
B-class cars not only help enhance a brand’s image but also account for a significant portion of profits for various car manufacturers.
Let’s take the BYD Han as an example again.
According to unofficial sources, the profit margin for a single BYD Han vehicle exceeds 70,000 yuan, which is equivalent to the price of a Seagull car.
If you doubt the credibility of this information, take a look at BYD’s recently published financial report: BYD’s automotive business gross margin for the third quarter of 2023 was 22.2%.
Therefore, the gross profit margin for a single Han car will only be much higher than the average, confirming the credibility of the unofficial information.
This car makes significant profits.
If you discount it by another 50,000 yuan, who would dare to compete?
- Outdoing the Competition
B-class cars are the backbone of joint venture car companies.
With the profits generated by B-class cars, joint venture car manufacturers can afford to lower the prices of models like the Corolla, Corolla Cross, and the Lavida to around 70,000 or 80,000 yuan.
But if B-class cars collapse and models like the Accord and Camry can only be sold for 130,000 yuan, will there still be enough profits to subsidize the Corolla at 70,000 or 80,000 yuan, or the Civic at 100,000 yuan?
In 2022, the cumulative sales of domestic sedans reached 10.19 million units (including new energy vehicles and traditional fuel vehicles), accounting for 49.6% of the total market share. The cumulative sales of A-class sedans were 4.949 million units, accounting for approximately half of the sedan market and 1/4 of the total domestic automotive market share. It is one of the largest and most competitive submarkets in China’s new vehicle sales.
Once the Corolla and Lavida stop lowering their prices, the largest sales guarantee for joint venture cars will be lost, leading to a wave of dealership closures, as exemplified by what happened to French car brands.
Therefore, B-class cars determine the price of A-class cars, and A-class cars determine the brand’s survival space.
After more than thirty years of effort, domestic B-class cars can finally compete head-to-head with their joint venture counterparts. Why not seize the opportunity and press on?
It is better to use remaining courage to chase down desperate enemies than to seek fame by imitating the most successful!
The Rise of B-Class Cars in the Chinese Market
The logic behind many people’s first car purchase is simple: besides daily transportation, it’s also about face and status. Leaving aside some uncontrollable factors, the role that transportation as a functional requirement plays in the decision-making process is minimal.
How many years can a car be driven? After starting a family, what should you do when you have a baby? Many people weigh their options and, gritting their teeth, take a leap by upgrading to a B-class car, which has become the mainstream decision-making approach for car buyers.
And more importantly, the domestic car market has already reached a consensus: B-class cars offer the same level of enjoyment as A-class cars but at a lower price.
The intermediate car market is actually a unique one. The majority of buyers in this segment are middle-class families, most of whom are middle-aged. Unlike the compact car market, where buyers are getting younger, with many purchasing their first car being young people who show higher acceptance of domestically produced new energy vehicles.
Ten years ago, the domestic market was still dominated by entry-level cars priced below 100,000 yuan, relying on cost-effectiveness through ample configurations and larger dimensions. But today, the situation is different. If you look at the strong defense line of joint ventures, it is B-class cars that are the toughest to conquer.
Chinese brands have never given up on challenging the upper limits of the B-class sedan market. It can be said that every trick in the book has been used, such as lower prices, larger dimensions and space, more configurations, and so on. These tactics have been effective in the SUV segment, but Chinese brands have not succeeded in the relatively conservative sedan market, especially in the mid-high-end B-class sedan market.
When it comes to the rise of new energy vehicles, Chinese brands have collectively risen in the domestic market. Not only have they rapidly increased their sales in the popular SUV market, but Chinese brands have also started to break through in the B-class sedan market.
The B-class car market is no longer dominated by joint ventures. With the addition of more domestic brands, most joint venture brands have begun to reduce prices.
What’s more important is that Chinese B-class cars no longer need to rely solely on any tricks. They come with plug-in hybrid powertrains and offer superior intelligent experiences, gradually becoming the most powerful weapon. However, the first consideration for B-class cars is maturity, and new energy is still lacking in maturity, which means the proportion of new energy in the current B-class sedan market is the lowest. In other words, it is a blue ocean in the market.
The success of the BYD Han has shown all Chinese brands the possibility of a breakthrough. With the highly efficient execution capability developed over the years, we will soon see many B-class sedans with similar features in the domestic market.
In 2023, when the A-class market takes off, the new generation of Chinese brand B-class cars will gradually gather, including those from Wuling, a specialist in low-end cars, which has been thinking of raising the prices of its models. Moreover, Wuling also wants to enter the B-class car market, a market it is less familiar with.
Finally, take a look at the Roewe D7. I have to say that this market is about to undergo a tremendous change!
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Competitive Situation in the B-Segment Car Market
It is undeniable that the B-segment cars, especially the new energy B-segment cars, have attracted the attention of various companies.
Market Competition in Segments
In terms of the size of the automotive market, the A-segment and B-segment are must-competes for automakers.
In the compact SUV segment, the BYD Song takes the lead in sales, along with strong players such as the Haval H6, Changan CS75, and CRV, which are traditional fuel-powered vehicles.
In the A-segment sedan market, the BYD Qin leads in sales, with price competition intensifying against the Nissan Tiida and Corolla. The main price competition range has dropped below 100,000 yuan.
In the B-segment SUV market, the Tesla Model Y is leading in sales, with strong competition from the NIO ES7, ES8, WM Motor EX5, and BYD Tang, among others.
In the B-segment sedan market, the BYD Han and Tesla Model 3 have achieved good sales in new energy vehicles, but the overall market is still dominated by traditional fuel-powered vehicles from joint ventures.
Wholesale Data
Based on the retail sales structure of the first ten months in 2023,
The B-segment sedan market (highlighted in yellow in the chart) is the 4th largest sub-segment market, with a projected total market capacity of over 3 million vehicles for the whole year.
And the penetration rate of new energy vehicles in the B-segment sedan market is the lowest among the top four main sub-segment markets.
By carefully analyzing the competition situation, it is not difficult to find that although there are many strong players in the B-segment, there has yet to emerge a true leading model in the new energy field. With joint venture fuel-powered vehicles already bringing the main price range below 200,000 yuan, there is considerable potential for new energy B-segment cars.
The road of B-segment sedans for domestic independent brands
In the B-segment sedan market, domestic independent brands have always played a supporting role, with models like Passat, Magotan, Accord, Camry, and Teana dominating the sales charts. In addition to that, the BBA trio of BMW 3 Series, Mercedes C-Class, and Audi A4, leaves little room for independent brands to make their presence felt in the B-segment sedan market.
During the era of fuel-powered vehicles, Geely Borui performed the best.
Regrettably, Borui had some shortcomings in terms of the powertrain system and failed to achieve a real breakthrough.
In the era of new energy vehicles, the BYD Han has truly become the first domestically produced mid-size car to achieve sizable sales in the B-segment car market.
The positioning of the BYD Han has sparked a lot of controversy in the industry, as some people don’t seem to want to see independent brands surpassing the numerous joint venture brands in the B-segment car market.
Of course, personally, I would be happy to see more independent brand models achieving sizable sales in the future competition of the B-segment car market.
B-segment Cars are the Battleground of the Future
Looking at the development of the domestic automobile market, future new car sales will mainly come from two main parts.
First, the purchase of new cars for the first time, which is mainly concentrated in the mid-to-low-end models.
Second, vehicle upgrades, which naturally have a need for model upgrades.
The proportion of the second part is gradually increasing, as long as there are model upgrades, B-segment sedans will inevitably have a place.
Although SUVs surpassed sedans in sales volume for the first time in 2023,
Personally, I believe that sedans and SUVs will eventually be in a relatively balanced state, and it is impossible for one to dominate.
With a sales volume of over three million vehicles per year,
There is plenty of room for more B-segment sedans, especially electric vehicles.
Competing Trends in the E-sports Market
The four cars mentioned by the OP will most likely become direct competitors in the market. Whether Zeekr007 and E8 are from the same company or not, they will eventually be seen as competitors by users. Many product managers overlook the fact that users' budgets and choices can vary. Traditional portals' primary focus is on creating comprehensive evaluations, which may seem fair but are ultimately unhelpful for car buyers. This is because users often struggle to decide between SUVs, sedans, and MPVs, and some may have budgets that span tens of thousands of yuan. Therefore, many recommended car purchases are of little use.
Now, let’s come back to the classic principles of product management. Another reason for the concentration of efforts in the B-class sedan market is that BYD Han has monopolized this niche market for too long. Everyone has recognized this unique market, and the sales of BYD Han EV have been considerable, achieving true parity between electric and fuel-powered vehicles.
Therefore, these major manufacturers also hope to participate, slicing a big piece of the cake. Take the Galaxy E8, for example. As a model with the advantage of being a latecomer, this car, which emphasizes sporty handling, initially invited KM77 to give everyone a lesson.
The E8 achieved a top speed of 82km/h in the ISO 3882 standard for elk tests. This data is indeed impressive. The internationally renowned media outlet KM77 tested the Geely Galaxy E8, and it ranked third globally in the KM77 global test list with the top speed of an elk. The incident where the car hit a pole at 84km/h was purely accidental, and the final result remained fixed at 82km/h.
In comparison, the ZhiJie S7 is also not weak. During its promotion, users discovered that the airbags were designed in front of the small tabletop, which had a negative impact on the sales of the S7. However, thanks to Huawei’s aura, users dare not speak negatively. Even the after-sales profit of this car can be substantial because people are hesitant to seek legal remedies when buying Huawei products.
As for the Xiaomi Su7, this car has not been released yet. However, based on the current announcement, there are still many important details to be observed. It is possible that Xiaomi will make adjustments to various details inside and outside the vehicle. We cannot make definitive statements here and must wait for the bullet to fly a little longer. For detailed announcements, you can refer to the article by Mr. Wang below.
In summary, car manufacturers are concentrating their efforts on attacking the B-class sedan market with an emphasis on electric power. Prior to this, the dominant forces in the B-class car market were the “Japanese Trio” (Honda Accord, Nissan Teana, and Toyota Camry), as well as the “Three Beauties” (Mondeo, Malibu, and Sonata), and the “German Three Beauties” (Passat, Magotan, and Volkswagen CC). These nine cars almost dominated the market for many years, but now they are showing signs of decline.
On the other hand, the BYD Han EV stands out in the electric car market as shown in the B+C-class car rankings from January to August 2023. Therefore, various major manufacturers are now contemplating entering this field. However, as long as traditional fuel car companies make a slight effort, they can still reduce costs in this niche market. In 2024, it will be a case of either you survive or I survive. Let’s wait and see.
Better battery layout in C-class cars, C-class cars should be prioritized
It’s not the B-class, but the C-class cars that are being centrally launched.
For pure electric and extended range vehicles, there is almost no cost difference between B-class and C-class cars. On the contrary, the C-class car’s nearly two-meter-long body is better suited for battery layout.
So here’s the question: There is a huge price difference between traditional car manufacturers' B-class and C-class cars. Now, by making the car bigger, you can compete with the market from a different angle. As a product manager, which one would you choose?
Diversification of the Automobile Market Demand
Consumers have diverse needs in terms of space, power, and status.
The profitability of automakers is also important.
Each individual has their own demands.
Take the example of Wuling Motors, those 30,000 yuan cars simply cannot generate much profit.