Xpeng's MONA M03 gains popularity due to its affordable price (March 18, Guangdong Province, Guangzhou City)

Ittaro Fujino: "Half of the sales in the store are concentrated on the cheapest models." In February, China's consumer price index for residents fell by 0.7% year-on-year, marking the first negative growth since January 2024, influenced by the decline in prices of durable goods such as automobiles. There is also a growing sense of frugality in the field of electronic products like smartphones...

Ittaro Fujino: In China, pure electric vehicles (EVs) and other new energy vehicles, as well as popular products like smartphones, are shifting towards the low-price segment. Due to economic slowdown, consumer awareness of saving has increased, and price competition among manufacturers is fierce. Insufficient domestic demand is becoming increasingly evident, and one can seemingly hear the footsteps of deflation.

"Half of the sales in the store are concentrated on the cheapest models," said a staff member at the store of the emerging EV company Xiaopeng Motors located in the suburbs of Guangzhou, Guangdong Province, in mid-March.

The best-selling product in the store is the "MONA M03," which was released in August 2024. Its moderate price range of 120,000 to 160,000 yuan and fashionable appearance are very popular. The high-end model is also equipped with advanced driving assistance features. Previously, the main model was the "G6," priced at 180,000 to 200,000 yuan, but data from the automotive information app "Dongchedi" shows that in the past six months, the sales of the MONA M03 in China have reached three times that of the G6.

Plug-in hybrid vehicles (PHVs) also show a similar trend, with Li Auto standing out for its advantages and premium image. At a store near XPeng Motors in Guangzhou, the newly launched SUV "L6," released in April 2024, is prominently displayed at the entrance. According to the staff, this model accounts for 40% of the store's sales.

The L6 is priced between 250,000 and 280,000 yuan, making it the cheapest among the Ideal models. It is significantly cheaper than the previous mainstay "L7" (300,000 to 360,000 yuan). According to data from "Dongchedi," the L6's sales in the past six months have been twice that of the L7.

The price leader in the new energy vehicle market is BYD, with the "Seagull" priced between 70,000 and 90,000 yuan, making it one of the best-selling cars in China. Xiaopeng and Ideal differentiate themselves from BYD through driving assistance features and a sense of quality, but overall, the pressure to reduce prices is increasing.

Data from China's National Bureau of Statistics showed that the Consumer Price Index (CPI) fell by 0.7% year-on-year in February. This marked the first negative growth since January 2024, influenced by factors such as declining prices of durable consumer goods like automobiles. A trend of cost-consciousness has also emerged in sectors like smartphones and other electronics, impacting high-end players such as U.S.-based Apple Inc.

According to data from the American research firm IDC, Apple's smartphone shipments in China decreased by 5% in 2024, being overtaken by Huawei, a major Chinese telecommunications equipment company that has recovered from U.S. sanctions, and dropping to third place in market share. The top spot in market share was held by China's vivo, whose cost-effective products gained strong support, leading to a 10% increase in shipments.

The iPhone primarily features models priced above 6,000 yuan, while vivo's main products fall within the 4,000 to 6,000 yuan range. A staff member at a vivo flagship store in a downtown Guangzhou shopping mall stated, "We collaborate with a German optical manufacturer, offering outstanding camera capabilities. At the same performance level, other brands would cost several thousand yuan more."

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If it's the affordable "Y series," it comes equipped with features for outdoor work, such as automatic screen brightness and speaker volume adjustment, for around 2000 yuan. The salesperson mentioned, "The iPhone is too expensive."

Apple lost market share in China for smartwatches, wireless headphones, and tablets in 2024. It is being poached by local manufacturers with low-cost offerings.

Data from the National Bureau of Statistics shows that the Producer Price Index (PPI) for industrial producers, which reflects factory prices, decreased by 2.2% year-on-year in February, marking a decline for 2 years and 5 months in a row. Recently, there have been reports that the American company Tesla has also begun developing a low-priced version of its main model "Model Y" in China. The Chinese government hopes to stimulate consumption through subsidies and promote the upgrading of consumer goods, but deflation still carries a realistic significance.

Source: Nikkei Chinese Network