Radical pricing sends auto market into a spin

Buyers have been comparing every new model in the same C-segment as the Mazda CX-5 and Hyundai Palisade, ever since these two models debuted with the segment’s lowest prices.

In July, automaker Thaco Group introduced the mid-cycle upgrade version of its 2023 Mazda CX-5, featuring improvements (to design, features and safety measures) and an unexpectedly lower selling price. Three car variants were priced at VND749-829 million, making the CX-5 the segment’s cheapest.

The cheapest car in the C-segment (mid-size) is also disruptive since it encroaches on the B-segment (small size) at under VND800 million.

"This is enough to get a CX-5" was a customer’s comment when they were considering buying a B-segment crossover vehicles.

The appealing price tag meant had the CX-5 well more than 1,200 units in June, 1,600 in July and 1,700 in August, making it the bestseller in the car market.

Automaker Hyundai Thanh Cong also adopted a similar strategy for its recently launched E-segment the SUV Palisade, pricing it at VND1.47–1.59 billion.

The price of the Palisade’s base version is VND19 million higher than the top-of-the-line version of the D-segment Santa Fe (VND1.45 billion).

The Palisade is also enormously cheaper than its competitors, with the difference being VND800 million in the case of imported rivals like the Volkswagen Teramont and Ford Explorer (both above VND2.3 billion).

The CX-5 and Palisade are undercutting all newly launched vehicles, whether in the same class or otherwise.

The Palisade, on top of the low price range, also has a 50% registration fee discount that imported rivals don’t.

To sell at these prices, automakers like Thaco and Hyundai Thanh Cong must have deep pockets and the parent companies on board.

"Only when the parent company is sold on this policy can we implement it," a senior manager at Hyundai Thanh Cong said.

"Timing is also key," he said, referring to the continuing auto market slump that began in early 2023.

Demand has yet to recover even with the constant promotions.

The Vietnam Automobile Manufacturers Association reported sales of 184,554 vehicles in the first eight months of this year, almost a third down from last year’s 262,939.

A marketing expert who used to work for Japanese and German automakers said in the current auto market, if a company has financial strength, large discounts might be a reasonable strategy.

Nevertheless, selling at low prices could be risky, the expert warned, pointing out that if the product fails to provide perceived value to the consumer, the "cheap is bad" mantra could take over.

But the bottom line is that Thaco and Thanh Cong’s pricing strategies are making the market more competitive and bringing prices down as other brands fear being undercut.