The sales of small SUVs priced below 80,000 yuan are very hot. However, this market that seems to be booming on the surface is quietly re-interpreting the old path of "homogenization, price war, and market shrinkage" experienced by small cars in the past.
Hidden worries behind the market boom
The rise of small SUVs is closely related to the consumption upgrade in third- and fourth-tier cities. Consumers in these areas are no longer satisfied with mini cars or small cars. They need models with higher visibility and better passability, and are extremely price-sensitive. This demand has given birth to a market segment below 80,000 yuan, making it one of the fastest-growing areas in the past five years.
However, the low price threshold has attracted too many participants. From 2018 to 2023, the number of independent brands launching small SUVs under 80,000 yuan has exceeded 15. The market quickly changed from a blue ocean to a red ocean, with a large number of products. However, the core selling points were almost the same. They were all concentrated on "high cost performance" and "practical configurations", which paved the way for subsequent homogeneous competition.
Low technical threshold aggravates product similarity
Many small SUVs are mostly developed based on mature sedan platforms, and powertrains are often shared among existing models. For example, the technical origins of the 1.5L naturally aspirated engine installed in many models can be traced back ten years ago. Such a "old wine in new bottles" model greatly reduces R&D costs and cycles.
The development cycle has been compressed to the extreme. The internationally accepted model of 36 months of R&D and 9 months of commissioning is often significantly shortened in China. With the existing supply chain and mature solutions, automobile companies can launch a new vehicle in a very short time. This results in a lack of in-depth research and development of products, making it difficult to form unique technical barriers, and the appearance and functions tend to be the same.
History Lessons: The Downfall of Small Cars
The small car market ten years ago was a lesson. At that time, models such as Chery QQ and BYD F0 were also very popular. However, the product capabilities of each brand were highly overlapping, and they fell into a vicious price war. The profit of a car was compressed to an extremely low level, so companies simply did not have the strength to invest in research and development for upgrading.
Along the trend of consumption upgrading, consumers quickly abandoned products that lacked core competitiveness, causing the entire market segment to shrink sharply. Until 2015, mainstream independent brands generally abandoned this market. This past period clearly demonstrates that pure price competition without technical differences will eventually destroy the profitability of the entire market segment.
New variables in the current market
Different from the past, consumers in the current low-cost market have new requirements for "technology". Even young buyers with limited budgets will pay attention to whether it is equipped with an automatic transmission, whether the vehicle's infotainment system is intelligent, and whether the active and passive safety configurations are complete. Just "low price and large capacity" can no longer impress them.
The technical reserves of car companies are now completely different from those in the past. Some leading independent brands, such as Great Wall and Changan, have been able to put more efficient turbocharged engines and dual-clutch gearboxes on entry-level SUVs. Because of this, a few products can rely on the advantages of core power technology to form a gap with competing products and prevent themselves from falling into the dilemma of complete homogeneity.
The critical path to escape homogeneity
The fundamental solution is to establish the "generation gap" of core technologies. For example, when competitors generally use 4AT or CVT gearboxes, being the first to install a better-tuned dual-clutch gearbox or an AT gearbox with more gears will create a significant advantage in the driving experience. The smoothness of the power system and fuel economy are the most direct perception points.
There is still a direction, which is to accurately meet the segmented needs. In view of the rising proportion of female users, to develop models that are easier to control, equipped with 360-degree panoramic images and better automatic parking functions, or for young families, focusing on strengthening in-car air quality management and child safety interface design, shifting from general-purpose products to refined products that meet specific groups.
The focus of future competition
The competition in the future will be a battle between comprehensive system capabilities, which covers product iteration capabilities that can quickly respond to market demand, quality management capabilities under strict cost control, and continuous R&D investment around core technologies. Only car companies that have advantages in these aspects can break through the cycle.
The market will eventually develop in the direction of differentiation, and brands that lack core technologies will continue to be consumed in price wars. However, a few car companies that control powertrain, intelligence, or solutions for specific scenarios will build a brand moat, obtain sustainable profits, and then lead the next stage of consumption upgrades.
In view of the possibility that a similar situation will occur in the small SUV market, do you think automobile companies should first delve into a key technology to build barriers. Should they focus more on exploring the unique needs of a certain segmented user group?
