This article is from the WeChat public account: Box Rice Finance (ID: daxiongfan) , author: Zhao Jinjie, title picture from: Visual China
“Wei Xiaoli” decided not to lower the price.
Recently, Li Xiang, the founder of Ideal Auto, responded clearly in a live broadcast that he would not follow Tesla to cut prices, and believed that “these medium-sized SUVs should be set at the current price to be reasonable.”
On January 1, after the official cancellation of state subsidies for new energy vehicles, Xiaopeng Motors neither lowered nor raised prices, and announced to the outside world that it will maintain the same price as the comprehensive subsidy at the end of 2022.
Li Bin, the founder of Weilai Automobile, has expressed his views on Tesla’s price reduction on many occasions. He thinks that it is not surprising that Tesla has dropped to more than 100,000 yuan, but Weilai will insist on not lowering the price, and may even increase it further. price.
In May 2020, through the price reduction, the price of Tesla Model 3 entered the range below 300,000 yuan for the first time. Li Bin said, “We don’t lower the price anyway, we can’t do it, and it doesn’t conform to our principles.” Under the pressure brought by Tesla’s price cuts, Li Bin said, “There is no way, everyone should improve their product and service capabilities. This is a bit cruel, but it is also fun.”
Li Bin didn’t know if he felt the fun, but Musk really felt the joy of price cuts . Since the start of the 2023 price reduction and the reduction of the starting price of the Model 3 to around 200,000 yuan, some media reported that the Tesla China market has already won 30,000 orders within 3 days of the price reduction. The official website was once overwhelmed.
Perhaps seeing the immediate effect of price cuts and promotions from the Chinese market, Musk then launched a global price cut that spread to North America, Europe, and Japan.
Also wanting to trade price for volume is Huawei, which has also become the first domestic auto brand to follow up since Tesla cut prices.
On January 13, Wenjie M5 EV version and Wenjie M7 announced price cuts, and the price cuts for all models ranged from 28,800 to 30,000 yuan. In order to take care of the interests of old car owners, Wenjie also provided these users with a gift package worth 33,000 to 35,000 yuan.
Ronald Jessico, an analyst at Guggenheim Securities, believes that Musk’s price cuts will make Tesla’s profit margin 25% lower than Wall Street’s consensus expectations, but it is expected to squeeze out all Tesla’s profits. competitors’ profits.
Since Tesla’s price cuts, user groups including Xiaopeng P7, G9, Weilai ES6, ET5, Ideal L7, L8, and BYD Seals and other similar price segments are undergoing fluctuations, especially for younger car models. Guotai Junan Securities analysts pointed out that Tesla’s sharp price cut this time has brought direct pressure on some competing models of new forces. It is expected that competing models will adopt some price measures that rise and fall in the future.
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How long can the “Wei Xiaoli” who have shouted not to cut prices last?
“Wei Xiaoli” is still generally in a state of loss. Compared with Tesla, which is continuously profitable, they do not have the confidence to cut prices and promote sales.
Even the question of choosing to follow up on the price reduction actually played a little trick: the extended-range models that really go up in volume are not within the scope of the price reduction.
According to the data from the Travel Association, in 2022, the sales volume of the Wenjie M5 extended range version will be nearly 49,000, accounting for over 60% of the total annual sales of 75,000 vehicles; 21,000 vehicles.
When responding to the outside world’s intention to lower the price, a person in the investment department of Cyrus said that this is a choice of balance between volume and price, and it is hoped that the profit will be considered from the perspective of volume after the market share increases.
But in terms of huge losses, Wenjie who followed up the price cuts was in the same state as Wei Xiaoli. According to the financial report data for the third quarter of last year, Cyrus had a cumulative loss of 2.675 billion yuan in the first three quarters, Weilai had a cumulative loss of 8.7 billion yuan, Xiaopeng had a cumulative loss of 6.778 billion yuan, and Ideal had a cumulative loss of 2.269 billion yuan.
The comparison of another group of single-car profit data is more intuitive. In the third quarter of last year, Tesla made an average profit of $9,711 per car sold, ranking first among global car companies, while NIO suffered a loss of $15,290. , Xiaopeng lost $10,484, and Ideal lost $6,566.
Especially for Weilai and Ideal, which have already shouted their hope of becoming profitable in 2024, choosing to follow up on price cuts will not only lower the gross profit margin, but also delay the originally planned profit time point.
After the cancellation of state subsidies for new energy vehicles, many car companies, including BYD, Geely, Changan, Nezha, Dongfeng, etc., have announced price increases compared to “Wei Xiaoli” who neither lowered nor raised prices. The price increases range from 2000-10000 yuan.
In addition to the need to maintain the highest possible car gross profit margin, another realistic factor that hinders the price reduction of “Wei Xiaoli” is that as the competition for intelligence becomes more and more intense, the R&D investment intensity of various car companies is becoming more and more intense. Bigger, it all needs to rely on car sales for blood transfusion .
From electrification to the second half of intelligent new energy vehicles, in order to achieve a better driving experience, from chips, algorithms to operating systems, integrated self-research has become the direction of more and more car companies.
The performance is particularly obvious in leading new energy car companies. He Xiaopeng once publicly expressed his opinion that “more and more controllable software and hardware models like Apple will appear in smart car companies”; Li Bin also called out the establishment of a full-stack self-developed ability target.
Li Xiang, who was the latest to express his opinion, also started to investigate the self-developed chip project last year. So far, the three companies have set foot in self-developed self-driving chips. According to later reports, the chips could arrive in cars as early as around 2024.
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The confidence to support Musk’s price reduction comes from Tesla’s ultra-high industry gross profit margin. By the third quarter of last year, although Tesla’s gross profit margin for bicycles declined slightly, it remained at 27.9%.
Huatai Automobile Research Institute estimates that after this price cut, Tesla’s domestic models still have a gross profit of about 10%, and there is still a profit margin of US$3,000 for bicycles . Based on this, Huatai Automobile Research Institute predicts that if the auto industry continues to decline in the second quarter, Musk may sacrifice more profits to gain sales and seize a larger market share.
This is also in line with Musk’s consistent statement to the outside world. When participating in a Twitter space discussion organized by many “special fans” and Tesla bull fund managers in December last year, when faced with the question of “under the economic recession, the trade-off between car prices and profit margins”, Musk said, In order to keep demand constant, Tesla has to lower the price of the car. “It’s just a case of you want to keep demand constant. If you want to increase demand, you have to further reduce the price of the car.”
Musk even aggressively stated that during the economic recession, Tesla will gradually reduce the profit margin, and does not rule out the possibility of eventually turning from positive to negative.
On the other side of the price reduction promotion, Musk’s greater ambitions are hidden. Once the scale of the car is rolled out, Tesla will earn far more profits than car sales through the self-driving subscription service.
In order to minimize the profit pressure brought by price cuts, Musk is still trying to find ways to lay more super factories to promote the localized production of cars, thereby reducing the cost of car production and manufacturing in the supply chain.
In September last year, Martin Viecha, director of investor relations at Tesla, said that in 2017, Tesla’s average production cost per car was about $84,000, but it has now dropped to $36,000, a drop of nearly 60%.
Judging from the new round of price cuts just launched in the United States in January this year, the basic model of Tesla Model 3, which has been reduced to $43,990, still has a gross profit of nearly $8,000 compared to the manufacturing cost.
Recently, after it was reported that Tesla’s China factory expansion plan of 2 million annual production capacity was suspended, soon there were media reports that Tesla is considering investing 775 million US dollars to expand the Texas factory in the United States, and will complete the first in Indonesia. Three overseas automobile production plants to accelerate the deployment in Southeast Asia.
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The impact on “Wei Xiaoli” is not only reflected in the domestic market.
In May last year, when Musk posted that China was leading the world in the field of renewable energy power generation and electric vehicles, He Xiaopeng reposted the remarks and commented: “China must lead the world in the field of electric vehicles, in addition to technology and It will take at least 10 years of hard work to take the lead in products, and more importantly, to lead in the global market and win business.
Weilai, who was aggressive, made the biggest moves when going out to sea. As early as 2019, Weilai had considered developing new cars directly in the United States and selling them to the market. In 2021, Weilai restarted its overseas expansion. The first stop was Norway, which had the highest penetration rate of electric vehicles in Europe at that time, and it will successively enter the markets of Germany, Finland, Sweden and Denmark in 2022.
However, the results are mediocre. NIO’s overseas sales in the past year were less than 1,000 vehicles. Compared with Tesla, its German factory has a weekly production capacity of 3,000 vehicles and plans to further increase to 10,000 vehicles.
Xiaopeng, who also chose Norway as the first stop to go to sea, has postponed going to sea in 2022, and ideal has not yet made any substantive moves.
After Tesla’s big price cut in Europe, how NIO and Xiaopeng should adjust their product pricing has undoubtedly become a headache for Li Bin and He Xiaopeng.
But there is more than one problem. For the domestic market where “Wei Xiaoli” is deeply involved, after Tesla lowers the product price to around 200,000 yuan, the release rhythm of the three low-end models originally planned will also be challenged.
In addition to announcing that he will not follow up on price cuts, Li Xiang also recently stated that the ideal L6, which focuses on the market of 300,000 yuan and below, will not be released this year and will be postponed to next year. As for the release plan of the ideal model that drops to the range of 200,000 yuan, Li Xiang has not responded yet.
Li Bin also planned new models for the mass market for NIO, namely the “Alpine” brand in the range of 200,000 to 300,000 yuan, and the “Firefly” brand in the range of 100,000 to 200,000 yuan. According to Li Bin’s original plan, the first model of Alps and Firefly will be a popular hatchback in the European market, and it is planned to be put into production in 2024.
With Tesla’s continuous price cuts, Li Bin’s above-mentioned plan does not rule out the possibility of being discussed and revised by the company again. After all, the original intention of launching these brands is to obtain larger sales orders in further competition with Tesla Model 3.
According to an estimate given by the Credit Suisse Research Institute, about 100 new energy vehicles will be launched in China in 2023, more than 30 more than last year, but the demand is not optimistic. Morgan Stanley mentioned in the report that in 2022, affected by the subsidy policy, the demand has been overdrawn to a certain extent. “China’s current penetration rate of pure electric vehicles has exceeded 20%, and it will be difficult to see a similar growth rate next year.”
In 2019, before the outbreak of new energy vehicles, Xiao Yong, then deputy general manager of GAC Aian, said: “Everyone shouts to be Huawei and Tesla. After 5 years, you will find that it is good to be Xiaomi. At least It means that you have survived, and that you are the leader in the market segment of the industry.”
Now, Tesla has personally started “Xiaomi”, leaving a greater test for domestic new energy car companies.
References:
“Li Xiang: Ideal L6 may be released next year, and is negotiating with Apple” Auto Consumer Network
“Wanjie Price Cuts to Fight Tesla” Wall Street Insights
“Which Electric Car Companies Will Die? Can Tesla be a winner? Phoenix.com Technology
“After the introduction of 7 billion investment, an exclusive dialogue with Li Bin: Tesla’s price reduction is a bit cruel, but the competition is full of fun” Chinese entrepreneurs
“Wei Xiaoli’s Core Making: Who is Radical and Who is Cautious” will be delayed by AUTO
This article is from WeChat public account: Box Rice Finance (ID: daxiongfan) , author: Zhao Jinjie
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