This year is the Year of the Tiger, and as domestic local car brands begin to develop new models, Tesla's dominance in China's electric vehicle market may face increasing pressure.
Tesla CEO Musk said last month that no new models would be launched in 2022 and that the company would focus its resources on tackling and overcoming supply chain issues. The statement led to the company's loss of $100 billion in market value overnight, but gave the country's three homegrown electric car manufacturers a chance to catch up. NIO said it would launch three models in 2022, while Xiaopeng and Ideal each planned to sell a new SUV.
Source: Reuters
However, it will not be easy to launch new models in the face of continued shortage of semiconductors, and the three electric vehicle start-ups of WEILAI, Ideal and Xiaopeng Automobile will have to spend a lot of money to assemble and promote. Gao Shen, an independent analyst in Shanghai, said: "These startups need to overcome some challenges to attract consumers from Tesla. First of all, make sure that there are enough chips and parts to ensure the smooth production of the new car. Second, these companies also have to spend a lot of money to promote new models, which may affect the total revenue. ”
Still, the development of any new model comes at the expense of profits, as a lot of money has to be invested in marketing upfront. In the third quarter of 2021, WEIO lost 835 million yuan, Xiaopeng lost 1.6 billion yuan, and the ideal loss was 21.5 million yuan, while Tesla's net profit more than tripled in the same quarter to reach $1.62 billion. However, UBS auto analysts said: "For these three start-ups, this year is more important to pursue the share of the Chinese market, rather than the pursuit of profitability, after all, they have raised sufficient funds in the capital market."
Source: EPA-EFE
Competition from other brands in China's ev market is also fierce, with 200 certified assemblers vying for the "big cake." According to a forecast by UBS, by 2030, three out of every five new cars in China will be pure electric vehicles. From BMW to Volkswagen, plus Ford and Toyota, every global automaker has several electric vehicle models waiting to be launched in China and competing with pure electric vehicle startups.
Source: AP
Crucially, China's electric vehicle manufacturers must find ways to address chip shortages. China needs 5 million electric vehicles this year, 4 million of which can be equipped with chips, which has led to a lack of microprocessors in the remaining 1 million cars, which will affect functions ranging from navigation and automatic parking to in-car entertainment systems.
Xiaopeng's co-founder and CEO, Xiaopeng He, recently said that the problem will take half a year to fully solve. Even Tesla's in-house design and component production could not avoid supply chain disruptions, and the company's Sales of model 3 and Model Y electric vehicle USB interfaces in China were cut to half of the promised due to chip shortages. Therefore, the chip problem will be the first problem that Chinese electric vehicle start-ups will solve this year.