Xiaopeng cars go to sea: new forces are forced to Liangshan?

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The author | Penger

On March 10 this year, the National Passenger Car Market Information Joint Association (hereinafter referred to as the "Passenger Car Market Information Association") released the operating data of the automotive industry in February. According to the data, passenger car exports (including complete vehicles and CKD) in February were 133,000 units, an increase of 69% year-on-year; new energy vehicle exports continued to maintain strong growth, reaching 45,300 units, accounting for 34% of the total exports.

Under the overall trend of automobile exports, the pace of Chinese automobile companies going overseas has gradually accelerated, especially in the field of new energy vehicles. On March 11, Xiaopeng Automobile (XPEV.NYSE; 09868.HK) P5 officially opened reservations in Denmark, the Netherlands, Norway and Sweden in four European countries; at the same time, the first Xiaopeng Automobile brand direct experience store in the Netherlands was grandly opened, and the latest mass production models were introduced into overseas markets under the "direct operation + authorization" new retail overseas mode of Xiaopeng Automobile.

It is worth mentioning that in addition to Xiaopeng, other domestic new energy vehicles are also "grabbing the beach" in the European market. At present, Chinese new energy vehicle brands have successively entered the European market, including by BYD (002594. Pure electric and plug-in hybrid two-wheel drive represented by SZ) to consolidate independent brands, traditional car companies represented by SC Group (600104.SH) and Guangzhou Automobile Group (601238.SH), and new car-making forces represented by "Wei Xiaoli".

What kind of business logic is the basis for domestic new energy vehicles to go to sea? What challenges will you face?

Competition intensifies in search of new breakthroughs

Among the new forces of car manufacturing in China, the three "Wei Xiaoli" are regarded as first-line brands. Among them, The delivery volume of Xiaopeng Automobile in 2021 is particularly gratifying - the total delivery volume of the whole year reached 98,155 units, 3.6 times that of 2020, surpassing nio automobile (NIO. NYSE；09866. HK) of 91,400 units and 90,500 vehicles of Ideal Cars (LI.NASDAQ; 02015.HK) have come out on top among the new car-making forces.

However, in stark contrast to the beautiful sales figures, Xiaopeng Motors' dismal profitability. According to the financial report, in the first three quarters of 2021, Xiaopeng lost a total of 3.576 billion yuan. Why is the loss widening? In addition to the impact of uncertainties such as rising prices of upstream raw materials and tight supply and demand, a very important reason is That Xiaopeng's research and development investment is rising.

He Xiaopeng, chairman of Xiaopeng Automobile, once said, "It is about 20 billion yuan to build a car from 0 to 1, and it will definitely exceed 30 billion yuan from 1 to 100." "Now Xiaopeng is in the stage from 1 to 100.

According to the financial report, in the first three quarters of 2021, Xiaopeng Automobile invested a total of 2.663 billion yuan in research and development, an increase of 99% over the research and development expenses of 1.264 billion yuan in the third quarter of 2020. This investment also far exceeds that of competitors NIO and Ideal Automobile – in the first three quarters of 2021, NIO and Ideal invested 2.073 billion yuan and 2.057 billion yuan in research and development, respectively.

The continuous increase in research and development investment means that Xiaopeng must produce and sell more cars, so that there will be a scale effect. However, due to the upstream supply chain and the downturn in the global economy, it is not yet possible to know how much Xiaopeng's delivery volume will be to achieve profitability.

Profitability is unknown, but the pressure is real. At present, the domestic new energy vehicle market is showing a steady growth trend, foreign brands are accelerating their layout in China, Chinese local car companies are fighting endlessly, and Xiaopeng Motors is facing huge competitive pressure.

According to a survey conducted by China Business Intelligence Network, in 2021, China's new energy vehicles sold 3.521 million units, and the top ten companies in retail sales were: BYD Automobile, SAIC-GM-Wuling, Tesla China, Great Wall Motors (601633. SH), GAC Eian, SAIC Passenger Cars, Xiaopeng Automobile, Chery Automobile, Nio Automobile, Ideal Automobile. The top five new energy vehicle manufacturers sold a total of 2.085 million vehicles in the whole year, accounting for 59% of the industry's market share. It is difficult for the new car-making forces represented by Xiaopeng Automobile to "get out".

In addition to pressure from competitors, Xiaopeng Motors is also facing a problem that all new energy vehicle companies are facing - the tide of subsidies for new energy vehicles.

On January 1 this year, the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology and the Development and Reform Commission jointly issued the "Notice on the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles in 2022", which clarified that the annual subsidy scale of new energy vehicles is capped at about 2 million in principle, and the intensity and rhythm of subsidy decline should be smoothed out, and the subsidy standards for 2020-2022 will be reduced by 10%, 20% and 30% respectively on the basis of the previous year. According to this policy, the subsidy standard for new energy vehicles in 2022 is 30% on the basis of 2021, and will be completely withdrawn by the end of 2022, and there will be no more state subsidies for the purchase of new energy vehicles in 2023.

In the past, the cost of new energy vehicles has been high, and it must rely on state subsidies to compete with fuel vehicles in price; now that subsidies are ebbing out, if new energy vehicle companies still want to maintain the previous price, they can either bear the subsidy cost themselves or directly increase the price of vehicles. This means that there will be greater competitive pressure between domestic new energy vehicle brands, as well as between new energy vehicle companies and traditional automobile manufacturers.

For domestic new energy vehicle brands, since the "inner volume" is serious, going to sea is a way to break the situation.

Opportunities and challenges of "going to sea"

Under the trend of carbon peaking and carbon neutrality, the demand for new energy vehicles in the European market is strong. At present, all countries in the EU are vigorously supporting the development of new energy vehicles, and have generous subsidy policies for new energy vehicles, while there is no restriction on the origin of vehicles. For example, Norway is exempt from 25% value-added tax and import duties for new energy vehicles.

China's new energy vehicles started earlier and are competitive in price, design and quality. The industry generally believes that the export of domestic new energy vehicles has ushered in a better time. For Xiaopeng, if it is successful in going to sea, it will undoubtedly create new increments for its revenue and enhance the competitiveness of enterprises on the basis of maintaining high investment in research and development.

"Going to sea is a step towards internationalization for domestic car companies, especially for new car-making forces." Auto industry analyst Zhang Xiang told Cai Entropy, "Like Xiaopeng, Ideal, Weilai, etc. are listed in the United States, but their current sales are mainly in China, there is still a distance from the international market, going to sea can be marked with international labels; in addition, if they go to sea, in Europe and other international markets to make sales, not only will their financial reports become good, but also good for their market value, stock price rise." ”

Opportunities are on the one hand, at the same time, the risks and challenges faced by the "Xiaopeng" will also be multiplied.

In terms of consumer demand, there are differences between the consumer markets of China and Europe, and in terms of demand for vehicles such as endurance and models, the demand between European consumers and domestic consumers may not be consistent, and it remains to be seen whether domestic new energy vehicles can be recognized by the European market.

In terms of brand recognition, compared with European local car companies, the international popularity of China's new energy vehicles is relatively low, and it is still necessary to cultivate foreign consumers' awareness of the brand.

In terms of technical strength, in recent years, European local car brands, including Volkswagen, Mercedes-Benz and BMW, are accelerating the layout of new energy vehicles and transforming into electrification. Europe's automotive testing standards, related laws and regulations are more stringent than the Chinese market, domestic new energy vehicles in product quality, performance and after-sales service, or will face a test, domestic brands need enough mature technical support.

Product issues are the most important issues for domestic new energy vehicles. Taking Xiaopeng as an example, Cai Entropy found through the index of the Sea Cat complaint platform that in the past 30 days, there were 100 complaints about Xiaopeng Automobile, mainly focusing on the issue of battery life, such as battery capacity being lower than publicity introduction, battery being locked remotely.

According to the "China Consumer Daily" report, on the eve of "315" this year, consumer organizations in Beijing, Tianjin and Hebei Province carried out a low-temperature driving range comparison test for electric vehicles in accordance with the relevant requirements of GB/T 18386-2017 "Electric Vehicle Energy Consumption Rate and Driving Range Test Method". The experimental results show that after 12 hours of standing at an ambient temperature of -10 °C± to 2 °C in the full-powered state of normal temperature environment of 20 °C to 30 °C, the driving range of Xiaopeng P5 was greatly reduced, the driving range of room temperature was declared 535km, and the low temperature driving range was only 326km.

Xiaopeng Automobile driving range test results Picture quoted from China Consumer Daily

Coincidentally, the main area where Xiaopeng goes to sea is the long and cold northern Europe of winter - on March 11, Xiaopeng P5 opened reservations in Denmark, the Netherlands, Norway and Sweden. Under such obvious endurance problems mentioned above, Xiaopeng's overseas sales may face challenges.

The scale dilemma of the "Xiaopengs"

"As an international car company, Xiaopeng pays attention to global development opportunities, and will balance domestic and foreign deliveries in the future, 50% sold abroad and 50% domestic, of course, this is a long-term goal in a few years." For going to sea, Gu Hongdi, vice chairman and president of Xiaopeng, once said so.

On March 11, Xiaopeng P5 officially opened reservations in Denmark, the Netherlands, Norway and Sweden in Europe, while the first Xiaopeng Automobile brand direct experience store in the Netherlands opened. Like other new car-making forces such as Weilai and Ideal, Xiaopeng has also adopted a new retail model of "direct operation + authorization". But whether this model can really leverage the Nordic market remains to be tested.

"'Authorization' means that car companies cooperate with local dealers in Europe, car companies and dealers share the risk, car companies are responsible for technical training, after-sales service and parts supply, dealers are responsible for operation, if sales are not good, both sides will suffer losses; 'direct operation' means that car companies directly operate, invest and manage stores, if sales are not good, car companies will be solely responsible, the risk is greater." Zhang Xiang believes that direct operation is more suitable for well-known car companies, and domestic new energy vehicle companies should do what they can.

At present, China's new energy vehicle brands have successively entered the European market, including pure electric and plug-in hybrid two-wheel drive represented by BYD to consolidate their own brands, traditional car companies represented by SAIC Group and GUANGZHOU AUTOMOBILE Group, and new car-making forces represented by "Wei Xiaoli".

Judging from the data, the achievements of traditional car companies going to sea are more eye-catching than those of new car-making forces. According to the operation data of the automotive industry in February this year, the export of new energy vehicles in February was 45,300, Tesla China exported 33,315, SAIC passenger cars exported 4,325 new energy vehicles, Dongfeng EasyJet exported 4,536 vehicles, Dongfeng EGemin exported 1,145 vehicles, BYD 804 vehicles, Geely Automobile 588 vehicles, SAIC Maxus 240 vehicles. Other car companies' new energy vehicles are mainly based on the domestic market.

The road to the sea of the new car-making forces is quite bumpy. Taking Aiways Automobile as an example, although its employees claim to be "mainly exported abroad", in fact, its export of new energy vehicles in 2021 is only 1676. Since the first shipments were exported to France in May 2020, the cumulative export volume has only been 2,783 units.

And Xiaopeng Automobile, which is mainly based on the domestic market, naturally cannot escape the sales challenge.

Regarding the sales challenge, the domestic new energy vehicle brands represented by Xiaopeng Automobile have invariably given a response of "not setting sales targets, layout first". This reflects the current common problem of domestic new energy vehicles - the dilemma of scale.

In this regard, Zhang Xiang said: "In the past, like Volkswagen and Toyota exports, their sales in China were good, almost all of them had a sales base in China, and then exported." Our current new energy vehicle companies generally have relatively low sales in China, not exceeding 100,000 vehicles. In this case, the cost of exporting is actually very high. Some analysts have calculated, "When sales reach 100,000 vehicles, new energy vehicle companies can basically break even." ”

In Zhang Xiang's view, "Compared with Tesla, Toyota, Volkswagen and other car companies directly investing in overseas factories, at present, China's new energy vehicle companies basically set up factories in China and then export their products overseas, which belongs to the relatively primary 'going to sea' stage." "The cost of transportation is a big expense, which is one of the reasons that affect the realization of large-scale benefits of new energy vehicle companies."

In view of the dilemma of "going to sea" in the primary stage, Zhang Xiang gave a suggestion: China's new energy vehicle companies should make full use of their strengths and avoid weaknesses, actively exert their own advantages, and form competitiveness in subdivisions such as automatic driving and power exchange technology to transform into economic benefits.