Tesla worries about recession, BYD worries about style

Author| Wangzai Editor| Cheng Yi

WeChat public account: slightly larger reference (ID: hyzibenlun)

01

Tesla's global price cuts continue.

At the end of last year, in the US and European markets, the Model Y fell by $7,500 and 2,000 to 4,000 euros, respectively. At the beginning of the year, the price reduction spread more widely. While reducing prices in the Chinese market, Tesla has also opened large price reductions in Singapore, South Korea, Japan and Australia, ranging from $4,000 to $8,000.

Basically, Tesla cut the price of the Model 3 and Model Y by about 10% in each of these markets.

For price cuts, Musk has already talked about his concerns in online communication with Tesla fans and investors last year, he believes that the United States is in a recession, and the severity of the recession in 2023 will be similar to that of 2009. In anticipation of a recession, there are trade-offs between car prices and profit margins:

In order to keep the demand constant, you will have to lower the price of the car as a result, which is the case where you want to keep the demand constant. If you want to increase demand, you have to further reduce the price of cars.

I tend to let us grow as fast as possible without putting the company at risk. This means that during a recession, profit margins will be low or even negative.

Historically, recessions have led to a decline in sales. Referring to the sales data under the subprime mortgage crisis in the United States, in 2007, the number of cars sold in the United States was 16.5 million, which fell to 13.1 million in 2008 and further fell to 10.4 million in 2009. From '07 to '09, U.S. car sales fell 36 percent.

From the perspective of the global market, the situation is not optimistic. Since 2017, when global car sales peaked, they have been declining. In 2020, due to the impact of the epidemic, annual sales fell to 78,774,300 units, and in 2021, the market recovered and increased by 4.96% y/y to 82,684,800 units. In 2022, the situation is worse than in the previous two years. According to German media reports, the total global car sales in 2022 will be 71.8 million units, returning to the level of 2009.

Although, starting in the fourth quarter of 2020, Tesla's earnings report no longer provides specific short-term performance guidance, instead provides long-term guidance of "average 50% annualized delivery growth over many years" in order to "allow the team to focus on achieving the company's long-term goals." However, it is the most specific and intuitive feeling of Tesla's long-term goals from the outside world that is still the numbers. 50% annual growth, and 20 million units sold worldwide by 2030.

Judging from the way Tesla cuts the volume of promotions to solve the lack of demand, it is clear that Musk's answer is to grow and give up a certain amount of profit.

Expectations of a shrinking global auto market are also affecting Tesla, whose shares fell nearly 70 percent last year, especially in the final quarter, when Tesla was unable to meet its annual target. Stock prices fell in a waterfall moment. Musk's personal wealth has also shrunk significantly.

A few days ago, the official website of Guinness World Records released a news that Musk, the CEO of Twitter and Tesla, has lost about $200 billion in assets since November 2021, officially breaking the world record for the most personal property losses in history. If the value of Musk's wealth is converted into yuan, it is about 1.37 trillion, which is about Hefei's GDP in 2022.

Musk's concern about recession is reflected in his emphasis on Tesla having cash in its hands, now $20 billion.

Musk has been criticizing the Fed's rate hikes lately, arguing that if the risk-free return rate is higher than the S&P, which is clearly volatile, then who would want to hold stocks? Moreover, for cars, the impact of this commodity usually purchased in the form of loans, the increase in interest rates, will bring users and increase the cost of buying a car.

02

China's new energy enterprises have caught up with the good times. In 2022, Chinese car sales once again surpassed those of the United States, and with an eight-digit gap.

Last year, China's car sales were 23.4 million units, ranking first in the world, accounting for 1/3 of the global total. Compared with the 13.8 million units sold in the U.S. in 2022, it will exceed 10 million units.

Moreover, the market penetration rate of new energy vehicles in China is still 30%. It is precisely because of the vast market that BYD won the first place in China's sales volume and became the world's first. In fact, it sells 3% of its total sales in other markets

There is still growth in the Chinese market. Wang Chuanfu said, "At present, half of the families in the mainland are still car-free families, and plug-in hybrid has realized short-distance electricity and long-distance oil consumption, so that the family's first car can be used for oil and electricity." ”

Guarding a market like a mountain of gold, Chinese car companies usually do not make money.

A few days ago, "emotional blogger" Ren Zeping named CATL, saying that it suppressed competitors, coerced car companies, and squeezed upstream and downstream profits.

Similarly, Zeng Qinghong, chairman of GAC Group, also said: the cost of power batteries accounts for 40%, 50%, 60% of new energy vehicles, and the price is rising, and the cost of batteries accounts for 60% of a car, so am I not working for CATL now? ”

Therefore, if you want to buy a new energy vehicle within 100,000, it depends on whether CATL agrees or not.

But not all car companies are like this.

Viecha, Tesla's head of investment operations, previously said at the Goldman Sachs Technology Conference that Tesla's production cost per car was $84,000 in 2017 and dropped to $36,000 in 2022. And with more than half of the cost decline, little from lower battery costs, instead Tesla benefited from better vehicle designs that make production as easy as possible, as well as new factory designs.

03

In 2012, Tesla delivered the world's first truly intelligent car, Model S, a 17-inch central control screen, a full LCD instrument cluster, and a software system version that controls them. Since then, electric vehicles have had a universal look – LCD center console and touch screen.

Compared with automatic driving, new energy vehicles have entered the era of touch screens. Screen to body ratio, gradually become one of the indicators of car luxury, Lantu chasing light has four screens, ideal L9 even has 5 screens of three-dimensional space interaction, depending on the situation, car companies are to create a five-dimensional space in a car less than 15 square meters of area.

The press conference of Chinese car companies mainly shows sincerity and hard power. Ideal L9,5 million or less best SUV. The core selling point is intelligent cockpit and intelligent driving, supported by a three-piece set of color TV, refrigerator and large sofa.

At the product launch that BYD looked up to, the first model, the U8, showed off its muscles - opening sideways, and then turning in a 360-degree circle in place. Wang Chuanfu said that the car also supports floating mode, which can drive and steer in water without the wheels touching the ground, building an "amphibious land".

With the determination to build tanks, BYD dreams of standing at the same price as Mercedes-Benz Big G and Land Rover. But how many people will buy, lack of sales that no one cares about, that can not be called a new product release, can only be regarded as publicity. Just like many companies are passionate about overseas markets, but they can only maintain their original intention by not looking at sales. NIO founder Li Bin said the truth, Chinese enterprises go overseas do not want to conquer, want to serve.

The Model 3, which makes Tesla truly a "car company", has been released for 6 years. Compared with Wei Xiaoli's pace of releasing new products, it is too slow, especially Xiaopeng, which is so rich that it is worried that it is not enough models.

The pace of Tesla's new product launches is slow, and it is not idle. From solving the cost problem, solving the capacity problem, to solving the demand problem now.

In the early years, the problem of battery production capacity was solved first. Tesla and Sony have partnered to build a factory in the United States to produce batteries, and are also expanding their suppliers, from CATL to LG to BYD.

In 2020, a battery day was held, the 4680 battery was launched, and the ambitious goal of combining electrochemistry, production optimization, and vehicle engineering to improve the follow-up flight by 54%.

It also includes the purification of lithium. Musk believes that the key link in the supply of lithium batteries is not mining, but refining. Opposite Tesla's Texas Gigafactory, a cathode refining plant was built for nickel-based cathodes. This project usually takes 7 years to see results, but Musk gave it two years. Of course, his timeline is for reference only.

In 2017 and 2018, he was busy expanding production capacity and successively building factories in Dezhou, Shanghai and Berlin. Tesla's Berlin plant has a weekly production capacity of 3,000 Model Y. The weekly production capacity of the Shanghai and California plants will reach 2,000 units. Tesla's annual production capacity exceeded 2 million units. Not to mention the fact that a new plant is being built, rumored to be in Corpus Christi, southeastern Texas, near the Gulf of Mexico, with a population of 320,000.

Unlike the new car-making forces that use what products are used in the market, Tesla will choose according to its own goals. Domestic car companies like NVIDIA chips, Musk is very disgusted, diss NVIDIA's chips are large and energy-consuming, after terminating cooperation in 2019, self-developed chip D1.

The "abandoned" NVIDIA embarked on the road of no return of "becoming bigger and stronger". In 2020, NVIDIA released the GPU NVIDIA A100, and Huang Jenxun posted a video of himself taking out the graphics card from the oven the day before the conference to promote the world's largest chip. By last year's NVIDIA A1000, it had developed into a graphics card so large that it couldn't fit in an oven.

Tesla has released five models, collecting Apple's three treasures: terminals, systems, and chips. Although its system ecology is much thinner than Apple's iOS. But the manufacturing capacity is also incomparable to Apple. After all, Apple's production is OEM.

04

Tesla, which doesn't want to frame itself in the category of "cars", always wants to show its manufacturing prowess. Musk is enthusiastic and recommends his factory to the outside world.

Last March, Tesla's Berlin factory opened, and at the scene of a ceremony rich in sci-fi elements, Musk danced awkwardly and passionately praised the German chancellor: calling the Berlin factory a jewel in the region, Germany, Europe and the world.

Tesla's factory is a joint factory with a larger and longer model, the roof is covered with solar panels, compared with the S-shaped workshop production line of the traditional factory, Tesla reduces the waste of resources formed by longer corridors and buffer zones, making the production area closer and the process more direct.

Using integrated die-casting technology in the manufacturing process, the manufacturing time of Model Y has been shortened from 1-2 hours to less than 2 minutes, the floor space has been saved by 30%, and the production workers have been reduced by more than 200. Tesla says this could save the Model Y about 20 percent in manufacturing costs.

The integrated die-casting technology is not Tesla's original, but Musk solved the problem of overheating during the die-casting process and causing material deformation by changing the aluminum alloy formula. Musk poached Charles Kuyman from Apple to set up an integrated aluminum alloy body for Mac computers. NIO, Ideal, Xpeng and even Volkswagen have also successively adopted integrated die-casting technology, and after Tesla announced the price reduction, A-shares even briefly had a hot concept of integrated die-casting.

Musk is a little smooth with the factory's production process, and in an interview with Silicon Valley car owners, he mentioned that Tesla will discuss each part and what is the use of leaving it in the body. They delete parts that aren't useful. Like the Model 3, the minimalist looks like a rough car. Simplicity means cost compression.

Tesla car manufacturing strictly considers the cost, the new forces of car manufacturing at the new car conference, or willing to mention how much lidar is used, Musk does not advocate the use of lidar, he believes that it does not meet the needs of machine vision, and the use of millimeter wave radar, the cost is lower. The merchant is full of attributes.

Domestic brands are still stuck in the arms race of performance parameters, Tesla is already selling solutions, it wants the world to quickly enter the clean energy era of solutions. At least, that's what Musk packaged it to look like.

On Tesla Artificial Intelligence Day 2022, Musk praised a robot - Optimus Prime. Musk sees it as another product of Tesla, a robot that helps manufacturers alleviate manpower shortages and increase production and sales. Musk believes that the Optimus Pillar robot, which may cost less than $20,000, has unfathomable market potential.

New energy vehicles to the half-market, from car manufacturing, mass production to cost control, bicycle production costs, become the most important indicators that need to be monitored in the future, it determines how many cars each company can produce in the future, and how large the scale can develop. Losses cannot support robust enterprises.

Because Musk is full of remarks about running rockets, Tesla has always had a high degree of attention. Tesla's one-year marketing expenses are 180 million yuan, BYD's sales expenses in the first three quarters of 2022 are 7 billion yuan, NIO's half-year marketing expenses are 2.7 billion yuan, and the marketing expenses of Xiaopeng and Ideal are 1.75 billion yuan 1.32 billion yuan.

After Tesla and Twitter "merged", the advantage was more obvious. User votes can oust Musk from the CEO, but no one can take Musk off Twitter. He can use his account to promote Tesla for a hundred years for free.

In the past few years, the new forces of car manufacturing have focused a lot of energy on service, brand premium, and user demand, but ignore that from Ford, Toyota, Volkswagen, each generation of enterprises standing in the C position of the industry, has its own manufacturing advantages, Ford is assembly line production, Toyota is lean management, Volkswagen is platform, modular, are from the manufacturing process to improve management, improve efficiency.

Once He Xiaopeng's sentence detonated the media circle, "The core of intelligent cars is in operation, not manufacturing."

I really want to use Liu Haocun's tone to ask rhetorically, why doesn't manufacturing count?