The price war of new energy vehicle companies is endless?

Written by | ZHANG Yu

Edit | Yang Bocheng

Title map | IC Photo

The "price reduction tide" of new energy vehicles is still continuing, and since Tesla has cut prices four times in a row since October 2022, the smell of gunpowder in the new energy automobile industry has become stronger.

According to Tesla China's official website, the price of all its domestic models has been reduced, of which the starting price of Model 3 has dropped to 229,900 yuan, and the starting price of Model Y has dropped to 259,900 yuan, the lowest price in history. This move also led to Tesla's sales of 66,000 units, up 10.3% year-on-year and 18.3% month-on-month.

Up to now, many new energy vehicle companies such as AITO, Xpeng, GAC Aion, Nezha Automobile, Feifan Auto, Extreme Krypton, Leap Auto, NIO and so on have followed up and adopted various forms of price reduction plans, such as financial subsidies, deposit inflation, limited-time free optional exterior decoration, optional discounts, insurance subsidies, delivery incentives, etc.

The reasons why Tesla dares to reduce prices are obvious: on the one hand, Tesla has formed a scale effect with its core technology and brand influence, the gross profit margin of the bicycle is strong, and the profit margin is broad enough; On the other hand, Tesla has an extremely complete supply chain system and a super factory in the Chinese market, which can further reduce costs.

However, after Tesla sounded the clarion call for a price war, the pressure on new energy vehicle companies increased sharply. As an industry giant, Tesla's price reduction will directly affect the survival space of new energy vehicle companies.

At present, with the official withdrawal of "national supplements" from the historical stage, the competition rules of new energy vehicles are constantly changing, but the continuous price reduction tide is not only not profitable for car companies, but will continue to increase costs, which will further intensify the competition and reshuffle of the new energy vehicle market. For domestic new energy vehicle companies, the price war can only last for a while, not permanently.

01.

New energy car companies that have had to cut prices

After Tesla cut prices, a huge problem was thrown in front of many new energy vehicle companies: follow up or not follow? If you follow Tesla to reduce prices, the cost pressure will increase sharply; If the price is not reduced, it will be snatched away by Tesla and face the risk of losing the original market.

However, price reduction has become the general trend, AITO Inquiry then announced to reduce the starting price of its two models M5 and Question M7, the price reduction range is 28,800-30,000 yuan, AITO Question also became the first new energy vehicle company to follow Tesla's price reduction.

Soon, Xpeng Motors also announced that it would adjust the starting price of its G3i, P7 and P5 models, with a price reduction of 20,000-36,000 yuan; after the official launch of the ideal L7, the starting price was reduced by 20,000 yuan with only minor changes.

In addition to directly reducing the starting price, many new energy vehicle companies choose fancy price reductions to cope with the impact of the "price reduction tide", such as GAC AION launched a time-limited delivery incentive, the purchase of specific series models can enjoy a discount of 5,000 yuan / vehicle, in addition, most models of the AION series can also enjoy a 3-year 0 interest time-limited financial subsidy; Leapmotor has launched a limited-time subsidy policy for C01 models, and the deposit of 5,000 yuan can be used up to 30,000 yuan, including 10,000 yuan cash discount, up to 10,000 yuan financial discount, and 5,000 yuan price reduction for comfortable all-equipped optional package; Zeekr Motors has also launched a limited-time preferential policy, covering all models of Zeekr 001 currently on sale, with a maximum discount of 17,200 yuan.

Compared with passive price reduction, some new energy vehicle companies choose to actively optimize the product structure, using cost reduction and efficiency increase and brand upward to face this war without gunsmoke, such as Nezha Automobile not only tailored time-limited user rights for Nezha S series models in terms of sales policy, but also will launch a new model Nezha E for product structure optimization and adjustment.

However, whether it is passive price reduction or active attack, the situation of new energy vehicle companies is not optimistic.

First of all, since new energy vehicles licensed after December 31, 2022 no longer enjoy state subsidies, some consumers locked orders in November and December 2022 to enjoy the final state subsidies, resulting in some sales in 2023 being overdrawn in advance, it is not difficult to foresee that the competition in the new energy automobile industry will become more and more fierce. Even NIO founder Li Bin publicly stated that the domestic new energy vehicle market will be under certain pressure in the first half of 2023, "on the one hand, because of the early release of consumption, on the other hand, consumer confidence also needs time to repair." ”

Second, losses are a common problem faced by new energy vehicle companies, and price cuts will make their situation more difficult.

According to the financial report, Xpeng Motors' net loss in the third quarter of 2022 was 2.38 billion yuan, which was the worst quarter since Xpeng Motors' listing; Li Auto's net loss in the third quarter of 2022 was 1.646 billion yuan, which was also the highest loss in a single quarter in its history; and NIO's net loss in the third quarter of 2022 was as high as 4.1108 billion yuan. In contrast, Tesla's net profit in 2022 was $12.6 billion, more than doubling year-on-year, and the gap is very obvious.

A person from the new energy automobile industry told DoNews, "Tesla still has a large room for price reduction, because it is one of the few new energy vehicle companies that can achieve stable profitability, and the high gross profit margin has also given Tesla enough confidence to reduce prices." ”

Obviously, in the case of Tesla's price war and the withdrawal of "national subsidies" from the historical stage, 2023 will be the most challenging year for new energy vehicle companies.

02.

A new knockout round has arrived

Price reduction may not be a life-saving medicine, but for some new energy vehicle companies with relatively weak brand influence, it is a last resort to alleviate the current competitive pressure.

Behind the intensification of the "price reduction tide", the growth rate of the new energy automobile industry has gradually slowed down.

After the sales of new energy vehicles exceeded one million units for the first time in 2018, the annual sales volume since then can remain above one million units, and even ushered in a leap forward of 157.57% year-on-year in 2021, and by 2022, the growth rate of the new energy vehicle market has fallen to 93.4%, for the situation in 2023, the China Association of Automobile Manufacturers expects that the growth rate of new energy vehicle sales will further decline, and the growth rate is expected to be only 35%.

The situation is indeed not optimistic, and the data of the passenger association also shows that in January 2023, the wholesale sales of new energy passenger vehicles reached 389,000 units, down 7.3% year-on-year and 48.2% month-on-month. Retail sales of new energy passenger vehicles reached 332,000 units, down 6.3% y/y and 48.3% m/m.

Specifically, according to the January delivery data of various new energy vehicle companies, in addition to Tesla achieving year-on-year and month-on-month growth, "Wei Xiaoli", GAC Aion, Leap Auto, etc. have all declined to varying degrees, although BYD's year-on-year growth rate reached 62.44%, but it is still a big regression compared with the year-on-year growth rate of more than 2 times in 2022. Obviously, Tesla has seized a lot of market share that originally belonged to new energy vehicle companies.

Some insiders believe that starting a price war without forming a scale effect will lead to the continuous expansion of losses of new energy vehicle companies, and as the price war intensifies, the competition in the new energy automobile industry continues to intensify, and the development road of new energy vehicle companies will be full of difficulties and obstacles.

"It's probably not entirely bad for the industry to start a price war." The above-mentioned new energy automobile industry personnel said, "behind the price war is actually the competition of comprehensive strength such as core technology, scale, supply chain and cost control, and the fundamental reason for being out in the price war is that the comprehensive strength is not as good as that of competitors, which will force new energy vehicle companies to develop comprehensively, and continue to improve in technology and services, and truly powerful new energy vehicle companies will smoothly enter a new stage of development." ”

In the final analysis, if new energy vehicle companies want to survive the price war and achieve corner overtaking, they also need to come up with sufficiently competitive products or core technologies and continuously strengthen supply chain cost control so as not to be eliminated. There is no suspense that although the price war will not last forever, in the increasingly fierce market competition, a new round of qualifying and elimination has been staged.

03.

How should domestic new energy vehicle companies respond?

Market growth has slowed down, price wars have begun, and "national subsidies" have officially retreated, but in fact, new energy vehicles are not only facing turmoil, but also huge opportunities.

Zhang Yongwei, vice chairman and secretary general of the China Electric Vehicle 100 Association, believes that China's new energy vehicle market will accelerate the sinking to second- and third-tier cities, and the product price range will change from "dumbbell type" to "spindle type". In 2023, the demand for cars in second- and third-tier cities and even urban and rural markets will continue to be released, becoming an important incremental market.

According to data released by the China Association of Automobile Manufacturers, in the first half of 2022, the production and sales of new energy vehicles increased by 1.2 times year-on-year, and the market share reached 21.6%. Among them, with the introduction of policies such as sending cars to the countryside, the sales of new energy vehicles in sinking markets such as third- and fourth-tier cities and their counties and rural areas have shown a hot trend, and the penetration rate has increased from 11.2% in 2021 to 20.3%, a year-on-year increase of nearly 100%.

According to statistics from Essence Securities Research Center, in February 2022, first-tier cities, second-tier cities, third-tier cities, and fourth-tier cities and below accounted for 14.3%, 49.4%, 20.6% and 15.6% of the new energy passenger vehicle insurance, respectively. Among them, the proportion of insurance in first-tier cities continued to decline, while the proportion of insurance in third- and fourth-tier cities and below continued to increase since 2019.

At the same time, relevant departments and local governments are also actively promoting the sinking market to release consumption potential at the policy level.

On the one hand, the Ministry of Industry and Information Technology and other departments jointly carried out the activities of new energy vehicles to the countryside. According to data from the China Association of Automobile Manufacturers, in 2021, a total of 1.068 million new energy vehicles will be completed in rural areas, a year-on-year increase of 169.2%, which is about 10% higher than the overall growth rate of the new energy vehicle market and contributes nearly 30%. On the other hand, more than 20 provinces and cities across the country have successively introduced local subsidy policies to promote the consumption of new energy vehicles through cash subsidies, consumption coupons, lotteries and other means.

With the popularization of energy replenishment infrastructure and the construction of after-sales networks, the consumption potential of the sinking market will gradually be stimulated and released, and the sinking market will become one of the new incremental markets, and it will also become a must for new energy vehicle companies. At this stage, the early dividends of the new energy automobile industry have basically disappeared, and new energy vehicle companies have ushered in the time when they really need to fight bayonets.