Text | Jiang Xiaohua
When the industry was rolled up last year, Brother Hua said that the so-called involution was actually a price war. However, no company generally has a great incentive to play the role of initiator of price wars.
From a decent industry perspective, everyone should also express their support for price wars in public. Therefore, it is acceptable for everyone to make Tesla the initiator of the price war this year.
Since January, most companies have stopped talking about price wars, and the trend of open fire is getting stronger and stronger, as far as I know, more than eighty percent of companies have either started a price war or are on the way to a meeting to discuss how to fight.
Price war has never been the wish of the industry, because the real pain is very great, but it has always been the only way to industrial restructuring and upgrading. Since the situation is inevitable, let's talk about ten problems in this car price war today.
First, why did this car price war happen.
The usual price war has several triggers, the shrinkage of the overall market, the monopoly of industry leaders or the desire to significantly increase share, the emergence of new entrants with strong financial strength, and the fatigue of the old system due to industrial upgrading.
These have played an important role in this car price war. In reality, the phased shrinkage of the Chinese market and the emergence of companies like Tesla that change the cost of the industrial system are the most fundamental reasons.
Of course, another reason for such a fierce price war is that most companies, mainly Chinese auto companies, misestimate consumer trends.
In the past few days, I have brushed a video, saying that I can't afford to love my country now. It is pointed out that whether it is an automobile or a 3C industry, those brands that were once based on low price and high quality have taken the high-price route, such as Xiaomi mobile phones.
However, the root and broad basis of the rise of national tide consumption is not that the original low-cost and cost-effective products have become high-priced and cost-effective, but still provide more cost-effective products on the basis of maintaining low prices. At the same time, capable enterprises develop new businesses with high-priced products.
The difference here is whether the basis of enterprise development is evolution based on low-cost and high-quality, or de-low-price. Many enterprises replace the actual needs of the market with the desire of enterprises to go upward, and determine their own strategies. This has also been followed by similar detours in other industries.
So far, the judgment of the so-called overall consumption upgrade of de-low-price is obviously false. This year's price war has become tragic, and this misjudgment is also one of the direct reasons.
Second, is Tesla the main target of this year's price war?
No. At Tesla Investor Day, Musk announced that Tesla's costs could be reduced by another 50%. This means that in terms of cost, new and old car companies cannot have equal advantages over Tesla for the time being. Therefore, in the main market of Tesla's products, it makes little sense to fight with Tesla purely on cost.
The opponents of the price war are the same type of companies other than Tesla in various regional markets at all levels. Of course, Tesla profoundly affects the direction and outcome of this year's price war.
Third, why do Chinese companies have the myth of the god of price war?
In industries such as color TVs and mobile phones that have had tragic price wars, the ultimate winners seem to be Chinese companies. Of course, this Chinese enterprise is a general reference, and if you look closely, the deaths and injuries of Chinese companies are also the most tragic. However, the general result is still that Chinese companies as a whole win in the consumer market.
There are several reasons for this.
First, the cost has advantages. This advantage comes from labor, supply chain efficiency, low profit tolerance of the entire industry chain, etc.; But these advantages have begun to become less strong in China today, and there is still great uncertainty in some aspects, such as chips and mineral resources.
Second, local operations, product application functions and services are grounded, the probability of wrong products is low, and the turn is fast.
Third, the distribution system has strong control and tolerance.
These three advantages are weaker than the home appliances of the 2000s and mobile phones in the 2010s. However, for enterprises with good management of the industrial chain in the early stage and good health of themselves, it is still an advantage that can fight a war.
Fourth, is there only one way to play price wars?
Not at all, according to different brands, different goals, different enterprise capabilities, there are many ways to play price wars.
For example, if the brand encounters the low-price challenge of the new brand, it can choose to increase the price appropriately, and then launch its own new brand to drag the challenger to death; This kind of main business does not fall but rises, which is not uncommon in industries with many levels of consumption.
In the automotive industry, some European brands have carried Henry Ford's attack in this way. And Tesla's current behavior, from the industrial point of view, the most appropriate comparison is the Ford Model T.
Of course, for state-owned enterprises in China, there is still a way to die for the government. This doesn't work in macro-industrial policy, but at the local government level, it often works. This also makes this year's auto price war more complicated, more unpredictable, and more harmful to the industry. China's industry associations can't count on it, and it is recommended that it must be managed.
Fifth, who can win this year's price war?
If you talk about shares, there may be a winner. However, the criterion for winning a price war is the increase in market share, which brings about the improvement of market pricing power and industrial resource concentration. That is, some enterprises with the strongest capital (utilization rate) resources use future profits to fight the current battle.
At least in the short term, it is not clear that after the emergence of Tesla and BYD, two giants with cost advantages in the industry, this asymmetric price war, whether the companies that are really taking profits or even the old capital to fight the price war can successfully rely on real money to cash out their respective profits in the future.
Sixth, who can avoid the price war?
Enterprises that have difficulties in completely avoiding but have brand and differentiation capabilities, enterprises with highly recognizable service products, enterprises with long boards in some key product technologies or configurations, independent brands with strong export capabilities, and international brands with strong market depth in the non-Chinese market will have relatively large room for maneuver.
The fundamental problem is still the comprehensive profitability and system cost control ability of enterprises in the global market, and the unique advantages of characteristic brands.
Seventh, what is the general strategy of foreign capital and joint ventures in price wars?
In many other industries, the conventional response of foreign capital and joint ventures to price wars is to reduce sales, and if costs are reduced below the parent company's affordability, then prefer to spit out market share first, reduce the size and maintain profits.
Follow-up wait for the dust of the Chinese market price war to settle, and then layout according to the situation. If the price war does not give rise to industrial upgrading, but only cleans up industrial participants, they will make a comeback; If a company is born that is difficult for them to reach in terms of cost and system, they usually rely on the underlying technology such as materials and intelligence to expand the B-end business and adjust the direction of enterprise development. These examples are familiar to every industry.
Due to the different industrial logic of automobiles and the 50:50 joint venture model pursued by Chinese automobiles for a long time, the relative flexibility of foreign investment in the Chinese market will be relatively low.
The status of the industry also determines that the participation of governments at all levels in the industry will be more obvious than that of other industries. But for example, legal companies have actually made a choice not to follow. German and American companies are relatively dependent on the Chinese market. The choice of foreign capital will also have an important impact on the trend of the price war.
Eighth, will this year's price war kill people?
Whether it is a time coincidence or not, many companies have changed their hands this year, and it can be seen with the naked eye that many will also change.
This shows from one side that the expectation that this year's very difficult to support is the consensus of the industry. At the same time, the root of the price war is to drive away weak industry participants, and the weakness here is not only about small enterprises with little capital, but more importantly, the old guns of the industry that are strong and dry. Therefore, if the result is that each of them lowers the price and holds their share, then this battle is a complete loss, and the shouting is not earned.
Therefore, without the intervention of external forces, the price war does not kill, at least until there is a large-scale redrawing of shares, and it is unlikely to stop.
So, if your intention to fight a price war is not aggressive, but passive; Not to kill the other party, but to save yourself, then I think such enterprises should act cautiously, your price war is definitely not as efficient as those who deliberately start the war.
Ninth, what are the non-market factors behind this year's price war?
Many, the most typical two. The first is the pressure on local governments to stabilize the economy. If a car company with an annual output of hundreds of thousands of levels falls in any place, the probability of this year's task being in vain is basically 100%;
The second is the disturbance of capital, which is not only the impact of obvious financing enterprises on the inherent rules of the market, but also the increase of the actions of many enterprises that are in the listing cycle or have strong capital intentions.
Tenth, what is the key to winning the price war?
In the case that everyone's level of physical and chemical resources is similar, there are actually two points, the first is that enterprises with high health and good internal consistency are more resistant and have the ability to take the initiative; The second is enterprises with clear thinking, clear understanding of the trend of the industry after the war, accurate grasp of changes in market demand, and enterprises that make fewer obvious mistakes.
Companies that can adapt to the times and strengthen their own advantages, rather than abandoning their advantages to embrace the new era before establishing new core capabilities, have a higher chance of surviving and winning.
Of course, there is also a kind of lying win-win enterprises, such as Chaohao, above a certain level of consumption, technological change, mainstream market share competition, the impact on such enterprises is relatively small. As long as they do not actively go to war.
Finally, all price wars will not be completely developed according to the plans of the participating enterprises, and the final price war will test internal strength, not external forces.
For example, an enterprise that is not originally advantageous may be able to reverse the situation and dominate the direction because it is in danger; Another example is a giant that should not fall or withdraw quickly, and accidentally falls; There are also the sudden rise and fall of companies with industrial transformation influences such as Tesla, and so on.
The higher the degree of uncertainty, which is determined by the characteristics of the price war itself, the greater the uncertainty, the greater the likelihood of a reshuffle rather than a stalemate. Automobile is not an industry where a few giants face off, not a one-on-one PK, there are many interventions in various factors, and capital cannot simply do whatever it wants, so this uncertainty will also lead the parties to the war to prefer moderation rather than necessarily doing their best.
Of course, after Xiaomi, a non-important enterprise participates, what will be like will be has to be observed.
As an industry editor, Brother Hua still has to sincerely wish the major car companies and small car companies to get rich in this year of price war and finish the fight as soon as possible.
The best result is that the overall economy and employment recovered as scheduled in the second quarter, the stock market was red every day, and closed shops were also opened.
Well, stop dreaming. The years of entrepreneurship are here again. Slow recovery, next year momentum is still hopeful, everyone hold on. According to the three years of preparation, but the turnaround may come in the third quarter.