Summary: In the face of the complicated international situation and market competition environment, especially when the "showdown" of the "Inflation Reduction Act" is held on the other side of the ocean, China's new energy vehicle companies are bound to receive more attention and care.
At the beginning of the new year, Tesla fired the first shot of "sales rather than profit", Xiaopeng and Qianjie domestic new energy vehicle companies were forced to follow up as soon as possible, and after the Lunar New Year, almost all Chinese new energy vehicle companies came up with their own price reduction strategies.
This round of new involution soon expanded from the "new forces" to traditional car companies and the traditional fuel vehicle market, and some people even worry that the momentum of "changing lanes and overtaking" in the Chinese automotive industry will be affected.
Because, for new energy vehicles that need long-term heavy asset investment, the patience of capital is limited, the domestic "new forces" are still generally in the stage of "selling one and losing one", the ideal of the head and the financial report just released by NIO last year have a more serious loss, Tesla has a first-mover advantage, global market and scale effect, it is easy to use the Matthew effect to suppress the latecomers, endangering the capital chain of China's emerging automobile companies.
On the other hand, the double-edged sword of "price war" may also engulf Tesla itself, on the one hand, its product iteration and update pace becomes slower, on the other hand, competitors are tired of coping and unable to invest more resources in innovation and research and development, slowing down the pace of electrification and intelligence in the entire automotive industry.
Gross margin of 28.5%, how did Tesla do it?
Tesla has demonstrated its ability to define market prices as a pioneer of electric vehicles through price wars: financial report data shows that Tesla's annual gross profit margin reached 28.5% last year, which is not only much higher than the average level of the new energy vehicle industry, but even much higher than traditional car companies such as Volkswagen and Toyota. It is worth mentioning that this is still the level after a round of price cuts in October last year.
In other words, Tesla, which has a high profit per bike, still has more room to cut prices.
In the eyes of industry insiders, Tesla's cost strategy does have merit.
Tesla's price advantage first comes from the scale effect brought by its huge market ownership. In the past 2022, Tesla achieved a total of 1.31 million sales with only two products, ranking first in the pure electric vehicle market and second only to BYD among all new energy vehicle companies. This size makes it enough to dominate the bargaining with supply chain companies and evenly share the high cost of electric vehicles.
At the same time, as far as the product itself is concerned, whether it is an integrated die-cast body, a streamlined interior configuration, or a self-developed chip product to replace the upstream supply chain, Tesla can reduce the cost to the extreme while ensuring the basic product strength.
Tesla Shanghai Factory Image source: Visual China
Although smart driving is one of the first disruptive concepts advertised by the Tesla brand, the route it has chosen in this regard is also quite restrained in terms of hardware costs.
In terms of computing power, Tesla currently uses the HW3.0 platform and adopts self-developed autopilot chips, while the domestic head new forces are currently widely used by NVIDIA ORIN chip computing power of 256TOPS, but the total cost of application is 50% higher than Tesla's self-developed chips.
In terms of sensors, unlike the new domestic forces configuring lidar, Tesla's self-driving adopts a pure vision solution, using only 12 cameras, and the cost is almost only 1/10 of the 3 lidar schemes.
When the technology continues to iterate and the intelligent driving policy is gradually opened, Tesla's hardware disadvantages may gradually be exposed, but at this stage, the intelligent driving ability of automotive products is still at a low L2 level, and the consumer experience brought by the difference in configuration is not obvious, just like driving a donkey cart and a horse-drawn carriage, you can reach the destination.
In addition, Tesla started with its high-end sports car Roadster, so that consumers preconceived the concept of luxury car brands, so when the "luxury" brand with a price of more than 200,000 yuan appeared in front of the ordinary middle class, even if its configuration level was only equivalent to 100,000 yuan of domestic car companies, there were still a large number of consumers willing to pay for its brand premium.
On this basis, when Tesla, which has achieved a first-mover advantage, forms a scale effect to invest in standardized production processes and further reduce costs and suppress competitors, the Chinese auto industry, which has just gained momentum through electrification and intelligent "lane change and overtaking", is facing a big test.
Domestic "new forces": have not yet passed the stage of "selling one at a loss"
Not long ago, the leading new forces in China, Ideal and NIO, have successively released financial reports. The data shows that the annual sales of Li and NIO vehicles exceeded 120,000 units, and their annual revenue exceeded 45 billion yuan, both hitting new highs, however, their net losses also reached 2 billion yuan and 15 billion yuan, respectively, also reaching a historical high.
In a word, even the largest domestic new forces still have not got rid of the embarrassing situation of "selling one at a loss". Looking at the world, except for Tesla's gross profit margin approaching 30%, only BYD can achieve profitability among new energy vehicle companies.
NIO ET5 Image source: Visual China
For new forces, high R&D investment and marketing and operating expenses are the costs that must be borne in the process of growth. According to industry statistics, the investment in the development of only one model is about 1 billion yuan, not to mention the capital consumption of offline stores, charging and swapping facilities, and overseas business.
What's more, NIO and Ideal have not yet made the heaviest asset investment, that is, the construction of their own production base. It is worth mentioning that at the end of last year, NIO's foundry Jianghuai Automobile acquired the project assets related to construction in progress and equipment installation projects held by the former for more than 1.7 billion yuan. If this part of the assets is included in the loss, then NIO's financial data will only be more ugly.
Therefore, new domestic forces are relatively cautious in the face of heavy asset investment, and the use of traditional car companies for OEM has become a common phenomenon. However, there are still crab eaters who "favor Tiger Mountain" among the new forces.
If one of the "new forces" is learning from Tesla's "super factory", it is the former leader, WM.
Although it once had the highest total financing amount of domestic "new forces", WM's recent life has not been peaceful. In the past year, work stoppages, layoffs, salary cuts, and negative news have been lingering over WM's head for a long time.
"Almost half of the capital in the early stage was invested in automakers." WM revealed that most of its early financing was used to build two factories in Huanggang, Hubei Province and Wenzhou, Zhejiang Province, totaling 12 billion yuan.
WM Motor Image source: Visual China
Such planning decisions may be related to the fact that the company's early entrepreneurial team has an automotive engineering background.
In the view of WM, the early investment in heavy assets such as factories is consistent with the logic of JD.com's investment in building offline logistics in those years. Time finally verified the necessity of upfront investment: the accuracy and service quality of JD logistics are indeed higher than those of pure platforms, and feed back JD services in the future.
But objectively speaking, the global political and economic environment after 2018 is too unfriendly for asset-heavy investors like WM.
The recurrence of the epidemic in the past three years has objectively caused a greater impact on the nascent domestic new forces, not only factory construction and production have stagnated, but also enterprises are facing great difficulties in further financing and impact IPOs. Due to the long waiting time and the adjustment of market valuation expectations, and catching up with the two turmoil of Didi and Ant Group, WM had to take the initiative to withdraw the IPO applications of the Science and Technology Innovation Board and the Hong Kong Stock Exchange.
Some investors in the automobile industry told the observer network that its own advanced factory was originally an advantage for WM, but in the face of the supply chain and capital chain crisis brought about by the epidemic for three years, the company's development rhythm was completely disrupted, and the early heavy asset investment became a huge burden.
Of course, WM is not the only one who has encountered difficulties in the capital market. "Wei Xiaoli", which completed its listing before 2020, has also experienced a big plunge in market value in the past year. Another company, Zerorun, which went public in the second half of last year, has not been able to return to the issue price so far.
Capital operation is a long-distance race, and Chinese athletes need support
To break this impasse, young companies in particular need new financing to revitalize.
Time is the great enemy of all new forces, including "Wei Xiaoli" and Weima. From the perspective of the time of establishment, if Tesla is a young man who has just turned 20 years old, then China's new energy car companies are only children less than 10 years old. The earliest batch of new automakers in China was established no earlier than 2014.
In particular, Tesla's growth process has not been smooth.
In 2018, Tesla once faced "production capacity hell", empty orders and could not be delivered on schedule, sales growth encountered bottlenecks, annual losses of $1 billion, cash balance of less than $3 billion, and to expand production capacity, it means greater capital investment. Therefore, Tesla's market prospects are bearish by many institutions, such as Bloomberg has predicted that Tesla will burn out funds in 3-6 months to go bankrupt, and Moody's analysts believe that it needs to raise $2 billion to solve the dilemma.
At that time, even Musk himself admitted that he was "five years old a year" to solve the production capacity. ”
Tesla CEO Musk Image source: Visual China
However, the Chinese market has become Tesla's "white knight", after becoming China's first wholly-owned car company and landing a gigafactory in Shanghai, Tesla solved the production capacity problem at the junction of the company's fate, and production and sales grew by leaps and bounds, and turned a profit after more than 10 consecutive losses. In the investment market, Tesla has also made great progress, surpassing Toyota in one fell swoop to become the world's most valuable car company.
"Tesla is on the right track almost every step and ahead of Chinese companies." Chen Zhong summed up Tesla's successful experience. In addition, compared with the new domestic forces, Tesla, as a global car company, not only lays out one market in China, but also does not have a highly involuted competitive environment in other regional markets, so Tesla can successfully gain a foothold in it.
In a sense, Tesla's opportunity is difficult for Chinese companies to get.
Some analysts believe that compared with the situation of Huawei and other companies in the United States, Tesla's development in China shows China's openness and inclusiveness, and also promotes the evolution of the new energy vehicle industry. However, Tesla, which also enjoys preferential policies between China and the United States, has sacrificed price weapons when domestic car companies are struggling to cope with the supply chain problem of "lack of core and less lithium", resulting in continuous blood loss of local enterprises in the development stage. Industry insiders believe that when domestic car companies can no longer afford to shed blood, China's new energy vehicle industry is bound to suffer setbacks after subsidies decline.
Tesla's direct agitation of the market has further aggravated consumers' wait-and-see mentality and intensified the price war. For Tesla, this is just to return the luxuriously packaged "cabbage" to the cabbage price. And the domestic car companies that sell "meat" lack this layer of operation, and can only continue to earn money at losses.
Further, although Tesla can strengthen its market position with a "price war", it is not necessarily a good thing for the entire industry, including itself.
In the view of auto analyst Shu Chang, Tesla has cut prices twice for no more than 2 months, which actually shows that the early destocking effect is not good. Tesla's choice to cut prices in January this year, which has the Spring Festival holiday, is also a helpless move under market pressure, and orders continue to decline week after the price cut, and the actual effect has not ushered in an outbreak as expected.
In fact, despite years of hot sales on Model 3/Y, Tesla's existing models have entered the end of the traditional product cycle. Compared with 2021, Musk's company's research and development investment is still increasing last year, but the growth rate has slowed down. In addition, Tesla's perennial leading technology company color is gradually fading.
Tesla Model 3 Image source: Visual China
When the storm of the price war begins to spin, whether it is the follow-up of companies such as Xiaopeng and Qianjie, or BYD and Changan taking the initiative to lower the price of new products, or Dongfeng Group focusing on the launch of model subsidies... The companies involved will be unable to help themselves, and their normal profits and R&D investment will be swallowed up.
As a bulk consumer industry with heavy asset input, the development of new energy vehicle companies takes time. In the past 10 years, new energy vehicles have been more developed by policy guidance. If emerging companies can leverage mass production scale, they will naturally be able to narrow the gap with leading companies in terms of supply chain, and at the same time create different user experiences through ecosystems such as intelligent software and services.
In the face of the complicated international situation and market competition environment, especially when the "showdown" of the Inflation Reduction Act is held on the other side of the ocean, China's new energy vehicle companies are bound to receive more attention and care.