Fight a price war with BYD, and "Wei Xiaoli" is dead

Produced | Tiger Sniff Car Group

Author | Wang Xiaoyu

Edit | attentive

Head figure | Visual China

Unlike picking up bargains in Pinduoduo, Chinese consumers are particularly cautious about the "trampling price reduction" in the car market.

According to the latest data from the Passenger Association of China, from March 1 to 12, the national passenger car market retailed 414,000 units, down 17% year-on-year and 11% month-on-month. Since the beginning of this year, the cumulative retail sales in the country have reached 3.094 million units, down 19% from last year. Obviously, the local wait-and-see of regional consumers is becoming a national overall wait-and-see. Everyone is waiting to buy a car, and no one wants to become a "big wrong" who "buys and reduces prices".

But under the big market, there are some special cases. For example, BYD launched the BYD Han EV Champion Edition and Tang DM-i Champion Edition on March 16, playing the banner of "the same price for oil and electricity", firmly occupying the price range of 209,800 to 299,800. On the surface, it is a punch to beat Japanese B-class cars, but in fact, it is trying to control the pricing power of the pure electric market - "below 300,000, I BYD will accept all orders".

No, the new models of BYD Han and Tang generated 8,196 orders in just four hours on the day of launch - more than double the amount delivered by Huawei in February this year. This posture is like: "Either you will be killed by everyone here, or everyone in this room will be killed." ”

Indeed, one of the groups most vulnerable to "punching to death" is those new car-making forces who are not yet "ten years old". Judging from the latest 2022 financial reports released by the three leading new forces NIO, Li Auto and Xpeng Motors, the book data such as huge losses and small profits have shown that they will be involved in the price war between BYD and Tesla and will definitely die.

How to survive in the rain of bullets has become a question that "Wei Xiaoli" needs to answer this year.

After a huge loss, a price cut is tantamount to jumping off a cliff

The three leading new forces are all in a state of huge losses in 2022.

In 2022, NIO delivered 122,500 units, with a net loss of 14.437 billion yuan, the highest loss in the past three years; Li Auto delivered 133,200 units, with a net loss of 2.03 billion yuan, compared with a loss of 326 million yuan in 2021, an increase of more than five times; Xpeng Motors delivered 120,700 units, with a net loss of 9.14 billion yuan for the whole year, compared with a loss of 4.86 billion yuan in 2021, and the loss amount was further expanded.

There is no doubt that "Wei Xiaoli" is "selling one at a loss". In terms of bicycle profit, NIO was -118,900 yuan, ideal was -15,200 yuan, and Xpeng was -75,700 yuan. In terms of profit margin, NIO is -29.55%, Ideal is -4.48%, and Xpeng is -34.02%.

Let's look at the gross profit margin of the car and the average price of a single vehicle. In 2022, NIO's automobile sales revenue will be 45.5066 billion yuan, the gross profit margin of automobiles will be 13.7%, and the average price of a bicycle will be 373,000 yuan; while Li Auto's will be 44.11 billion yuan in the same period, with a gross profit margin of 19.1% and an average price of 331,000 yuan; Xpeng Motors will be 24.84 billion yuan, with a gross profit margin of 9.4% and an average price of 206,000 yuan.

To put it bluntly, with the current financial situation of the three "Wei Xiaoli", they can't afford to reduce prices at all.

Here is a good comparison of Tesla's earnings report. In 2022, Tesla's net profit was $12.6 billion, deliveries were 1.31 million units, and profit per vehicle was 66,000 yuan, with a profit margin of 15.4%. It can be seen that Tesla has room for concessions, and can still make a lot of money after the reduction.

In addition, although BYD, the largest sales of new energy vehicles, has not yet released its 2022 financial report, its profit from a single vehicle should not be too low. According to its 2022 annual performance forecast, sales volume of 1.8635 million vehicles, operating income exceeded 420 billion yuan, the net profit attributable to the parent was 16 billion to 17 billion yuan, and the profit of bicycles in the first three quarters reached 2,400 yuan, 7,000 yuan and 9,500 yuan respectively - price reduction, nothing more than small profits and more sales.

Unlike traditional car companies, new automakers still need external blood transfusions to maintain their survival and development. On the one hand, R&D expenses are burning money, brand building cannot be stopped, and on the other hand, sales have not seen explosive growth, which is difficult to form a scale effect. Therefore, sustained self-hematopoiesis cannot be achieved in the short term. Blindly involved in a price war will only exacerbate risks and may seriously lead to the rupture of the capital chain.

Caught in a price war, it's time to save yourself

"We do not have the idea of reducing allocations under the NIO brand, and the price strategy of NIO brand models is not a low-price strategy." Li Bin, founder and CEO of NIO, made it clear at the earnings call: no reduction, no price reduction.

He Xiaopeng, CEO of Xpeng Motors, also talked about the price war during the earnings call. "I think 15 years ago, 'There is no product that cannot be sold, only the price that cannot be sold,' but today's perspective is becoming more and more accurate. ”

Li Xiang, founder and CEO of Ideal Auto, answered more tactfully, saying: "Reducing prices may not necessarily help you increase sales, but reducing prices can hit other companies, because after the price reduction, everyone will watch the rival companies will definitely reduce prices." ”

The mouth is hard, but the body is honest.

A person from the strategic planning department of an OEM told Tiger Sniff that "they (Wei Xiaoli) are not the logic of direct price reduction and direct promotion, but take part of the existing cars or inventory cars to participate in the price reduction." This will not disturb the market price, and part of the volume will rise faster. This is actually participating in the price war, but not participating in the surface, and not all products directly participate. ”

In February this year, it was reported that many NIO models had reduced their prices by 100,000 yuan. Later, Qin Lihong, co-founder and president of NIO, responded, "At present, ES8, ES6 and EC6 still have some exhibition cars and existing cars, and there are some additional preferential policies according to the age and status of the vehicle, but there is no 'full price reduction' that the outside world over-interprets." "But even the ET5, which is now hot, has a car and a giveaway.

A similar situation happened with Ideal Car, and although the company removed Ideal ONE from the official app, the car can still be bought in first-tier stores. The ideal ONE, which was originally priced at 349,800, can now be driven home for only 279,800 new cars. This is why, in February this year, there were 1,129 Li ONE on the risk, which was higher than the entire brand delivery volume of Lantu Auto that month.

The situation is slightly different for Xpeng. After the facelifted Xpeng P7i was launched, the old P7 after the official drop is still on sale, and the car will be picked up in 3 weeks at the earliest. Compared with the price range of 249,900 yuan to 339,900 yuan of the new P7i model, the old P7 covers the lower range of 209,900-249,900 yuan. Relying on the current stage of "new and old sales", it still ensures that Xpeng P7 covers a lower price range.

"Wei Xiaoli" has inevitably been involved in the price war, at least one leg is trapped.

If you want to get out of the quagmire of price wars, you must essentially get rid of the pattern of low-price competition. Looking at the entire industry, the main battlefield of the price war is the market segment below 300,000 yuan. In the definition of the passenger association, a model with a starting price of more than 300,000 yuan is a high-end model. Because in the high-end market, users are relatively less sensitive to price, but pay more attention to the brand and the product itself.

The price can be cut, but the flagpole cannot be poured

For "Wei Xiaoli", a more rational approach is to establish a brand in a market of more than 300,000 and eat a share in a market below 300,000. The current actions of NIO and Ideal have proved this, but Xiaopeng is still trying to learn from the two "big brothers".

Li Xiang once said: "The market of 200,000-300,000 is relatively difficult for us (ideal cars), and we need to have a stronger scale effect before entering the price range of 200,000-300,000." "In his opinion, from the current range of 300,000-500,000 yuan, after sinking to the range of 200,000 yuan, it will not reduce any product force, but the size has been reduced." Our core technology and platform advantages will continue to continue. ”

To put it bluntly, it is to make a set of technologies and products highly replicable through vertical integration. High-priced models bear extremely high R&D costs and low gross profits per vehicle, but with the large-scale reuse of configurations, better product capabilities can be achieved on low-priced models. Once sales grow rapidly, they can dilute costs and improve profit margins.

Like NIO in the second generation platform, flagship products NIO ET7 and ES8 are the existence of the spire. After they established the market image, they relied on ET5, ES6, ET5 hunting edition and other products to achieve a leap in overall sales.

ET5 Hunting Edition

Similarly, the ideal L9 is the existence of the flagship model of the ideal car, and its market share and user reputation have directly brought Li Xiang's success in this set of "new nesting doll-style cars". He didn't even shy away from saying, "These cars are all the same, but the shells are different." ”

Unlike NIO and ideal maturity, Xiaopeng is slightly "green" in product planning. The first car G3 is positioned as a compact SUV, the second P7 kills the B-class sedan, the third car P5 returns to the A-class sedan, and the fourth car G9 suddenly enters the medium and large SUV.

He Xiaopeng also said frankly in this earnings call, "President Feng Ying (former president of Great Wall Motor and new president of Xpeng Motors, Wang Fengying) has been here for about a month and a half, and the biggest criticism of the company and my people is that she thinks our plan, and secondly, we have not done a good enough job in marketing, and I have seen a lot of problems." ”

At present, it seems that the next model that Xpeng will launch soon is the G6 positioned in the price range of 200,000-300,000. This will be followed by the launch of a new all-electric seven-seat MPV in the second half of the year. An insider close to Xpeng Motors told Tiger Sniff that this MPV model is internally code-named H93, which is built on the H platform, which is completely different from the F platform of the G6 (internal code F30), and the price will be higher than 300,000 yuan.

Xpeng G6

After Wang Fengying joins, he may be able to help Xpeng Motors reorganize its product line, but time is really urgent. In contrast, Ideal and NIO have each run out "hundreds of meters away" in the matter of vertical integration.

Like Li Xiang, when talking about the layout of the pure electric market, he prioritized the things he mentioned: 800V platform, charging pile, power battery. For example, last year, Li Auto cooperated with Sanan Optoelectronics and invested in the construction of a power semiconductor R&D and production base in Suzhou, mainly to produce silicon carbide power modules required for the 800V platform. Another example is the 800V self-built supercharging that was previously exposed, with a rated power of 640KW and an output voltage of 200V-1000V. This parameter is most likely to exceed the current supercharging pile of Xpeng S4.

Different from Li Xiang's vertical integration, Li Bin is more about horizontal ecological layout. In the third quarter of 2022 earnings call, Li Bin said that in addition to the core business NIO brand, NIO expects to invest 3 billion to 4 billion yuan in sub-brands, batteries, chips, mobile phones and other related businesses next year, with an average of nearly 1 billion per quarter.

In the earnings call, He Xiaopeng only talked about some trends and directions on research and development. For example, he mentioned: "In the past, Xpeng's technology research and development mainly focused on performance and function, and in the future, our research and development capabilities will be more reflected in maintaining performance while significantly reducing costs." ”

From the perspective of the amount of R&D investment, Xiaopeng is in the worst position of the three. In 2022, NIO's annual R&D investment will reach about 10.8 billion yuan, firmly winning the title of "the most daring to spend money on R&D" among the new forces of car manufacturing. Li Auto changed the situation of only making money and not R&D in the previous two years, and invested 6.78 billion yuan as R&D expenses in 2022. Xpeng Motors' annual R&D expenditure was 5.21 billion yuan, only half that of NIO.

Write at the end

"The first half of the year will be crazy reshuffle, if the shuffle period does not do a good job of market share, it means that there is no scale effect in the later stage." Even if the cost is reduced, the marginal return will not be too high. A person from the strategic planning department of an OEM told Tiger Sniff that if you want to have a higher market share, then you can ensure that the brand effect is large enough when you shuffle the cards, and you can live better during the shuffle period, and it is also a multiplier effect on future sales growth.

According to the financial report, Li Auto expects to deliver 52,000 to 55,000 vehicles in the first quarter of 2023, NIO expects to deliver 31,000 to 33,000 vehicles in the first quarter, and Xpeng expects to deliver between 18,000 and 19,000 vehicles in the first quarter of this year. It can be seen that at this stage, both Ideal and NIO have begun to "harvest" the market, and Xiaopeng is still in a quagmire.

In fact, for Wei Xiaoli, for BYD and Tesla, it is good to keep "looking up" at this stage. Everyone should think about how to eat BBA's market share now.

After all, instead of comparing the gross profit margin with these two giants, it is better to "fool" German luxury fuel vehicle owners to buy new energy vehicles.