At present, the price war being staged in the car market is being staged in the open and in secret, Rao is Tesla, I am afraid it is difficult to "stop".
Image source: Tesla
At the beginning of May, Tesla reversed the previous price cut, and suddenly announced two official price increases, first the starting price of Model 3 and Model Y increased by 2,000 yuan, and then the price of all new Model S and new Model X models was raised by 19,000 yuan. However, the car market price war did not "extinguish" here.
The policy of stimulating the car market in many places is still continuing, and car companies have successively announced new price reduction information, recently Wuling Hongguang MINI claimed to be "the first shot of new energy to the countryside", up to 13,000 yuan, Nezha Automobile officially announced the launch of the 5th anniversary feedback activity, Nezha V limited to 10,000 units, the maximum discount of 10,000 yuan.
What is more noteworthy is that in addition to reducing the price of models on sale, many car companies have rolled up the price of new cars. Since the beginning of this year, the prices of many new cars on the market have been lower than expected, constantly refreshing the price "lower limit".
In February this year, BYD lowered the price of DM-i models to 100,000 yuan for the first time, and launched the 100,000-level "same price for oil and electricity" Qin PLUS DM-i 2023 champion version. In April, Ocean Network welcomed the new small electric vehicle Seagull with an entry-level market drop, with a pre-sale price of only 78,800 yuan to 95,800 yuan. In May, the BYD Han DM-i Champion Edition was launched, with a starting price of only 189,800 yuan, killing the entry price to less than 200,000.
Han DM-i Champion Edition; Image source: BYD
In addition to BYD, Extreme Krypton Automobile, which once said that it "does not make products below 200,000 yuan", launched the Extreme Krypton X, which has a starting price of only 189,800 yuan, and is involved in the "200,000 yuan market"; The Haval Thunder Dragon series has recently been officially launched, of which the starting price of only 159,800 yuan of the Thunder Dragon MAX is equipped with four-wheel drive as standard, and the four-wheel drive replaces the two-wheel drive.
Not only its own brand, but also a joint venture brand, the Buick E5 was officially launched in April, as a medium and large pure electric SUV, priced from only 200,000 yuan. Dongfeng Nissan super hybrid electric drive X-Jun recently launched, the new car launched a total of two models, the official guidance price of 189,900 yuan and 199,900 yuan, said to achieve "hybrid and fuel at the same price, four-wheel drive and two-wheel drive at the same price".
It seems that the price war in the car market has evolved into the pricing of new cars, and it is becoming more and more intense.
A more tragic price war is yet to come
Tesla has increased prices, but there is a high probability that they will not keep rising.
Since the beginning of the year, Tesla has adjusted its prices several times, first sharply cutting prices and then occasionally rebounding. But even so, it will not change the long-term trend of price reductions.
On the one hand, from the current profitability situation, Tesla still has room to reduce prices.
In the first quarter of this year, Tesla's gross margin was 19.3%, which was lower than expected, but still better than many domestic and foreign car brands, and the best performing BYD in China was only 17.8%. Therefore, even if Tesla's profit indicators fell in the first quarter of this year, its profit margins in the industry are still very amazing, which also gives Tesla more "pricing freedom".
Tesla, on the other hand, continues to reduce costs. Musk has said that if the cost is low enough, demand is not a problem, because for the vast majority of people, price is an important factor in limiting sales.
At this year's Tesla investor conference, Tesla revealed that the cost per vehicle of the Model 3 has already been reduced by 30% by 2022, but the "next-generation car platform" is expected to reduce the cost by another 50%, which means that the total cost of ownership of next-generation platform vehicles will also be lower than all of its current models.
At the recent shareholders' meeting, Musk revealed that in addition to Cybertruck, two new models based on Tesla's third-generation pure electric platform will also be the absolute main force of Tesla's sales in the future. According to the renderings released at the scene, the first new car seems to be the Model Q, which has already made waves in the industry.
Image source: Tesla Live screenshot
It is rumored that the price of Model Q may fluctuate between 150,000 and 200,000 yuan, and some say that the price is as low as 130,000 yuan. If this is the case, before the arrival of the model, it may be the "optimization" of Tesla's existing products, either to increase the configuration or to reduce the price, and after the arrival of the model, the price war in the car market will only become more intense.
If Tesla is the "initiator" of the price war in the car market, BYD has accelerated the process in its own way.
It is reported that the recently launched Han DM-i champion version is the sixth champion version model launched by BYD this year. The price of each champion model has decreased compared to the entry guide price of the previously sold model. Among them, the Seal Champion Edition listed in May, the guidance price even dropped by 2.3-40,000 yuan overall, and the Han DM-i Champion Edition was 28,000 yuan cheaper than the entry guidance price of the previous 2022 Han DM-i.
Not only that, BYD is also continuing to "reduce prices" in the name of "champion version". The news shows that Song PRO and Song PLUS will also launch the champion version next. "They seem to want all models to push the championship version, which is equivalent to the official drop of the whole series." Some insiders sighed with emotion.
Under such a situation, other car companies will naturally not stop, or dare not stop.
According to incomplete statistics from the Gasch Automotive Research Institute, in 2022, there will be a total of 84 car companies in China's passenger car market, 124 brands on sale, 817 models on sale, nearly 2,000 specific models, an overall planned production capacity of 52.14 million units, and an average capacity utilization rate of 45.7%, so the overall surplus of the industry and the intensification of competition in the terminal market are an inevitable trend. Coupled with insufficient effective demand, car companies will naturally roll the price, or the cost performance.
As mentioned earlier, the Thunder MAX relies on the new intelligent four-wheel drive electric hybrid technology Hi4 to enter 160,000. According to the plan, the subsequent models launched by the Havron sequence will be equipped with the new Hi4. Not only that, according to Li Ruifeng, chief growth officer of Great Wall Motor, Hi4 technology will be fully upgraded in the next few years, and by the end of 2024, all models of Great Wall Motor will be equipped with Hi4 technology as standard.
Independent brands are crazy "competition" in the price of new cars, more joint venture brands may also have to bite the bullet to join the "battle", Dongfeng Nissan X-Trail "low price" listed, Versailles C5X plus "1 yuan" full series upgrade, should be just the beginning.
Image source: Dongfeng Nissan
"Fancy" cost reduction and efficiency increase, the trend has come
Behind the price war is the cost reduction war. And when it comes to cost reduction, it seems difficult to avoid Tesla.
Tesla pays great attention to technology cost reduction. At this year's Tesla Investor Conference, among the seven ways to reduce costs, the core is technology cost reduction, such as through battery technology iteration (upgraded to 4680 and CTC chassis), Tesla bicycles have saved about 1-20,000 yuan, through integrated die-casting, bicycles have saved 2000-5000 yuan.
As mentioned earlier, by 2022, the cost per vehicle of the Model 3 has been reduced by 30%, and the "next-generation car platform" is expected to reduce the cost by another 50%.
Image source: Tesla
In terms of specific implementation, Tesla mentioned that it will redesign the controller for the next generation of vehicles and completely eliminate all crossover harnesses to reduce the complexity and cost of electronic devices. Recently, Musk further revealed that 100% of the controllers used in the new car of the next-generation platform are Tesla's self-developed, while the previous Model Y is only 61%, and the Cybertruck is 85%, and the new car controller will all be based on the 48V system, which will bring lower current and achieve cable savings.
In addition, the next-generation platform will use permanent magnet motors that do not require rare earth materials, and the cost of the drive unit will also be reduced by $1,000; In the assembly of the next generation of vehicles, Tesla will allow more people to assemble at the same time, reducing assembly costs by 50%.
In terms of cost reduction and efficiency increase, Ford is on par with Tesla. In February this year, in order to improve the profitability of the second-generation electric car, Ford CEO Jim Farley said that Ford plans to adopt underbody integration to reduce the number of parts and simplify manufacturing, learning from Tesla.
Ford says it could save "thousands of dollars in battery costs" by introducing more efficient batteries and reducing battery pack size, while shifting to more aerodynamic vehicle designs.
Nissan has its own idea of cost reduction. In March this year, Nissan announced its new method for developing electric powertrains "X-in-1". One of the benefits of electric powertrains developed based on the X-in-1 method is that shared and modular core components increase production efficiency and reduce powertrain costs by about 30% compared to 2019. Nissan revealed that it aims to achieve cost parity between e-POWER vehicles and internal combustion engine vehicles around 2026.
Image source: Nissan
Technological innovation often has to maximize the effect of cost reduction through scale. Taking integrated die casting as an example, although the initial investment is relatively large, the number of parts is greatly reduced, the production process is simplified, and the cost can be significantly reduced in the case of large-scale production.
Under Tesla's higher gross margin, the scale effect is greatly credited. Some industry insiders said that although Tesla only has a few models, its high production means unparalleled economies of scale.
According to reports in January, during Tesla's fourth-quarter 2022 earnings call, Musk and other executives outlined plans to reshape Tesla's cost base. Tesla executives said the plan includes expanding production at Tesla's new plants in Berlin and Austin, Texas, and boosting battery production within the company because of the cost savings that could result in expanding mass production.
Compared with other car companies, BYD's entire industry chain layout, three electric self-research and self-production, has a vertically integrated cost advantage. "BYD will tap all possible cost space through large-scale and highly vertical integration." Wang Chuanfu once said that the company will gradually reduce costs in the process of scale and improve profit margins through large-scale benefits.
However, technological innovation usually takes time to take effect, and it is not easy to amortize the cost with scale effects. Relatively speaking, layoffs are clearly a quick fix.
Ford, which claims to cost $7 billion more than its rivals, is cutting costs by cutting jobs in addition to improving processes and products. In February, Ford announced that it would cut 3,800 jobs in Europe over the next three years in order to cut costs and remain competitive in the electric vehicle market. Recently, there are rumors that Ford China has also begun to lay off employees.
Beyond Ford, Volvo Car CEO Jim Rowan said in a statement in May that while the group's efficiency initiatives have begun to show results, further steps are needed, including cutting 1,300 office jobs in Sweden to further cut costs.
Of course, a more routine cost-reduction operation is to lower prices for supply chain companies. Although Tesla's experience tells us that technological innovation and scale are important to reduce costs, for most companies, the way to reduce prices to supply chain companies seems to be more effective. In fact, even Tesla has not been "moving knives" in the supply chain.
Under the intensifying price war in the auto market, what kind of pressure are supply chain companies under? And what are the tools of "cost reduction and efficiency increase"? Gascar is continuing to pay attention, next article, we will elaborate!