Who made the money for new energy vehicles?

After years of development, the market share of new energy vehicles has reached 31.6% in 2023. Despite this, the upstream and downstream of the new energy vehicle industry often argues, and "who makes the money" is still an unsolved problem in the industry. This also reflects that the manufacturing cost of new energy vehicles has not decreased on a large scale with the growth of sales, so the price of electric vehicles under the same brand has always been higher than that of fuel vehicles of the same level.

However, as the market landscape continues to change, this "conventional" situation is constantly being broken.

Recently, the launch of the all-new BMW 5 Series has once again aroused heated discussions in the industry about "the same price of gasoline and electricity". The starting price of the all-new BMW 5 Series Long Wheelbase Edition, Standard Wheelbase Edition and the innovative pure electric BMW i5 Long Wheelbase Edition is 439,900 yuan.

Image courtesy of the BMW Group

In fact, in the past year or so, more and more products have been labeled as "the same price of gasoline and electricity" when they are launched, whether it is a new pure electric and plug-in hybrid product of its own brand, or a new model such as strong electric intelligent hybrid, electric hybrid dual engine, and super hybrid electric drive that have been launched one after another by joint venture brands.

According to data from authoritative research institutions, from 2018 to 2022, the average starting price of the new energy version of a car will be about 46,000 yuan higher than that of the fuel version. At that time, in order to compete for more share, the strategy of "the same price of oil and electricity" was basically based on Chinese brands, and the most well-known to consumers was that in February 2023, the BYD Qin PLUS DM-i2023 Champion Edition was launched, opening the "same price of oil and electricity".

Since then, with the continuous spread of the price war, the new energy vehicle industry has gradually entered the stage of exchanging price for volume, and more and more joint venture brands have also entered the battle of "oil and electricity at the same price". With the further release of market demand and rapid penetration into the sinking market, it is believed that the industry will officially open the era of "oil and electricity parity" in 2024.

In fact, after the new energy vehicle subsidy was completely withdrawn, the new energy brands that had been losing money for a long time tried to raise the price at the first time, but Tesla, known as the "price butcher", took the lead in reducing prices, so that other brands had to follow up one after another. As a result, the market price continues to fall, greatly benefiting consumers, while many new energy vehicle brands have also fallen into the dilemma of increasing but not increasing income. Now, as joint venture brands and luxury brands have also begun to lower the price of electric vehicles, the battle is bound to be further stalemate.

In the era of "oil and electricity at the same price", who will be eliminated at an accelerated pace?

Joint ventures continue to increase

According to the data released by the China Association of Automobile Manufacturers, in 2023, the production and sales of automobiles in mainland China will exceed 30 million units for the first time, of which the sales of new energy vehicles will reach 9.495 million units, and the market share will rise to 31.6%.

Although new energy vehicles continue to occupy the market of traditional fuel vehicles, the automobile market is divided into three parts, and fuel vehicles still occupy the second place. It is too early to say that the end of fuel vehicles is coming.

Previously, in the early stage of the new energy industry, due to the high cost of supply chain and batteries, the price of pure electric vehicles and hybrid models was generally higher than the pricing of fuel vehicles in the same class. However, even if the price is higher, both automobile manufacturers and battery manufacturers say that it is "quite difficult".

In 2022, Zeng Qinghong, chairman of Guangzhou Automobile Group, complained that "the cost of power batteries has accounted for 40%~50%, or even 60% of new energy vehicles, so am I not working for CATL now"; Zhu Ronghua, chairman of Changan Automobile, also pointed the finger at power batteries, saying that "expensive electricity" has led to an increase in the cost of a single vehicle by 5,000-35,000 yuan, which seriously affects the achievement of product benefits and causes great disturbance to the cost of enterprises At that time, its chief scientist Wu Kai responded: "Although our company has not lost money this year, it is basically struggling on the edge of a slight profit, which is very painful, and you can imagine where the profits go." ”

Despite the difficulties, in this initial market battle, Chinese brands still from the beginning of the low-price market to the product market to compete for pricing power, in just a few years, not only to mature China's new energy market, but also to achieve "corner overtaking". Today, not only the pricing power of the new energy vehicle market in the price range of 10-200,000 yuan is controlled by BYD, but the 400,000 yuan market has also been gradually broken by new car-making forces.

In contrast, the development of joint venture brands in the new energy market is slow, and although the fuel vehicle market has a huge base, the growth is weak, and the new energy transformation is imperative. Therefore, after Chinese brands hit the strategy of "the same price of oil and electricity", more and more joint venture brands have also begun to change to the pricing logic of "the same price of oil and electricity", joined the camp of exchanging losses for the market, and were forced to reshape the price system of products.

IN APRIL 2023, THE BUICK BRAND LAUNCHED ITS FIRST PURE ELECTRIC MODEL, THE ELECTRA E5, WITH A STARTING PRICE OF 208,900 YUAN. "Buick wants to achieve the pricing strategy of 'oil and electricity at the same price'. Our pricing principle is to ensure the stability of this electric vehicle in the end market in one step. The relevant person in charge of Buick's marketing department said.

In May of the same year, Guangqi Honda's all-new Accord was launched, and the new car covered two major power types, including the Rui· The guide price of the T motor vehicle and the first e:PHEV strong electric intelligent hybrid model is 225,800-258,800 yuan. From the price point of view, the plug-in hybrid version and the fuel version have achieved the "same price", which was very rare before.

Image source: Guangqi Honda

Two days later, Dongfeng Nissan's X-Trail, a super-hybrid electric drive equipped with the second-generation e-POWER, was launched, with a price range of 189,900 to 199,900 yuan. At the press conference, Dongfeng Nissan directly played the slogan of "hybrid vs fuel at the same price".

In addition, the prices of the SAIC Volkswagen Passat PHEV and Tiguan L PHEV are basically the same as the gasoline version.

Also in May, Cadillac first proposed the strategy of "sharing oil and electricity", that is, allowing oil and electricity users to share the new era of smart travel, aiming to empower fuel vehicles through new energy technology, enhance the intelligence and sense of technology of fuel vehicles, and cover more luxury fuel vehicle users. It also launched three models of GT4, XT4 and CT6 in one go, and provided a 1.5T+48V mild hybrid system.

Gu Yebin, director of the Cadillac marketing department of SAIC-GM, said at the press conference: Cadillac pays attention to the future, but it cannot snub the majority of fuel users of 80%. Especially in the main luxury market of 200,000 yuan to 400,000 yuan, there are many people talking about the status of luxury brands, but there are really not many luxury products that really satisfy users.

Now, as one of the top streams in the C-segment car market, the BMW 5 Series has also joined the camp of "gasoline and electricity at the same price". Gao Xiang, President and CEO of BMW Group Greater China, said: "The BMW 5 Series has been in production in China for 20 years. The all-new BMW 5 Series marks the beginning of a new era of intelligence for the best-selling BMW. With the launch of the BMW i5, the number of BEVs offered to Chinese customers has increased to seven, and the BMW Group's BEVs cover almost all major market segments. ”

Image courtesy of the BMW Group

In fact, the "same price of oil and electricity" of luxury brands has long been traced. In 2021, when Volvo launched the XC40 EV, it was proposed to promote the price of the higher-cost BEV version in line with the gasoline version, so as to increase purchasing power. However, at that time, the penetration rate of new energy vehicles had not yet achieved explosive growth, so the market response was modest.

Now, perhaps, the time has come. Moreover, in the traditional luxury C-segment segment, the 56E has been the benchmark model for quite some time (BMW 5 Series, Audi A6, Mercedes-Benz E-Class). Now, when the i5 enters a completely different new energy market at the same price, can it bring about a new pattern change?

The shuffle is coming early?

In the eyes of industry insiders, the sharp decline in the cost of power batteries has become a direct driver of the price reduction of new energy vehicles.

In the early years, because of the high price of upstream materials, the price of the terminal car companies was increased layer by layer, which led to high cost pressure and bitterness of terminal car companies. However, since 2023, as the virtual fire of capital has gradually extinguished, the price of battery raw materials has begun to fall sharply, and the profit margins of car companies have increased, providing a lot of help for the "price war".

The latest data shows that the price of battery-grade lithium carbonate has fallen below the 100,000 yuan/ton mark for many consecutive days. At the peak of the price in 2022, the price of a ton of lithium carbonate soared to 520,000 yuan. According to Xinchun information data, the average price of lithium iron phosphate square power cells in January was as low as 0.38 yuan/watt-hour, and ternary square power cells were 0.475 yuan/watt-hour, both of which were halved compared with the same period last year.

The core reason why Tesla's car price has been able to drop again and again is because of its strong cost control: battery cost reduction and vehicle design optimization.

The industry generally believes that if the price of lithium carbonate continues to fall in 2024, the cost of power batteries can continue to fall, and there may still be room for price reductions for new energy vehicles.

In recent years, the "battle between oil and electricity" has often been staged on major social platforms, and oil truck owners and tram owners have their own opinions, striving to make their choices more cost-effective. And "the part of the tram price that is higher is enough to add fuel for N years" is one of the main arguments of oil truck owners.

When the price of trams and petrol cars is the same, or even lower than that of petrol cars, will consumers insist on choosing petrol cars? At present, neither traditional car brands nor new energy vehicle brands can give an answer.

However, the consensus of the industry is that in 2023, the successive launch of the "same price of oil and electricity" strategy of many manufacturers and the continuous escalation of price wars are accelerating the reshaping of the price system of automotive products.

Looking back now, the early Chinese brand hit the "same price of oil and electricity" in order to attack the hinterland of the joint venture brand and make consumers who are swaying in their hearts firmly choose the tram, and now the joint venture brand is playing the "same price of oil and electricity" in order to give the target users another choice, reduce the loss of users and keep the original share. Although the original intentions are different, the essence is to overcome the "consumer defense line" in the hearts of consumers

"China is now the world's fastest-growing market for electrification and the highest sales volume. Guangqi Honda is fully committed to embracing electrification, and will invest in every electrified model based on the Chinese market and Chinese consumers. Talking about the pricing strategy, Yuan Xiaohua, deputy general manager of Guangqi Honda Automobile Co., Ltd., said in an interview, "It will not only break the previous price system, but also carry China's local electrification intelligent technology to more electrified models to lead Honda's global electrification forward." ”

Yang Hongxin, chairman of Honeycomb Energy, also publicly stated that the rapid change and involution of prices in the domestic new energy market has brought a very important signal that the "era of oil and electricity with the same price" has arrived in advance. In the next two years, as the price of raw materials continues to fall, the problem of higher cost of pure electric vehicles compared with plug-in hybrid and extended-range hybrid models due to their large charge will be solved.

However, some people in the industry believe that at present, all car companies advertise the "same price of oil and electricity" are stuck at the sales end, and for the comprehensive cost of the entire life cycle of the car, including charging, battery maintenance and residual value of second-hand cars, "the same price of oil and electricity" still has a long way to go. Moreover, even with the sharp drop in raw material prices, most new energy brands continue to lose money, and joint venture brands that have cut the price of their electric models in exchange for the market are also mixed when it comes to financial reports.

According to foreign media reports, Ford CEO Jim Farley has said that the production cost of electric vehicles may not fall to the same level as gasoline models until after 2030.

Judging from the data of domestic automobile manufacturers, at least for the time being, the cost of "oil and electricity at the same price" is still quite large, but in the face of the current market situation, if the market is not seized at a relatively tragic cost, the survival dilemma is even more fleeting. With the early arrival of the "era of oil and electricity at the same price", in 2024, more weak brands are bound to be out.

Author: Zheng Yu