Tesla’s big price cut, is “Wei Xiaoli” still fragrant?

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Text / Zhang Kaijing

Source / Mustang Finance (ID: YMCJ8686)

Tesla has slashed prices again.

On October 24, Tesla announced on its official Weibo that the starting price of five versions of Tesla Model 3 and Model Y in mainland China will be lowered. After taking into account the subsidies for the purchase of new energy vehicles, the two The starting prices of the models reached 265,900 yuan and 288,900 yuan respectively, and the five versions fell between 14,000 and 37,000 yuan.

After the price cut news was released, Tesla’s official applet was squeezed and collapsed.

In fact, Tesla’s price cut has long precedent. When the domestic Model 3 was released in October 2019, the pre-subsidy booking price reached 355,800 yuan. By October 2020, the price of the Model 3 after the subsidy was as low as 249,900 yuan, with a price reduction of more than 100,000 yuan in less than a year. . But since then, affected by the supply chain crisis, Tesla China has experienced “six consecutive rises”, and it has only returned to the price reduction track today.

The continuous price cuts two years ago have significantly boosted Tesla’s sales. In the first nine months of 2020, Tesla’s market share in the domestic new energy vehicle market exceeded 10%, and the cumulative sales of Model 3 alone surpassed that of Weilai, The total sales volume of Xpeng, Ideal and WM Motors. Now that the old tricks are repeated, can Tesla still get the desired results? What kind of impact will it have on Wei Xiaoli in distress?

Tesla cuts prices, “Wei Xiaoli” raises prices

This year’s Tesla has continued its hot sales trend in the past. Although sales fell due to capacity upgrades in the middle of the year, in the first three quarters as a whole, Tesla China sold 318,000 vehicles, a year-on-year increase of 55.4%, which is close to the level of last year.

However, since Tesla previously gave a 50% growth forecast for the whole year, the annual sales in 2022 will need to be more than 1.5 million, while Tesla’s global delivery in the first three quarters was 908,600. Therefore, in the view of people in the auto industry, the price reduction target is directly aimed at promotion.

In order to remind consumers, Tesla also specifically stated on the poster for adjusting the starting price that the national new energy vehicle purchase subsidy policy will be terminated on December 31, 2022. It should be noted that the subsidy is aimed at models below 300,000 yuan, and Model Y directly enters the subsidy range after price adjustment.

Zhang Xiang, an auto analyst and a visiting professor at the Yellow River University of Science and Technology, said that Tesla’s price reduction is based on its profits. Even if the price is reduced, there is still room for profit, and after the sales increase, the economies of scale will be more obvious.

According to Tesla’s third-quarter financial report released on October 19, the company’s net profit attributable to common shareholders was US$3.292 billion, a year-on-year increase of 103%, and the gross profit margin of the automotive business reached 27.9%.

It is worth mentioning that while Tesla’s price has been cut, Wei Xiaoli’s price has risen.

Aside from the price hike of new energy car companies in March, the prices of new models launched by Wei Xiaoli this year are gradually rising, except for Weilai’s ET5. The starting price of the ideal ONE is 349,800 yuan, while the starting price of the ideal L9, which will be delivered in August, has risen to 459,800 yuan; Xiaopeng’s previous best-selling P7 has a starting price of 239,900 yuan, and the G9, which has just been launched in September, starts at 239,900 yuan. The price has risen to 309,900 yuan; although the starting price of Weilai ET7 and ES7 is lower than that of ES8, it is also higher than EC6 and ES6.

It is not difficult to see that high-endization is becoming Wei Xiaoli’s collective strategy. In order to bring more added value to his brand, Wei Xiaoli also told the story of the combination of software and hardware.

For example, NIO ES7 is equipped with PanoCinema, a panoramic digital cockpit that applies AR/VR technology, and recently released native car AR glasses jointly developed with AR equipment company nreal; Li Auto equipped L9 with a “five-screen smart cockpit”; and Xiaopeng At the same time as the G9, the Xopera Xiaopeng Concert Hall was released.

“Wei Xiaoli’s high-end development and Tesla’s price reduction are two completely different trends.” According to Jiang Han, a senior researcher at Pangu Think Tank, Wei Xiaoli’s layout in the high-end field is to show his brand influence, and he has already Tesla, which has Model S and Model X, does not have to worry about this problem. Instead, it can hit the market with low prices and increase its share.

However, Tesla’s price cut will have a more or less impact on Wei Xiaoli. Even if the Model 3 and Model Y of around 300,000 cannot interfere with the ideal L9 of around 500,000, they can compete head-to-head with the Xpeng G9 and NIO ET5 at almost the same price.

Sales and stock prices both fell, what happened to “Wei Xiaoli”?

Looking at the market performance this year, “Wei Xiaoli” has not had a good time.

According to the data released by the National Passenger Vehicle Market Information Joint Conference, in the sales rankings of new energy manufacturers in September, “Weixiaoli” has fallen out of the top eight, of which the sales of Weilai only increased by 2.4% year-on-year, and the sales of Xiaopeng Motors were even higher. There was a negative growth, and it has fallen to the fifteenth place. In recent announcements, Ideal and Xpeng Motors also stated that they expect the delivery guidance for the third quarter to be lower than market expectations.

While sales are lagging behind, the three auto companies are all caught in the dilemma of increasing revenue without increasing profits. In the second quarter, the revenue of Weilai, Ideal and Xiaopeng increased by 21.83%, 73.3% and 97.71% year-on-year respectively, but their net losses also increased by 316.37%, 162.42% and 126.1% year-on-year respectively. All three companies posted their highest losses in a single quarter since 2021.

Judging from the results, Wei Xiaoli has not yet climbed out of the pit of “losing money and earning shouting”. If calculated based on the deliveries and losses of the three car companies in the second quarter, it can be seen that Weilai will pay 102,000 yuan for selling a car, while Ideal and Xiaopeng will pay 22,300 yuan and 78,700 yuan respectively. Seeing this data, some netizens even ridiculed: “In order to reduce the burden, I hope everyone will stop buying their cars.”

It is worth mentioning that Wei Xiaoli’s listing once set off a frenzy in the capital market. Among them, the stock price of Ideal and Xiaopeng rose by more than 40% on the first day of listing, and Weilai has achieved an 11-fold increase in 2020, once surpassing Volkswagen Group to become the third largest car company in the world by market value. But that all came to an abrupt end in 2021.

As of October 25, the stock prices of Weilai, Ideal, and Xiaopeng were US$9.45/share, US$14.68/share, and US$7.16/share, respectively, down 84.93%, 66.61%, and 90.08% from their historical highs, and the declines during the year were 84.93%, 66.61%, and 90.08% Respectively reached 70.17%, 54.27%, 85.77%, the current market value is only 16 billion US dollars, 15.3 billion US dollars, 6.2 billion US dollars.

Auto blogger Feng Shiming believes that the dilemma of the sluggish stock prices and sales of the three major new forces is related to the negative expectations of international capital for Chinese concept stocks, but at the same time, internal reasons are also superimposed: Xiaopeng’s main products P7 are weak, G9 The homogeneity with competing products is obvious; the discontinuation of Ideal ONE leads to negative reputation, the product matrix changes too randomly and quality problems continue.

In fact, continuous losses are inevitable on Wei Xiaoli’s development path. Jiang Han pointed out that whether it is an ideal car’s range extension mode or Weilai’s battery swap, long-term market investment and education are required. At the same time, car companies must continue to make great efforts to spend money on research and development, and endure the high prices of the upstream industry chain.

In the second quarter financial report, both Weilai and Xiaopeng mentioned the impact of R&D expenditure and the rising cost of bicycle materials, and the introduction of high-priced vehicles was also considered to offset this part of the rising cost. Even if it is the only ideal of the three companies with a gross profit margin higher than 20%, operating expenses have soared, and behind it is the substantial expansion of the company.

Another industry insider pointed out that the weakening of the momentum of “Weixiaoli” is also related to the excessive concentration of efforts in the early stage. Now the three companies are changing their strategies, and they may experience a long period of pain during the period. One phenomenon is that in order to attract early users, “Wei Xiaoli” tried his best to please consumers, but this year, the user service rights of the three car companies have shrunk; Xiaopeng Motors recently held several management meetings to reflect on issues such as products and operation strategies. , and even made a comprehensive organizational restructuring of the company.

However, during the adjustment period of “Weixiaoli”, traditional car companies and second-tier new forces have caught up.

What does “Wei Xiaoli” rely on to retain consumers?

Li Bin, Li Xiang, and He Xiaopeng are almost the first batch of entrepreneurs in China to bet their entire net worth in the field of new energy vehicles. They were once dubbed “the three electric fools”, and they are the learning models of many traditional car companies. But now, Wei Xiaoli’s first-mover advantage is being eroded.

Feng Shiming said that changes have taken place in the current new energy vehicle market: BYD is one of the best, second-tier new forces Leapao, and Nezha are gaining momentum, overtaking Wei Xiaoli. At the same time, GAC, Great Wall, Geely and other traditional car companies have also On the counterattack.

Among them, data released by BYD shows that its monthly sales in September exceeded 200,000 units; seven of the top ten new energy vehicle sales in August were from BYD; GAC Aian recently completed a 18.294 billion yuan A round Financing, the post-investment valuation reached 103.239 billion yuan, far exceeding the valuation of Wei Xiaoli before the IPO in the United States, and this is still a transcript handed over in the period of low industry valuation.

Different from Wei Xiaoli, traditional car companies have generally completed the layout of different price bands in the market through multi-brand strategies. For example, BYD’s Dynasty and Ocean series, Geely’s Krypton and Geometry, SAIC’s Zhiji and Feifan… At the same time, with the rise in oil prices and the continuous increase in battery costs, the “oil and electricity” hybrid market ushered in an explosion. In the first seven months of this year, the production and sales of domestic plug-in hybrid models increased by 1.9 times and 1.7 times year-on-year respectively, both higher than the 1.2 times of the overall new energy vehicles.

In terms of second-tier new forces, Nezha and Leaprun are the main brands of “cost-effectiveness”. Among them, Nezha has been ranked first in the delivery list of new forces for three consecutive months. In September, it became a new force brand with sales exceeding 18,000 in the first month.

“Weixiaoli’s main advantage is that it started early, but its shortcomings are also relatively obvious, lack of funds and relatively small scale.” Zhang Xiang said.

Against this background, how does Wei Xiaoli reverse the trend? Jiang Han believes that the first is to find ways to confirm the correctness of his own path, and the second is to use technological innovation to break the rigid shackles of cost. “For Wei Xiaoli, to maintain his competitiveness, the core is research and development capabilities and technical capabilities.”

However, it is difficult to make breakthroughs in these two paths in the short term, and it may be more realistic to give the market confidence in making profits. To this end, while trying to raise prices, “Wei Xiaoli” gradually clarified the goal of turning to scale growth in the next stage. After all, gaining a cost advantage through economies of scale is a long-established and feasible path for the automotive industry.

In addition, in order to make more consumers pay, “Wei Xiaoli” must start from the essence of the product. Under the circumstance that the intelligent concept of new car interaction has not been fully accepted by the market, practical considerations such as large space, driving experience, and battery life may be more urgent needs.

“Less marketing, more practical work.” Feng Shiming concluded.

Do you or your friends have Tesla or “Wei Xiaoli” owners? Which car do you like? Let’s chat in the comments section.

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