Not long ago, Tesla cut its price in China, and its sales volume increased rapidly, but analysts were not so optimistic. They believed that Tesla should focus on long-term games, otherwise it would soon fail.

Looking at the data first, Tesla's delivery volume in China increased by 18% in January compared with last December. However, due to the impact of the Spring Festival in January, the sales volume announced by each factory changed greatly, and the data in February deserve attention.

On February 6-12, Tesla's sales volume in China was 6963 vehicles (insured), down 19% from 8643 vehicles last week. During the same period, the insurance coverage of BYD was 31417, up 29% from last week. Ideal growth of 81% to 4062 vehicles; Weilai increased by 56% to 3045 vehicles; Xiaopeng increased by 43% to 1396 vehicles. Tengshi also reached 1457 vehicles.

It can be seen that Tesla's price reduction advantage is losing. Of course, the Spring Festival in 2023 is in February, and the Spring Festival in 2022 is in January. The data in March may be more referential.

Tesla's bottom line for price reduction

Tesla certainly has the power to reduce the price, because Tesla's profits are relatively high.

In the third quarter of 2022, Tesla's average profit per vehicle was $9574, almost without rivals. GM's average profit per vehicle is $2150, BYD $1550, Toyota $1197, Volkswagen $973, Hyundai $927, Ford $762, Xiaopeng $11735, and Weilai $19141. It is not difficult to see that the profit situation of Chinese electric vehicle manufacturers is grim.

Compared with its Chinese rivals, Tesla launched its new car at a slower pace, and its navigation system upgrade and interior optimization were also a bit slower. Cui Dongshu, secretary-general of the China Passenger Car Association, believes that Tesla's product portfolio is severely limited and the problem is not small. It is slow to respond to the preferences of Chinese consumers, which ultimately leads to awkward positioning. There are few means to maintain competitiveness, only a few options such as price reduction.

Even Tesla CEO Musk admitted that the company faced fierce competition in China. Why reduce the price? Tao Lin, the vice president of Tesla's public relations business in China, explained that the price reduction in China was mainly due to the innovation in engineering, and China was stimulating the economy and encouraging consumption.

It is estimated that the sales of electric vehicles and plug-in hybrid vehicles in China will increase by 35% to 9 million in 2023, accounting for about one third of the total sales of new vehicles. In China, Tesla's share is declining, from 15% in 2020 to 10% in 2022.

New energy vehicle enterprises that have to cut prices

After Tesla's price reduction, a huge problem was thrown in front of many new energy vehicle companies: follow up or not? If you follow Tesla's price reduction, the cost pressure will increase sharply; If the price is not reduced, Tesla will steal the order and face the risk of losing the original market.

However, the price reduction has become the trend of the times. AITO Inquirer subsequently announced the reduction of the starting price of its two models, Inquirer M5 and Inquirer M7, with a price reduction of 28800-300 yuan. AITO Inquirer has also become the first new energy vehicle company to follow the price reduction of Tesla.

Soon, Xiaopeng Motor also announced to adjust the starting price of its G3i, P7 and P5 models, with a price reduction of 20000 to 36000 yuan; After the official launch of Ideal L7, with only a few changes, the starting price was reduced by 20000 yuan.

In addition to directly reducing the starting price, many new energy vehicle companies have chosen to reduce prices in a fancy way to cope with the impact of the "price reduction tide". For example, GAC Aian has launched a time-limited delivery incentive, which can enjoy a discount of 5000 yuan per vehicle for the purchase of specific series of models, and most of the AION series models can also enjoy a 3-year zero-interest time-limited financial subsidy; The time-limited subsidy policy for the C01 model is introduced by Zero Run, with a deposit of 5000 yuan up to 30000 yuan, including a cash discount of 10000 yuan, a financial discount of up to 10000 yuan, and a reduction of 5000 yuan in the price of the comfortable full optional package; Jikron has also introduced time-limited preferential policies, covering the current sales of all models of Jikron 001, with a maximum discount of 17200 yuan.

Compared with the passive price reduction, there are also new energy vehicle enterprises that choose to actively optimize the product structure, and use the cost reduction and efficiency increase and brand to face the war without smoke. For example, Nezha Motors not only customized time-limited user rights for Nezha S series models in sales policy, but also will launch a new model Nezha E to optimize and adjust the product structure.

However, the situation of new energy automobile enterprises is not optimistic, whether it is passive price reduction or active attack.

First of all, since the new energy vehicles licensed after December 31, 2022 will no longer enjoy the state subsidies, some consumers will lock their orders in advance in November and December 2022 to enjoy the state's final subsidies, resulting in the early overdraft of some sales in 2023. It is not difficult to predict that the competition in the new energy vehicle industry will become increasingly fierce. Even Li Bin, the founder of Weilai, said publicly that the domestic new energy vehicle market will bear certain pressure in the first half of 2023. "On the one hand, because of the early release of consumption, on the other hand, consumer confidence also needs time to repair."

Secondly, loss is a common problem faced by new energy vehicle enterprises, and price reduction will make their situation more difficult.

According to the financial report, the net loss of Xiaopeng Automobile in the third quarter of 2022 was 2.38 billion yuan, which was the worst quarter since Xiaopeng Automobile went public; The net loss of Ideal Automobile in the third quarter of 2022 was 1.646 billion yuan, which is also the highest quarterly loss in its history; Weilai's net loss in the third quarter of 2022 was up to 4.1108 billion yuan. In contrast, Tesla's net profit in 2022 was 12.6 billion US dollars, more than doubled year on year. The gap is very obvious.

A person in the new energy vehicle industry told DoNews, "Tesla has a lot of room for price reduction, because it is one of the few new energy vehicle companies that can achieve stable profits at present, and the high gross profit margin has also made Tesla have enough room for price reduction."

Obviously, in the case of Tesla's price war and the withdrawal of "national subsidy" from the historical stage, 2023 will be the most challenging year for new energy vehicle enterprises.

A new round of knockout has come

The price reduction may not be a lifesaving medicine, but for some new energy vehicle enterprises with relatively weak brand influence, it is the only way to alleviate the current competitive pressure.

Behind the intensification of the "price reduction tide" is that the growth rate of the new energy vehicle industry has gradually slowed down.

After the sales volume of new energy vehicles exceeded one million in 2018 for the first time, the sales volume of new energy vehicles could remain above one million each year. In 2021, the sales volume even ushered in a leap of 157.57% year-on-year growth. By 2022, the growth rate of the new energy vehicle market dropped to 93.4%. For the situation in 2023, the China Automobile Association predicted that the growth rate of new energy vehicle sales would further decline, with an expected growth rate of only 35%.

The situation is indeed not optimistic. According to the data of the Passenger Transport Federation, the wholesale sales of new energy passenger vehicles reached 389000 in January 2023, down 7.3% year-on-year and 48.2% month-on-month; The retail sales of new energy passenger vehicles reached 332000, down 6.3% year-on-year and 48.3% month-on-month.

Specifically, according to the January delivery data of all new energy vehicle companies, in addition to Tesla's year-on-year and month-on-month growth, "Weixiaoli", GAC Aian, and Zero-run vehicles have all experienced different degrees of decline. Although BYD's year-on-year growth rate reached 62.44%, it still has a significant decline compared with the year-on-year growth rate of more than twice in 2022. It is obvious that Tesla has seized a lot of market share originally belonging to new energy vehicle enterprises.

Some insiders believe that launching a price war without forming a scale effect will cause the losses of new energy vehicle enterprises to continue to expand. With the intensification of the price war, the competition in the new energy vehicle industry will continue to intensify, and the development path of new energy vehicle enterprises will be full of difficulties and obstacles.

"It may not be a bad thing for the industry to start a price war," said the new energy vehicle industry, "Behind the price war is actually the competition of core technology, scale, supply chain, cost control and other comprehensive strengths. The fundamental reason for being out of the price war is that the comprehensive strength is not as good as that of competitors, which will force the new energy vehicle enterprises to develop in an all-round way, and continue to improve in technology and services. The truly powerful new energy vehicle enterprises will smoothly enter a new stage of development."

In the final analysis, if new energy vehicle enterprises want to survive the price war and realize the curve overtaking, they also need to produce enough competitive products or core technologies, and constantly strengthen the supply chain cost control, so as not to be eliminated. There is no doubt that although the price war will not continue, in the increasingly fierce market competition, a new round of qualifying and knockout competitions have been staged.

Will more than 60% of auto brands be forced to "leave" in the next 3 to 5 years?

While the "price war" is becoming increasingly fierce, new energy vehicles are also facing the challenges of subsidies withdrawal, supply chain fluctuations and other adverse factors. In the environment of fierce competition, where is the new breakthrough?

Zhang Yongwei, vice president and secretary-general of the China Electric Vehicle Hundred People's Association, believes that China's new energy vehicle market will accelerate to sink to second-tier and third-tier cities, and the product price range will change from "dumbbell" to "spindle". In 2023, the demand for car purchase in second-tier and third-tier cities and even in urban and rural markets will continue to be released, becoming an important incremental market for electrification.

Zhang Yongwei said that in terms of product line and price range, new energy vehicle enterprises will gradually expand to the range of medium-sized vehicle products from the strategy of focusing on "one big and one small" two model markets in the past. The price war and brand war will start in the product price range of 150000 to 300000.

According to his prediction, driven by the driving force of stimulating consumption policies and the strengthening of market supply and other favorable factors, China's new energy vehicle sales are expected to achieve a growth rate of 30% - 40% in 2023, becoming the first country in the world to break through the threshold of tens of millions of new energy vehicle sales.

However, from the perspective of market structure, the new energy vehicle industry will usher in a brutal "shuffle period". In the view of An Qingheng, director of the China Automobile Industry Advisory Committee, with the gradual maturity of the market and the survival of the fittest in enterprise competition, the number of industry brands will decrease sharply, and some new energy vehicle brands can not bear the continuous sluggish sales and huge losses, which has become unsustainable.

"According to the current market capacity, 100 models will be saturated." According to Zhu Huarong's judgment, 60% - 70% of the car brands will be shut down in the next three to five years.