On March 28, 2019, TESLA’s selective closure of stores to reduce costs started on January 18. Then, Ford and Fiat Chrysler successively announced their layoff notices in March, marking an unexpected period of “slimming down” in the automotive industry. At that time, the DENZA brand, established as a joint venture by BYD and Daimler, seemed to declare its impending departure with a team of over 400 people almost gone, and the remaining 40 employees left for handover, all of whom had been evacuated or dismissed.
DENZA, a Sino-German joint venture founded in 2012, is about to conclude its seven years of existence. We might as well take a look back at the past seven years before unveiling the answer.
Perhaps the top management of Daimler saw the potential of electric vehicles since Tesla used only eight weeks to transform the Smart into an electric car and invested USD 70 million to acquire a 10% stake in Tesla in 2010. Therefore, when BYD and Daimler signed a letter of intent in Stuttgart on March 1, 2010, the birth of DENZA was destined.
In June of the same year, Tesla, far away in the United States, announced its IPO at an issue price of USD 17 and landed on Nasdaq. On the first day of trading, Elon Musk made a profit of USD 630 million on paper. Tesla became the only independent manufacturer of pure electric vehicles listed in the United States at that time. One month after Tesla’s listing, Shenzhen BYD Daimler New Technology Co., Ltd., a subsidiary of BYD Company Limited and Daimler Greater China Investment Limited, respectively contributed RMB 300 million to set up a joint venture in Shenzhen, named Shenzhen BYD Daimler New Technology Co., Ltd.
On March 20, 2012, DENZA, China’s first brand focused on new energy vehicles, was created by Shenzhen BYD Daimler New Technology Co., Ltd., with a focus on electric vehicle products. At that time, BYD had leading domestic power battery technology and driving technology, while Daimler Group had a long history of vehicle manufacturing technology worldwide. DENZA effectively integrated the technology, process, and design resources of both companies, complementing each other’s advantages. Breaking away from the inherent positioning and constraints of the original brands, DENZA seemed to have enough room to “rise”. However, the reality was far from optimistic.
Time Flies and Memory LastsIn June 2012, the Mercedes-Benz booth at the Shenzhen-Hong Kong-Macau Auto Show unveiled the first concept car of the DENZA brand. Despite its simple interior design and mediocre appearance, it did not receive much attention as Tesla, located on the other side of the ocean, began delivering Model S from its Fremont factory on June 22.
After 22 months of intense preparation, DENZA’s first mass-produced car, DENZA 300, officially debuted at the Beijing Auto Show on April 20, 2014. Despite the relatively luxurious features such as carbon crystal roof, privacy glass, and Harman-Kardon audio system on the high-end version, the price range of 250,000 to 300,000 yuan after subsidies and a range of 253 km still deterred many potential buyers.
During the 22 months of DENZA’s careful development of DENZA 300, Tesla came to China and established Tesla Motors (Beijing) Co., Ltd. Model S also arrived in China with the “D plan” and began Tesla’s “Exploring China” journey. On November 25th of the same year, Li Bin, who succeeded in serial entrepreneurship, and Qin Lihong, who shared the same goals, established NIO in Shanghai. From then on, the battle for China’s electric vehicle market began quietly.
The rise of talented people and the fall of the evening stars
Changes in time can create a lot of history. Tesla made full use of three years to focus on product development and market expansion. They delivered the first SUV model, Model X, upgraded the exterior and interior of Model S, launched the affordable sedan, Model 3, upgraded the battery capacity of Model S and X, and on November 17, 2017, slowly drove out the Roadster 2 from Semi Truck … Tesla finally became known as “Tesla” by the people and electric cars gradually entered the vision of more people in that year.
After lying low for three long years, the DENZA brand finally launched its second vehicle model in 2017—the DENZA 400. The styling is basically following that of DENZA 300, while the configuration has added features that enhance the luxury and practicality of the vehicle, including panoramic sunroof, ambient lighting, touchless tailgate, and memory seats/external rearview mirrors. The major change is in the battery, as the capacity of the battery increased from 47.5 kWh to 62 kWh, resulting in an increase in the mileage from 253 km to 352 km.
For DENZA, the DENZA 400 is a much improved version of the 300 model. However, for the Chinese automotive market of that year, Tesla was not the only choice, nor was DENZA, as NIO was also on the horizon.
Three years changed Tesla, changed DENZA, and changed NIO as well. From an unknown domestic brand, NIO has now become an international FE racing team and is developing electric supercar EP9, going from China to Europe and America with self-developed and cooperative efforts. NIO’s pace is clearly faster and bigger. Shortly after ES8 made its debut at the Shanghai Auto Show in April, EP9 set the fastest lap record for the Nurburgring Nordschleife in May with a time of 6 minutes and 45.9 seconds.
NIO swept over the Chinese market like a wind in 2017, raising the hope of electric vehicle enthusiasts who had not yet bought an electric vehicle. The ES8, a domestically produced “high-performance intelligent electric SUV,” ignited the enthusiasm of NIO fans at the Wukesong Sports Center on December 16, 2017, and garnered the attention of many electric vehicle enthusiasts.
In 2018, it was a year for DENZA to gradually say goodbye to the stage of electric vehicles, for Tesla to face the greatest challenge, and for NIO to be subject to intense controversy.
In March 2018, DENZA released its new DENZA 500, a model that improved its previous DENZA 500 with upgrades to the front and rear lights and the battery capacity. The DENZA 500 still maintained its inherent styling and design, with a starting price of 299,800 yuan and a range of 451 km.
As for Tesla in 2018, due to tariff changes resulting from the US-China trade war as well as a gradually saturated demand in the Chinese electric vehicle market, Model S and Model X had a significant decline in sales by the middle of the year. With the slow ramp-up of Model 3’s production capacity and negative news around Elon Musk’s unilaterally announced public-private transition, coupled with the SEC’s lawsuits, Tesla’s path to profitability has become increasingly difficult.
Fortunately, the Model 3 survived the production hell and achieved a weekly production capacity of 7,000 vehicles. The Shanghai factory, Dreadnought, is also urgently being built. Autopilot welcomed the update of the V9 version, and Navigate on Autopilot is gradually undergoing experimentation and adjustment. Tesla finally withstood the test and achieved two quarters of profit.
As for the Chinese “friendly competitors” NIO, from the highly-anticipated ES8 at its debut to the software problems and range defects that persist after delivery, attention gradually turned into controversy. More people who don’t understand the situation began to follow some media outlets that exaggerated the facts to attack NIO. Words like “over-marketing” and “semi-finished products” have always been associated with NIO. Even though they eventually completed financing and listing, released their second model, the ES6, and achieved a delivery volume of 11,348 units at the end of the year, NIO still cannot get out of the storm.
Perhaps some people think that Tesla is an overseas brand and inconvenient to compare, so let’s use NIO as a reference to compare horizontally with the DENZA. DENZA’s annual sales in 2018 were 1,974 vehicles, which is a lag of up to 9,374 vehicles compared to NIO, which began delivery in June of that year, typical of the “back wave pushing the front wave.”
Public data shows that DENZA has lost more than 3.5 billion yuan in the past five years, with an annual average loss of as high as 700 million yuan. Due to various factors such as single model, DENZA’s annual sales are only a few thousand units, and DENZA’s sales have also continued to decline. In 2018, DENZA only sold 1,974 vehicles, a year-on-year decrease of 58.12%. BYD’s financial report shows that DENZA’s operating income in the first quarter of this year was 35 million yuan, and net profit was -44 million yuan.
Due to poor performance, DENZA has always relied on blood transfusions from shareholders. Between 2012 and 2018, BYD and Daimler both increased their capital by 450 million yuan, 150 million yuan, 280 million yuan, 500 million yuan, and 400 million yuan for DENZA. As of now, Daimler and BYD have increased their capital for DENZA seven times, with a total increase of more than 4 billion yuan.In seven years, DENZA released three models, 300, 400, and 500, but these have very little difference. In fact, for many years, DENZA has only released one model, and the price after subsidies is an average of over 300,000 yuan. In addition, due to DENZA’s low brand awareness, it has not established any price advantage, resulting in the scene mentioned at the beginning of the article.
Suddenly looking back, there you are
Just when everyone thought that DENZA was about to leave the stage of new energy vehicles, it returned to the battlefield in a new form.
On June 1, 2019, at the familiar exhibition hall of the Shenzhen-Hong Kong-Macao Auto Show Mercedes-Benz booth, DENZA’s latest concept car, Concept X, was prominently displayed in the center. This model is expected to be mass-produced and delivered in early 2020, with both plug-in hybrid and all-electric versions available. The all-electric version has a range of over 500 kilometers, accelerates to 100 kilometers per hour within 5 seconds, and will also be available in a 7-seater version.
BYD provided the underlying three-electric technology, while Mercedes-Benz designed the appearance. The biggest change is DENZA’s operating model: Starting on July 1, 2019, Beijing Mercedes-Benz Sales Service Co., Ltd. will officially operate some of DENZA’s businesses, including sales, marketing, brand communication, customer service, and network development. Although the parameters of the car model are still unknown, DENZA’s approach of returning to the public eye in the same way as seven years ago still inspires some followers and triggers more reflection and deep thinking.
As the first Chinese brand to enter the new energy vehicle market, DENZA’s evolution from “daring to be first in the world” to “meeting after sunset” during its seven-year period is not an accident. The insufficient brand influence, the excessively uniform product lineup, the low cost-effectiveness, and other factors all contributed to DENZA’s predicament.
When the country strongly promotes the development of new energy vehicle markets and all automakers develop models with lower prices and longer ranges, DENZA has already lost its first-mover advantage and cannot find its own position in terms of pricing and brand building.
In the previous paragraphs, I deliberately mentioned NIO’s growth history, although NIO is still a controversial enterprise struggling with topics, it does not affect its successful brand building and business philosophy dissemination. The company has positioned itself as high-end and luxurious since its establishment. From international events to electric supercars, from the track gene to high-performance SUVs, from exquisitely decorated showrooms to the excellent service and exquisite life of its surrounding, NIO’s successful extension from high to low-end is undeniable. Quoting a sentence from my best friend, “When people naturally compare NIO with Tesla, NIO has already succeeded.”Tesla spent four years struggling to complete the market education and brand positioning. NIO has almost caught up in just under two years. This is the part that DENZA must learn and adjust. As a century-old traditional company, Mercedes-Benz has already completed brand extension from high-end imported cars to low-end joint venture cars. BYD, as a domestic car brand, has also been making efforts in recent years to extend its brand from low-end to high-end, and now its price has finally reached the 300,000 yuan mark. As an old new energy vehicle brand, DENZA has little time and space left in terms of brand positioning and product pricing. This cannot be compensated for by sufficient technological resources and a wide range of sales channels. Whether they can truly perceive consumer needs is the most important issue DENZA needs to consider after their new entry into the market.
Although we cannot predict what will happen tomorrow, we still look forward to tomorrow. Hopefully DENZA can bring us more surprises.
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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.