The content of this article is sourced from 42how and has been translated by ChatGPT
The “Data Intelligence Bureau” column is jointly launched by Garage No.42 and SoCar Product Strategy Consulting, and is updated monthly.
In the first month of the second quarter, the most discussed topic must be the sharp decline in Model 3 sales data (reported by the China Passenger Car Association as over 3600, which is over 60% lower compared to the previous month).
Whether it is Tesla’s habitual “end-of-quarter sales rush” or the various interpretations of the price reductions and rumors by the “wait and see” crowd, all of them are the interpretations from the perspective of the public…
Looking back rationally, the reason for the sharp drop in sales in April compared to March is straightforward:
At the end of April, the subsidy policy changed. Last month’s “Data Intelligence Bureau” also suggested that everyone should wait for the updated pricing and subscribe for a longer period. So if we look at these two configurations separately, for Tesla’s Shanghai factory, in April, customers who ordered the standard range opted to wait (they waited for the updated pricing and did not have to wait long to get the discount), while those who wanted to extend the range have not yet been scheduled. The standard range produced last month is likely to continue to be sold in the future. This is the most significant impact on the decline in sales in April.
The news of the “long-range price cut” has caused some hesitant customers to become increasingly anxious, and they are waiting to see the outcome. This has to a certain extent reduced the current demand (in fact, Tesla’s decision to subsidize the product out of pocket after July 22 to respond to these rumors was a very appropriate decision, but it took a long time to do so, and it revealed the disadvantages of a US company’s slow response). However, this impact is relatively smaller.
All the above reasons are relatively easy to understand, and everyone can judge and do not need to be overly concerned.
From the information we have obtained, Model 3 sold nearly 15,000 orders in April, and most of them were for the Long Range version, which also indirectly verified these two factors.
At the beginning of May, the standard range version was reduced in price. The 270,000-yuan-level product is most likely to give a boost this month. We will have to wait and see.
What is even more anticipated is the early halt of the long-range version for more than a month. Its gradual delivery can confirm the above order numbers.
The rumor of a price cut is just a temporary hot topic, as shown in the WeChat index screenshot above, and it will pass.
Looking at the problem from Tesla’s perspective, the starting point of price reductions and other financial policies is solely to increase the number of orders and inventory, and there is no “just for fun” logic.
If the “wait and see” crowd really needs a reference, it is better to evaluate it based on the monthly market performance: for example, last month’s price reduction of the standard range was analyzed by our team correctly.
Ultimately, the actual price of the product forms an elastic relationship with demand in the end market. Looking back at the whole year of 2019, more than 30,000 Model 3s were sold in China, and the corresponding base price range at that time was from 360,000 yuan to 520,000 yuan (without considering optional configurations).By now, the actual price elasticity of the 270,000 and 340,000 Model 3s, based on the brand’s existing influence and the product itself, is expected to amplify last year’s sales by at least two to three times.
The price range of domestically made Model 3s has always been a relatively stable area of market share, accounting for about 10% of China’s total car sales, while the price range of imported Model 3s only accounts for about 3% to 3.5% of the entire market.
Additionally, the entire price center of gravity is clearly trending upward, which means the huge market base of 100,000 to 200,000 is still in the process of rising.
These calculations are very crude, and other estimation methods are even more bizarre and likely to backfire. In fact, no matter how eloquent or clear the prediction, it is impossible to be accurate…
If a prediction that can be challenged must be made, considering factors such as charging coverage, demand, competition, etc., it is conservatively estimated that at least 100,000 Model 3s will be delivered this year, with 20,000 completed in Q1.
Of course, the market in April is not just about the Model 3 diving, and there are many other things worth paying attention to.
A dark undercurrent and two pieces of land
With the dissipation of the pandemic’s impact, the arrival of spring has brought about the recovery of enterprise work and people’s lives, and the overall automobile market seems to have returned to a “normal” state. In April, the total number of insured vehicles in the whole market fell by 9.3% compared to the same period last year, compared to -30.1%, -78.3%, and -31.4% in the first three months of this year.
The overall recovery has also boosted the recovery of demand for different products. In April, the total number of insured plug-in hybrid vehicles, including extended-range models, was 14,415 units, a year-on-year decrease of 7.4%, compared to a drop of over 20 percentage points in March; the total number of insured pure electric vehicles in April was 38,837, a year-on-year decrease of 6.5%, recovering nearly 40 percentage points compared to March.
Of course, compared to the gasoline-powered car market, these two areas are still just a small part, so the fluctuations are relatively large.
What caught my attention while observing was a subdivision of the market that we tend to overlook when dealing with new energy data: oil-electric hybrids represented by two Japanese automakers.
The main reason for this attention is that in the past two years, as China’s total automobile sales have stopped growing and entered a stock situation, products such as the Yali hybrid, Corolla Double Engine, and Brisk Hybrid, which are representative of the two Japanese automakers, have hardly been affected by market fluctuations, and their absolute sales have maintained a monthly average of nearly 20,000 units, the stable performance corresponds to the gradually climbing market share of Toyota’s hybrid market, which has increased from less than 1% in early 2019, to discreetly double.
This figure is almost twice the market share of the plug-in hybrid market bolstered by the license plate policy, and is roughly equivalent to the market penetration level of pure electric vehicles.
Going back to Toyota again, it’s definitely not the only car maker in this area, but Toyota has sold the most in the TOP 10.
Isn’t this the old guard?!But it is also a new energy vehicle, it’s just that policies have not been taken into account.
The reason why the two Toyota cars are getting attention is not only because of the data itself, but also because of the inevitable impact they have on user demand – whether it is biased towards electrification of driving, comfort experience, or lower usage costs, almost like pure electric vehicles, providing a “once you use it you won’t go back” feeling. With this kind of demand foundation, cars like the ideal ONE “plug-in hybrid” received nearly a quarter of their insurance coverage this month from Guangdong Province – the home of Toyota.
The difference from pure electric vehicles is that the hybrid cars of Toyota can only be refueled.
From a market standpoint, this new energy vehicle that can only be refueled is impacting the market of fuel-powered cars along with pure electric vehicles from different directions.
The true penetration of pure electric vehicles, from high-priced products led by Tesla to the gradual lowering of Model 3, is exposed in high-end markets; while hybrids from Toyota, such as Corolla and Accord, are progressively expanding into the mainstream market.
When the high endurance of pure electric vehicles is burdened by large batteries, products like this, which enhance driving experience and reduce energy consumption with just a bit of battery use, provide a path for new energy to enter ordinary homes.
And all new energy products should not ignore this slowly rising trend.
“New Force”, Main Force
Let’s turn our attention back to the “legal” new energy field.
Last month, in non-commercial new energy vehicles, the Tesla Model 3 that skyrocketed into the market was followed by the NIO ES6 and the ideal ONE. For now, they’ve not only established a little milestone of new power leading the way, but also include Tesla in the category of “new power”.
From a supply perspective, this is an accomplishment that represents the smoothness and efficiency of the entire new company system, which is enviable.
From a market demand point of view, this outcome has always been only a matter of time. So from a particularly macro perspective, why is there such a bullish view that a new power is forming a dominant position?
Under the background of the mobile Internet, Chinese users have a unique lifestyle that traditional luxury brands and joint venture brands have not kept up with, and even less catered to, such as new experiences in the field of intelligence. Especially for middle-to-high-end users, there has long been a demand for choices that are more personalized, better, and newer than except for a few models on the market. There is a market vacuum and the product has an opportunity.
Chinese brands have been burdened by cost-effectiveness for a long time and have failed to successfully block foreign brands at this time of “national pride”. Products have not broken away from cost constraints and have gone to satisfy the opportunity to accept the demand. The market vacuum lacks power to fill.
New power is the best candidate to meet the above market demand and opportunity: they have a better understanding of new user lifestyles and needs, and they also have the lightweight packaging without any burden on their backs. Furthermore, with the complete Chinese supply chain system and the accumulation of industry talents, the basic capacity building has reached a high level, and it is inevitable that a top player among the new powers holds strong.
NIO ES6 and ideal ONE are leading the way.Compared with other “policy-oriented” pure electric vehicles, the interesting data is that the sales of these two vehicles in restricted license plate cities and non-restricted license plate cities are almost 1:1, and even more in non-restricted license plate cities. Even the Model 3 has not achieved this, let alone other pure electric vehicles.
Looking at NIO, ES6’s Q1 delivery exceeded expectations this year, and its sales in two super cities, Beijing and Shanghai, were comparable to those of the same level of BBA models in April alone.
In addition, the continuation of positive news such as obtaining more than ¥300,000 in “battery swap mode” exemptions, 2,000 orders in four days, and successful financing in Hefei in April have stimulated market confidence. And the scene-based live broadcast of Wang Han, Li Rui, and Li Bin, which started in May, has also become a hit, and become a popular live-streaming car.
As NIO’s second product, ES6 has already hit the road.
In terms of Ideal ONE, at the media communication meeting on April 30th, Li Xiang revealed that the sales of Ideal ONE in some cities exceeded that of Highlander.
Looking at the number of car insurance policies in various cities, in the five cities of Shenzhen, Shanghai, Suzhou, Hangzhou, and Chengdu, the number of insurance policies for Ideal ONE has already exceeded that of seven-seat SUV hegemon Highlander in April. In the other twelve cities where Ideal has already established retail centers, the data of these two vehicles are also very close. In the hometown of Highlander, Guangzhou, the difference between the two this month is only 36 cars.
The road ahead is long. Ideal ONE is Ideal’s first product on the market, and he will encounter the challenges encountered by others, including solving product problems, expanding user scope, and continuing to maximize product efficiency.
When the production capacity and market of these two vehicles gradually stabilized, the first step for the “new forces” to become the main forces was taken.
Also, XPeng Motors’ G3 is doing well, with steadily high sales. The average number of monthly car insurance policies in all of 2019 was over 1,100+, and this performance has been well maintained in 2020, which is very difficult in such a market environment, reflecting the attractiveness of the product in the terminal and the sales ability of the brand. The soon-to-be-launched P7 has undergone comprehensive upgrading from positioning to product details and will fight hard against the Model 3. Regardless of how it ends, the stage has been set, and the arrow has been put on the bow.
Moreover, there is BYD, disguised as “new forces”. Qin Pro and Song Pro’s hybrid and electric versions of four models combined have monthly sales of 2-3 thousand units. We will also see what the real face of BYD Han is in a few days — “a Tesla that can be made in minutes”.
So, what happened in April when the catfish plunged into the water? It was not real diving, but the demand had been postponed, and many people in the market were waiting for delivery. I have several friends who are immersed in the joy of early delivery.
In March, I mentioned that the positive impact of the big catfish effect had already seen some signs, and this sign became more prominent in April.The two Tian’s dark surges mentioned above are only related to new energy. The three cars leading the “new forces” besides the so-called new energy have an additional common feature, which is assisted driving.
This is the embodiment of the differentiated value on the basis of the basic meaning of new energy. Whether it is Model 3 equipped with all hardware, the growth of NIOPilot, the full range of Ideal ONE or the great progress of Future P7, they are all designed to allow users to get closer to the future – the real trend demands beneath the appearance of new energy.
Compared with the low energy consumption and the feeling of electric driving, assisted driving has a higher experiential threshold, and they already have a first-mover advantage.
What are their limitations?
First, perhaps it is to let more users accept such a new brand. The only way is to get more cars on the road and start the snowball effect of reputation.
Second, it is the construction of charging facilities. After the basic disappearance of range anxiety, charging anxiety can only be solved by the combined effort of the brand and urban developers. Tesla has already made a commitment to 4,000 supercharging stations, and XPeng and NIO have chosen to cooperate first. The ideal’s extended-range has no such restriction. The future is full of excitement.
Third, it is the pursuit of tradition. This refers not only to traditional car brands, but also to the giants that these traditional car brands may cooperate with, such as Apple, Google, and Huawei.
Returning to the original intention of the data observation bureau of SoCar and 42How: observing the impact of new energy on fuel cars from the forefront.
In the world of automotive products, everything happens slowly, and compared to the rapidly changing world, it is like a sloth in “Zootopia”. The cost of design, testing, production, logistics, and end-user experience in the product world is all in slow-motion replays.
Therefore, this process of advancement will also be slow, and there may be setbacks, darkness, hell, shorts…
Fortunately, there are a group of people rushing ahead. Since the result is already known, the road from now to the result must be walked by people.
Looking forward to it.
Data Intelligence Bureau, taking you to see how electric vehicles are gradually eroding the fuel vehicle market, see you next time.