On the last day of 2020, the Ministry of Industry and Information Technology (MIIT) brought the last heavyweight news: the technology indicators and thresholds for China’s new energy vehicle (NEV) subsidies will remain unchanged in 2021, but the subsidy amount will decrease by 20%.
As the national subsidy is constantly declining, this means that electric cars have become less dependent on policies when it comes to pricing. In other words, the price of electric cars has begun to approach the price level of gasoline cars.
However, in the past year of 2020, the consumer market for NEVs has shown a “dumbbell” phenomenon. Compared with the hot “bloodshed” of the electric car market for above ¥250,000 and below ¥100,000, the market for electric cars priced between ¥100,000 and ¥200,000 has become much colder.
This is also understandable. The electric cars priced above ¥300,000 and below ¥100,000 mainly target the “additional purchase” market, while a large part of the ¥100,000 to ¥200,000 consumer market is for “initial purchase.”
Because initial purchase users have higher demand for cars and are more inclined to buy traditional gasoline cars, this has largely limited the performance of electric cars in this consumer market segment. This also indicates that the competitiveness of NEVs in the ¥100,000 to ¥200,000 market has not yet met the expectations of consumers.
In this environment, a domestic brand, Leapmotor, has stubbornly entered this relatively blank market.
Under the banner of “half-price Model Y,” Leapmotor’s C11 uses more raw materials and a more cost-effective price to stimulate demand in this market.
So today, what I want to talk about is whether the Leapmotor C11 will be the second “disruptor” after Tesla?
What does Leapmotor C11 want to do?
Let’s talk about the price first. Leapmotor announced the pre-sale price one year ahead of schedule, which is not common in the industry. The price of ¥159,800 to ¥199,800 is currently difficult to understand.
Because, in our perception, this goes against the law of cost. Judging from the material cost, Leapmotor C11 will not have much gross profit, even loss-making. Remember, this is a mid-size pure electric SUV with a 2930mm wheelbase.
Let’s take a look at the entry-level model that is equipped with a 76.6-degree battery and sold for only ¥159,800. This reminds me of NIO’s ¥70-degree battery, which reduces the car price by ¥70,000. If this is such an algorithm formula, the single battery cost will account for almost half of the car price.Even at the current price of 700 yuan per kilowatt-hour for ternary lithium batteries, the cost of the entire battery pack is 53,620 yuan, accounting for one-third of the price of the whole vehicle.
But the reason behind this lies in the pricing logic of LI, which is different from Tesla’s strategy of pricing based on material costs. LI’s pricing strategy for the C11 is based on a bet that the cost of components in the third quarter of this year will decline, and it is a pricing strategy aimed at future material costs.
Moreover, it seems that this kind of pricing strategy is slowly becoming mainstream, and many automakers have adopted this pricing logic.
For consumers, LI’s pricing strategy is a good thing, as it allows them to enjoy the benefits of cost reduction resulting from technological iteration in advance. For the industry, LI’s move is more like playing the role of “price butcher,” with a reported price for the C11 to be sold a year later, forcing other carmakers who want to enter this niche market to first calculate their own vehicle configuration lists.
As for whether LI’s intention was to keep other competitors out, or to force other automakers to improve their product strength to tackle the toughest challenge of the 100,000 to 200,000 yuan market together, only LI knows.
But what I want to say is that electric vehicles can only be said to be popular among the public if they can stand firm in the 100,000 to 200,000 yuan market.
So, is the LI C11 good enough?
To get the answer, I went to the LI experience center. As soon as I entered the exhibition hall, I was impressed by the combination of the orange-red body and the suspended black roof of the C11.
However, the car in the exhibition hall was still an engineering display car. Fortunately, the interior design of the C11 is also “stacked enough,” with the third-generation Qualcomm Snapdragon automobile digital cockpit and the iFlytek 3.5 voice interaction system. The car-machine interaction adopts a “three-in-one screen,” and the co-pilot has a dedicated entertainment space.
As I always say, this kind of design is aimed at pleasing female consumers, whose status is becoming higher in family car purchase decisions.
Of course, the reason why it is called the “price butcher” by the industry is not only because of the exterior and interior design of the LI C11, but also because of the two aspects of motor and battery, and auxiliary driving hardware.
With regard to the motor, the LI C11 is equipped with the independent research and development of Hegelis Electric Drive System, with a maximum output power of 400 kW, peak torque of 720 N.m, and acceleration of 0-100 km/h in 4.8 seconds for the dual-motor all-wheel-drive model.The maximum output power of the single-motor rear-drive version is 200 kW, the maximum torque is 360 N・m, and the acceleration time from 0 to 100 km/h is 7.9 seconds. It must be said that a few years ago, it was unthinkable to buy a car under 200,000 RMB with an acceleration time of 4.8 seconds per 100 kilometers. As for the suspension, the LI ONE C11 also uses independent front double wishbone and rear five-link suspension. The advantage of the double wishbone front suspension is that it has an upper control arm with an additional connecting pillar shock absorber compared with the commonly used MacPherson front suspension. This can effectively enhance the overall stability of the suspension, but the disadvantage is that the structure is complex, takes up a large space, and is expensive. Such a combination of “secret formula” is rare on car models under 200,000 RMB.
In terms of battery life, there are three different models of LI ONE C11, which are:
- The entry-level luxury version has an NEDC range of 480 km and a battery capacity of 76.6 kWh;
- The rear-wheel drive premium version has an NEDC range of 600 km and a battery capacity of 90 kWh;
- The four-wheel drive performance version has an NEDC range of 550 km and a battery capacity of 90 kWh. All versions use ternary lithium batteries.
It is worth mentioning that there are sedans with an NEDC range of 600 km under 200,000 RMB, but currently LI ONE C11 is the only mid-size SUV model.
Let’s take a look at the assisted driving. LI ONE C11 is equipped with 28 perception hardware, including:
- 10 camera radars
- 5 millimeter-wave radars
- 12 ultrasonic radars
- 1 face recognition camera
In terms of “stacking”, LI ONE C11 has a tendency to “leave no room for others” in the same price range, with 2 more millimeter-wave radars than Tesla Model Y.
Let’s take a look at the chip. LI’s self-developed Lingxian 01 chip has a computing power of 4.2 Tops. LI ONE C11 is equipped with two chips that are mutually redundant, with a total computing power of 8.4 Tops, combined with the self-developed Leap Pilot 3.0 intelligent driving assist system.
Purely based on the data on the paper, the 8.4 Tops computing power is not very eye-catching, but since the Lingxian 01 chip is independently developed by LI, it has been optimized for memory bandwidth, video data flow, and has a better understanding of internal demands. The theoretical efficiency will be higher than that of chips with the same computing power.
If combined with the selling price of LI ONE C11, this is a competitive hardware solution for assisted driving.
However, the performance of this assisted driving system is still unknown. Specific answers will only become clear after test drive experiences when the vehicle is delivered to customers.
After seeing the actual vehicle, the appearance and interior design of the C11 impressed me. However, the hard seats and somewhat cheaper materials used in the interior somewhat detracted from the overall score. Of course, I’m even more unsure of the high cost suspension combination of the front double wishbone and rear five-link “secret formula.” How much will this really improve the product’s competitiveness in the 10-20 level market?
I fell into deep thought, wondering who is the target audience for the C11 by LI.
Who Will Buy the LI C11?
With a deposit of 20,000 yuan and delivery after 9 months, the C11 received 1,030 orders on the first day of presales within a total of 16 hours, which is a decent performance for LI Auto.
According to LI staff, the main sales come from repeat customers and those who compare models such as the Tesla Model Y and NIO ES6.
First, let’s look at the “repeat customers,” which account for more than 30% of orders. The typical repeat customers are mainly two types of people: one is owners of other new energy brands, and the other is consumers with a purchase history of gasoline B-class cars or above.
Further analysis shows that among the owners of other new energy brands, it is not yet the right time for them to purchase a new car, and the likelihood of buying an additional C11 is not high. Therefore, the main growth point comes from the “upgrade” of consumers from gasoline B-class cars.
This once again verifies the “three laws” of electric vehicles: first, the market needs to be “educated”; second, users who have been “educated” have high loyalty to electric vehicles; and third, brand loyalty is the core of conversion.
Currently, the LI C11 orders mainly come from people who already have a basic understanding of electric vehicles, not only digesting some customers “educated” by Tesla and NIO, but also “educating” their own customers, once again demonstrating the importance of “marketing education” of electric vehicles.## And the way to educate the market is diverse. Whether it is Tesla’s terminal price reduction or NIO’s BaaS battery rental, they are all part of the market education. However, I believe that the market education method of SERES is to use the simplest and most direct way, which is to launch the SERES T03.
Instead of making a big fuss about advertising and promotion, it is better to lower the threshold for purchasing cars and let more people “try out” electric vehicles at a lower cost, and then use a better product experience to thoroughly “convince” users.
And doing this is the beginning of a closed loop. Because in this process, the stickiness of users to electric vehicles is getting higher and higher. When the SERES C11 with stronger product power comes, it will stimulate the enthusiasm of basic users to “upgrade” and become reasonable.
No, there is a missing link in the middle. That is how an automaker can digest as many users as possible when doing “market education”, rather than doing “public welfare” for the industry. Brand stickiness is very important.
First of all, brand stickiness has nothing to do with whether it is positioned as high-end. It can be a service, a story, or even a “feature”. Regarding SERES, what I want to say is that it has created a brand feature of “cost-effectiveness” and “piling materials” in the industry. It can be confirmed that this is indeed a way to impress consumers and enhance brand favorability, because most people are still sensitive to “price”.
Perhaps this also explains why users who used to be interested in Tesla Model Y and NIO ES6 are now turning to SERES C11.
To say more about the matter of seizing the market share of fuel vehicles, the current electric vehicle market seems to me to be like “Chop a Price” of Pinduoduo. Word-of-mouth promotion between acquaintances’ networks is the fastest effective way of spreading currently. This mainly reflects in the better purchase experience, product experience and after-sales service. And SERES has an additional feature, which is “ultra-high cost-effectiveness”.
So how to better promote word-of-mouth among users in the fuel vehicle market circle is not only a problem that SERES needs to think deeply about, but also a problem that the electric vehicle industry needs to consider.
In the short term, the SERES C11 breaking into this market of RMB 100,000-200,000 has indeed opened up some “upgrading” markets, but in the long run, how to leverage the larger “first-purchase” market is a new test for SERES.
In conclusionTo be honest, before the release of the LI ONE C11, I couldn’t really understand the pacing and strategy behind LI’s vehicle launches. From the S01 to the T03, there wasn’t much connection between them. If we had to draw some link, it would be that they were all targeting the “add-on” market.
However, with the LI ONE C11, although the logical continuity between products is still missing, they have connected the core user base together. This seems more like an “aim everywhere and hit the center” operation.
Going back to the consumers, having more choices is always a good thing, especially when the manufacturer is willing to sacrifice profit margins to provide high cost-performance options.
I always believe that collectively, we can make the electric vehicle market share even bigger – the industry is not at the stage where infighting is necessary. After all, bickering is no more than a competition of delivering only one to two thousand more vehicles than the counterpart per year – a small matter compared to the vast gasoline-powered vehicle market.
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.