The Potential of NETA Motors and their Pricing Strategy

Author: Diancheshen

After wandering in the second tier of the new energy car industry for many years, today’s NETA Motors seems to have the potential to break through and change their name to “Wei Xiaoli NETA”.

From the data that has been announced, NIO delivered 41,956 vehicles in the first half of the year, leading many players in the new energy vehicle industry. Followed by Ideal ONE, a model that stood alone in the market with 30,154 vehicles delivered in the first half of the year. Later comes Xpeng Motors and NETA Motors with 30,738 and 21,104 vehicles delivered in the first half of the year, respectively.

The top three on the list are familiar, but NETA Motors, originally in the second tier, surpassed their peers and entered the first tier.

Pricing is Their Ultimate Weapon

The data shows that NETA Motors had more sales in the C-end market than in the B-end market in the first half of the year. In particular, in June, 3,895 cars were sold in the C-end market, accounting for 85% of the total. That is to say, more than 80% of NETA Motors’ sales are delivered to customers in the C-end market. The fact that more and more buyers are choosing to purchase C-end electric vehicles indicates that the route the company is taking to “make cars for the people” has been accepted and recognized.

In other words, NETA Motors’ sales are supported by two words – cheap price.

Currently, there are three models under the NETA Motors brand, with the cheapest priced at only CNY 59,900 and the most expensive at only CNY 179,800. Their main models are all priced below CNY 100,000, which is quite different from Wei Xiaoli.

In the first five months of this year, the sales of NETA V ranked 10th among all pure electric vehicles with a total of 14,539 units, and second among pure electric SUVs, second only to Tesla’s Model Y. The total sales volume of NETA V has exceeded 20,000 since its launch. It is reported that 90% of the users who purchased NETA V are from the C-end market, and the total number of orders to be executed exceeds 6,000.

Let’s take a quick look at the three products under the NETA Motors brand:

• The highest-priced model is the NETA U with a recommended price from CNY 99,800 to CNY 179,800.

NETA, the most “serious” car, is well-designed and even has a gimmick called “transparent A-pillar”. Its endurance is also on par with the top-tier vehicles. Unfortunately, the intense competition in this price range makes it difficult for NETA to sustain its pricing. Its brand currently lacks the support to attract attention, so it is destined to fail.

Its main sellers are NETA N01 (guide price: 6.68-13.98 yuan) and NETA V (guide price: 5.99-12.08 yuan).

Both vehicles have average appearances, spacious interiors, and mid-range endurance. There are not many competitors in this price range, and the opponents are evenly matched. In addition, Chinese consumers have proven to be kind, as long as a car is cheap enough, they can tolerate all its flaws.

Overall, NETA is not in the same league as NIO, XPeng, and Li Auto. At this stage, the only advantage that NETA has to secure its position in the new car market is its low price.

A good card and a spare card

On the first day of the Shanghai Auto Show this year, NETA officially released its new flagship model — NETA S. The car is a mass-produced version of the Eureka 03 concept car and is built on the new NETA HPC electric platform. It has a range of more than 1,100 kilometers for the extended-range version and more than 800 kilometers for the pure electric version. The car is expected to hit the market next year at the earliest.

In addition, the mass-produced version of the Eureka 03 concept car has another major advantage: it uses a brand-new electronic and electrical architecture, with all the vehicle’s controllers concentrated on three main domains: the power domain, cockpit domain, and intelligent driving domain. The mass-produced Eureka 03 will be equipped with three LIDARs, five millimeter-wave radars, 12 ultrasonic sensors, and 18 cameras, achieving Level 3 autonomous driving capability and, in some scenarios, Level 4 autonomous driving capability.Although the specific market planning of NETA S is currently unknown, its equipped features indicate that NETA Motors intends to enter the over 200,000 yuan smart EV market, which undoubtedly challenges many veteran smart electric sedans like BYD Han, Xpeng P7, and Tesla Model 3.

Regardless of NETA S’s potential threat, it is only a “trial card” given that NETA’s current share in the pure electric market is quite limited.

Success means entering the new energy flagship sedan market, while failure means adding a new name to the ride-hailing industry.

The final boss: democratized “smart cars”

In May, Zhou Hongwei, the founder and chairman of 360 Group, officially announced the establishment of NETA Motors, another internet giant following the footsteps of Xiaomi’s Lei Jun, and 360 became the second-largest shareholder of NETA Motors.

360’s involvement is not equivalent to other investors’ shareholding, as 360’s greatest advantage lies in automobile network security, given that Zhou Hongwei often questioned Tesla’s safety issues in the past. Especially since there is a lack of effective national supervision of network data, as there have been cases of car signal theft by hackers with regards to Tesla in the past. As intelligent cars continue to grow, auto network security will be another crucial issue that new energy cars will face in the future, and this is precisely 360’s specialty.

In other words, coupled with NETA Motors’ inherent “low-cost” advantage, creating a “cheap” smart car is an absolute must for NETA Motors in the future. Zhou Hongwei personally promised this.

On June 10th, He XPeng, the chairman and CEO of Xpeng Motors, stated at the 13th China Auto Bluebook Forum held in Hefei that 150,000 yuan is the watershed price for smart cars.

“If a new company says today, ‘I want to make a very good smart car, and I want to sell it for 10,000 RMB by 2025. I think it is impossible to make a profit.” It can be made and sold, but not with profits.On July 8th, during the 2021 World Artificial Intelligence Conference, Zhou Hongwei, in an interview with the media, expressed that He XPeng’s statement “cars under 150,000 yuan cannot be intelligent” sounds like something said by a layman, not the words of someone who has a background in software, the internet, or IT. “Just because one of your models uses an expensive LiDAR and the cost cannot be reduced, it does not mean that cars using LiDAR cannot be made for under 150,000 yuan.”

Zhou Hongwei believes that “in a year or two, LiDAR may drop to the price of cabbage. If LiDAR can be made for 100 or 200 US dollars, it will definitely be popular and even Wuling could install one.” At the same time, he believes that LiDAR or Tesla’s purely visual approach are both solutions for intelligent driving. “Some cars under 100,000 yuan may not install LiDAR temporarily. As long as the visual approach is done to the extreme, it is also possible to achieve assisted driving or semi-automatic driving.”

In fact, what Zhou Hongwei wants to express is that with NIO continuously improving its supply chain to control costs and ensure quality, using Moore’s Law and network effects and doing well in software experience, it is possible to achieve “intelligent cars under 150,000 yuan”.

Intractable Problems Waiting for Official Solutions

Even if Zhou Hongwei is full of confidence in the NIO, and the NIO has also lived up to expectations and produced results, it still stumbled over a stone.

On July 5th, the WeChat public account of Netcom Zhejiang informed that 57 apps including NIO’s were found to have illegally collected personal information. NIO’s app had not clearly stated the purpose, method, and scope of collecting personal information, and collected personal information without the user’s consent, which leads to security vulnerabilities and risks of personal information leakage. In response to this matter, NIO will correct the vulnerability issue within 7-14 days.

However, some bugs in the NIO app that affect user experience also urgently need to be fixed by the official. From the complaints of car owners in the NIO forum, various problems such as frequent crashes, automatic downgrading of app versions, constant pop-ups, and being logged out after clearing cache exist.

If NIO wants to win the hearts of its users, maintain its recent upward sales trend, and strive for a high position on the new force ranking, it will have to listen to its customers to the greatest extent and reduce complaints. The principle of pulling a single hair to move the whole body applies equally to both the vehicle itself and the app and peripheral development.

In addition, as one of the new forces in car-making, going public is also the result that NIO is most eager for. Although there were frequent relevant news, there has been no actual progress.

In July of last year, NETA Automobile announced that “the company has officially initiated Series C financing and plans to go public on the Science and Technology Innovation Board in 2021.”

In the same year, Zhang Yong also introduced that “we are indeed preparing to go public on the Science and Technology Innovation Board. We will announce the intermediaries and underwriters we have established this month. They have been stationed in the company for three to four months and have started giving us guidance before going public. We hope to apply for the Science and Technology Innovation Board IPO next year.”

However, as of now, NETA Automobile and its parent company, Zhejiang Hezhong New Energy Automobile Co., Ltd., have not disclosed the information of their public offering guidance record with Zhejiang Regulatory Bureau.

Recently, Zhang Yong said in an interview that the timing of NETA Automobile’s listing may have changed. The company will continue to promote its original listing plan while also considering finding more listing channels.

Going public is not only an important milestone in the development of a company, but also the biggest significance for a new car manufacturer to raise funds! Since the concept of new car manufacturing was first proposed, funds have been their biggest problem. Most of the new car companies that were forced to withdraw from the competition went bankrupt due to their financing difficulties and broken capital chains.

Data shows that in the 7 years since Hezhong Automobile was established, NETA Automobile has completed 7 rounds of financing, with a total amount of about 11.25 billion yuan in public trading. The latest financing is the Series D financing of 3 billion yuan led by 360 Group this year.

Among the new car companies, the financing amount of NETA Automobile is not high. Li Bin, the CEO of NIO, once stated that at least 20 billion yuan in funds is needed to enter the car manufacturing industry. Today, the financing amount of NETA Automobile only reaches half of this “threshold”. Therefore, while seeking strategic investors, the fastest way for NETA to obtain continuous funding is to achieve listing, because you can’t play cards without chips.

In conclusion

In June of this year, NETA Automobile clarified its strategic goals in “three steps”. Zhang Yong stated that NETA’s first-stage goal was to achieve monthly sales of 10,000 vehicles. The second goal is to achieve monthly sales of more than 5,000 vehicles or even tens of thousands of vehicles within one to two years in the market of 100,000 to 200,000 yuan. The third goal is to achieve annual sales of 500,000 vehicles by 2025.

However, currently, including NIO, Ideal, XPeng, and other new car manufacturers have not achieved their target of monthly sales over 10,000 vehicles.

For NETA Automobile, relying only on its “cheap price” advantage can maintain its “good-looking” sales volume. However, if it wants to achieve the goal of selling over 10,000 vehicles per month, NETA may have to use its only two cards to compete with the other two players in the first and second tiers.As for whether it’s a one-turn win or being beaten by pressure, it depends on the size of the remaining two cards in NETA’s hand…

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.