*This article is reproduced from the official account of autocarweekly.
Author: Karakush
The determination made by humans in secret is often the most resolute.
There is a question on Zhihu: “How long do you think NIO can lead China’s electric car industry?”
There were two “thank you for the invitation” responses in total.
One mocked the typo – yes, it’s “Weilan”.
The other came from a certified account of Li Auto, which said that my fate lies with me, not with NIO. NIO doesn’t have a market below 200,000 yuan, so how can it lead the market for new energy vehicles below 200,000 yuan?
The conclusion is as follows: “We admit that the short-term position of NIO as leader of the first group will not change, but they should be more careful, because if someone falls behind, we can catch up. After all, we have already surpassed WM in the short term to become fourth place.”
It has a taste of the animal world.
This response was written in July of this year. In May, NIO’s delivery volume once surpassed Xpeng, creating a scene called “Weilittle-NETA”. In August and October, NETA surged past NIO twice, creating “Lixiaone” and “Xiaonali”.
When facts speak louder than words, there is nothing you can do.
It’s a bit embarrassing that no matter whether it’s “whatever NETA” or “NETA whatever”, people always think it’s Li Auto or NIO’s fault, and rarely think it’s NETA who is doing well. The implicit consensus is that, even if the sales volumes are similar and there is room for occasional rogue attacks, NETA is still not at the same level as the top players.
Until November, NETA delivered more than 10,000 vehicles, standing alongside NIO, and pulling away from the second group. It’s time to study its merits and demerits.
The victory of tacky punk
In November, NETA delivered 10,013 vehicles and still had 13,500 orders in stock. From January to November this year, NETA delivered a total of 59,547 vehicles. Relying on two electric SUVs, NETA V and NETA U, covering the 60,000 to 180,000 yuan range.
Even though it is the cheapest member of the 10,000 vehicle club, it is still a worthy historic achievement, as the lower-end new forces have always fallen short of the high-end ones. This is related to the stage of new energy consumption and requires a further increase in penetration.Many people express doubts about whether the sales numbers are all from the commercial market, given that the business-to-business (B2B) market for NETA, which was previously booming, once accounted for more than half of the sales. However, according to the information released by NETA, the majority of sales are now focused on the business-to-consumer (B2C) market, with B2B only accounting for less than 10% of sales, and in the past two months, even only around 2%-3%.
Behind NETA’s success is the real car owners and their real demand. All discussions are based on this premise.
When Hozon introduced NETA in 2018, it had no chance to please anyone. Regardless of the first car product N01’s poor performance (which has been discontinued in 2020), “Who would spend money on a car called NETA?” is a more critical issue.
The name “NETA” was reportedly proposed by CEO Zhang Yong. He believed that traditional car brands always had a noble and high-end name, while those internet companies had more grounded and easy-to-understand names such as Didi, Meituan, and Eleme. When it comes to making cars for the people, it needs to be that accessible, that down-to-earth. Moreover, more than five-year-old Chinese people know “NETA,” which can also save publicity costs.
To put it bluntly, want to reap some free publicity. Everyone understands it, and NETA also understands that everyone understands the technique of nesting. It was highly expected. According to trademark service website statistics, Hozon registered 106 trademarks in 2018, including not only NETA but also associated words such as Jinzha, Muzha, Tangseng, Bajie, Wukong, Chang’e, Pangu, etc., which monopolized one journey to the west universe.
However, the results were meager. Not that it’s not to say that national style doesn’t work, but just like why the protagonist in Ba Zhua Yu’s literature cannot be a Northeasterner, there are always some settings that are not easily acceptable. If you have to explain, there is a subtle boundary between accessibility and populism, making people feel that the Great Dane is intimate, and first love is too greasy.
Of course, the name can be continuously constructed, and I have repeated it. Huawei registered a whole book of Shan Hai Jing to name its products, which is not more advanced than Journey to the West. The important thing is what the enterprise and the product can achieve, which determines whether the name is quirky or tasteful. The earliest N01 can only be said to have confirmed NETA’s haste.
Due to poor sales, Hozon held a meeting in March 2019 and decided NETA was too lackluster and strategically abandoned it. They took the opportunity to change the brand while launching the second high-end product U-Plus, which lasted for a while. “Hozon” is very decent, in line with the decent Industrial Pearl, but there is no memory point. There is also another brand called “Hochi,” which is also the same.Dramatic changes occurred in the latter half of 2019, when “Ne Zha” was released and made a comeback. The film has a large fan base and is still the fourth highest-grossing film in China. In addition to collaborating with the film, Hozon Auto also registered a series of new names, such as Ao Bing, Huang Tianhua, Yang Jian, Lei Zhenzi, Jiang Ziya, and Daji…The return of Ne Zha actually marked the beginning of the Hozon brand universe.
Bringing up this past event is a starting point to see that at the beginning, Hozon didn’t have a particularly clear concept of what kind of brand they wanted to build, which is typical of traditional auto industry players who embark on entrepreneurship. They have always strived to shape themselves as public servants like Jiao Yulu, serving the people, and not making toys for the rich…But they haven’t been very successful.
Fortunately, they met a popular IP and quickly responded commercially, riding on the trend to develop a brand attitude and an image that won the identity of some car owners. Some car owners wrote in their delivery comments, “I liked it at first sight because I felt like I was Ne Zha.” The Ne Zha film helped to modernize and connect the traditional image of Ne Zha with people, and Hozon was very lucky.
Of course, small brands can also become giants in the market. They have made at least three correct decisions:
Firstly, they targeted the sinking market. At the beginning, they didn’t have the money or resources and only had one N01 model, so they had to focus on playing the cost-effective card in the sinking market. At that time, Zhang Yong kept a tight rein on the N01. He was afraid that it would undermine the brand’s image, so he basically didn’t allow it to be sold or channelled in mainstream cities.
In retrospect, choosing another track might not be better. The sinking market is large enough, the margin for error is wide enough, and there are not many players. In the early days of the new forces in the auto industry, they either believed that the high-end market had great opportunities, or that the mainstream market had unlimited potential, so they flocked to the mid- to high-end market, leaving room for Ne Zha.
At the same time, the competition from the domestic gasoline-powered cars in this segment was only homegrown brands that focused on cost-effectiveness, which was easier to win compared to other markets. As the penetration rate increases, the harvest is a foregone conclusion.
Secondly, they had the right product. If you only have a budget of RMB 100,000 and want to buy an electric SUV for licensing or cost reasons, you will find that there are no decent options other than the Ne Zha V. The only other option that catches your eye is the BYD Yuan Pro, which looks very shabby based on the brand alone.# NETA V is priced at seventy thousand and was launched last year as the replacement for the main model, accounting for 70% of NETA’s sales. It presents a decent quality at this price, with two doors and five seats, 2420mm wheelbase, and a range of 401km. It comes with a 14.6-inch screen and supports intelligent voice interaction and external discharge. The more expensive V Pro also has ACC and automatic parking with the eight thousand-yuan version. NETA is one of the few cars under 100,000 yuan that comes with ACC. Its low cost has satisfied some targeted user groups. On the NETA APP, many young female car owners post pictures every day. The pink interior and exterior are all equipped with the original factory’s cute yet stylish design. NETA V- Witch Edition is also very popular on Xiaohongshu, becoming “a car that ordinary female college students can easily afford.” In this price range, NETA maintains low operational costs and generates positive gross profit, which balances cost and value. However, its low-end brand, weak service, and lack of intelligence are the three weak points that Zhang Yong mentioned in a recent media interview.
There is no Jindong in Beijing, Shanghai and Guangzhou.
Next, NETA plans to “enter the city”. It is not a simple geographic entry into the core cities but an intellectual entry into the mainstream consumer groups in core cities and the core camp of intelligent competition. Zhang Yong believes that he cannot wait any longer. Change leaps and bounds in one day. If he misses this narrow window of time, he will have nothing but to wait for others to counterattack and will have no ability to resist. Therefore, they must reach new markets, including all core markets, and enter into the core cities’ mainstream consumer groups’ minds.
NETA V currently mainly sells in new first-tier and second- and third-tier cities, with a low percentage in first-tier cities. Shanghai has the highest cumulative sales of first-tier cities, but it is not currently available for license plates. NETA U Pro, on the other hand, has a high proportion of users in first-and-second tier cities, accounting for 75%, mainly for second-time buyers, but sales have not yet been established, and 28% of users are travel users. Many friends believe that NETA S will save everything.This coupe, expected to be released at the end of 2022, is based on the NETA’s self-developed platform. The investment in the new platform alone is around 1-2 billion yuan. It adopts Huawei’s 200T high computing power MDC computing platform and will be equipped with 2 lidar, 5 millimeter-wave radars, 12 ultrasonic wave radars, 13 cameras, high-precision positioning units, and high-precision maps and other perception units. It can achieve automatic parking, remote summoning, and high-speed and urban road navigation assistance driving.
In terms of hardware, it meets the forefront trend of intelligence. But when it is launched, it will no longer have the advantage of being the only one in the market, and will face competition from many similar hardware-based products. The pricing advantage will not be so obvious, and the cost has already been announced. The market and target audience are not the same as those familiar with NETA, and the inherent rough marketing methods and unscrupulous character setting will not have a market in the city. This has always been NETA’s biggest shortcoming.
Regardless of service or intelligence, short-term improvements can be achieved by investing money. In fact, NETA has already demonstrated its ability to break through itself in terms of channel layout and product planning. But for branding, it’s faster to tear down a house than to build one. We sincerely suggest recruiting some experienced marketing professionals, given so many high-end brands rising rapidly, there must be suitable candidates.
Fortunately, this should be the time when NETA is most financially stable. According to Zhang Yong, it will achieve a balance of payments by the year after next, and even have a slight profit, and the operating cash flow is positive. So by the end of December, this round of financing will be closed, and the amount of investment obtained is already enough for the development of the next 24 months.
It is rumored that a certain investor recently spent 200 million yuan in Zhang Yong’s office for an afternoon and didn’t get any shares.
Spend some money. Branding is a kind of human value.
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.