Jia Haonan from Co-driver Temple

AI4Auto | Smart Car Reference

Shameless, Bottom-line-breaking, and Most Likely Scammers

This is the first big news in the automobile industry in 2022.

The stunning words come from Li Xiang, the founder of Li Auto.

After a report about a new entrant in the car manufacturing industry, Li Xiang made such a sharp comment.

Does Li Xiang think that company is a peer of Li Auto? No way!

How does Li Xiang criticize them? Why?

The new entrant in car manufacturing industry is called “Tuanche”, whose main business was car group-buying and has never involved in car manufacturing before.

What Li Xiang said about Tuanche is:

The key points are: relying on hitting the jackpot and looking for a savior.

What Li Xiang means is that Tuanche’s approach and ideas are unrealistic, ignoring the complexity and objective laws of the automobile industry.

So what kind of car does Tuanche want to manufacture? Is it reliable?

On January 5th, Tuanche made a high-profile announcement on Weibo: “In 2022, we are also going to manufacture cars! Do you think it’s crowded?” and @ed NIO, Li Auto, and XPeng.

Later, Tuanche’s CEO, Wen Wei, revealed some details in an interview.

First is the team.

Wen Wei said that Tuanche’s biggest motivation for manufacturing cars comes from an external team of over 100 people. He highly praised his in-house car-manufacturing team, claiming that they are almost capable of everything, including product planning, engineering development, and intelligent driving.

He said this team can undertake almost all car-manufacturing processes, including the production of vehicles worth over 20 million yuan and the production of vehicles worth less than 50,000 yuan, including commercial vehicles and logistics vehicles.

The team already has semi-finished car models, and Tuanche’s first car will pick one of these semi-finished car models. The price will range from 100,000 to 200,000 yuan, and it is expected to start pre-sales in the second half of this year.

Secondly, is the money.

Wen Wei even said that the external car-manufacturing team can even shorten the car manufacturing cycle of new energy vehicles from 36 months to 18-24 months. And reduce the mass production cost of a car to around 50 million US dollars.

When it comes to funding to make cars, the team at Tuanche definitely has to rely on financing.

As public information can be found, Tuanche has not yet made a profit since going public, with losses of 670 million yuan over the past five years.

Considering the size and business of Tuanche itself, the difficulty of financing is considerable in the race to make cars, where burning through nearly RMB10 billion in a year is common.

But Wen Wei revealed, “The eagerness of local governments for car-making projects can also be one of the solutions…we can make another car in three months even if our first car fails.”

This statement is beyond the normal cognition of any current automotive industry practitioner.

Because developing a car from scratch requires at least RMB2-3 billion in funding and 2-3 years of time.

50 million yuan and 3 months is a bit of “car-making fantasy.”

It is not surprising that Li Xiang, who has put in great effort and hardship to make cars, would be angry with such remarks, and directly denounced it as “fraud.”

Who is Tuanche?

What is the background of Tuanche, which Li Xiang fiercely criticized with rare and intense words?

Tuanche is a newcomer to the car-making industry, but this company has been around since 2010.

For more than 10 years, Tuanche’s main business has been selling cars, and specifically automobile group buying.

Tuanche’s network has covered more than 100 cities in more than 30 provinces across China. A visit to the official website reveals that Tuanche’s main business model is to frequently hold automobile group buying events in different cities, covering almost all mainstream automobile brands and price ranges on the market.

Consumers can choose to attend the event or have Tuanche employees help them buy the car.

Tuanche’s official website claims its services are completely free.

As for whether or not it can actually save money, opinions are mixed online.

Some say they can get discounts ranging from 5% to 40% depending on the brand and model, but there are also netizens who say there is no significant discount, and in some cases it is even higher than negotiating the price themselves at a 4S store.

In 2018, Tuanche went public on the NASDAQ stock market.

However, its latest market value has fallen to $52 million, more than a 90% drop from when it first went public.

If Tuanche really does not charge any fees for any part of the car purchase process, then its revenue source, aside from automobile maintenance and repair services, undoubtedly lies in its cooperation with dealerships.However, a new trend is emerging in the car sales industry. Most new players are choosing the direct sales model, and even many new brands from traditional car factories are abandoning distributors to build their own sales and service networks. This is certainly not good news for Tuancheg, a company whose main business relies on distributors. Additionally, due to the impact of the pandemic, Tuancheg’s offline group buying activities have been greatly affected over the past two years.

This may partially explain why this car group buying website is also targeting the difficult and risky field of car manufacturing, which is a rapidly growing industry.

How will Tuancheg respond?

After being criticized by Li Xiang, Tuancheg’s CEO, Wen Wei, made a response:

“I didn’t expect the first shot from Mr. Li Xiang to come from thousands of miles away. Besides rhythm and patience, did you forget about vision and judgment? Did you forget that Fan Sihan was criticized because he saw things too early? So, nobody should take themselves as a prophet, nor become the people they hate the most.”

Here, “Fan Sihan” refers to Fan Sihan, former president of Volkswagen China, who made fierce comments about extended-range new energy vehicles.

However, today, Ideal Auto’s actual performance, with a single model’s sales exceeding the total sales of all the SUV models of Volkswagen in China, has slapped Volkswagen executives’ faces.

So, Tuancheg’s message is clear: Li Xiang, how can you be so sure that Tuancheg won’t succeed? You may be the one who gets slapped in the face in the future.

Can a “grand statement” from a former car group buying website entering the car manufacturing industry create a miracle?

Or do you prefer to believe in Li Xiang, a former auto industry professional who has already established himself?

What’s your take on the upcoming big news in the car industry in 2022?

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.