文｜Li Zi in Tiexi District
Yesterday morning, Tesla announced that both Model Y and Model 3 had a price cut ranging from RMB 14,000 to RMB 37,000. After the price cut, the subsidized starting prices of the two models were reduced to RMB 288,900 and RMB 265,900, respectively, and the highest prices of both models were under RMB 400,000.
It was not surprising that there was a price cut. As early as last month, relevant news was already widely circulated on the Internet. Additionally, Tesla launched two rounds of insurance subsidy activities since mid-September, which was widely interpreted as preparation for this round of price cuts.
What effect will the price cut have? What impact will it cause? These questions are essentially not questions, and the answer is obvious. With a price cut, sales of the two models will surely increase, and competitors at the same price point will inevitably lose some sales. Moreover, just as in previous instances of price cuts by Tesla, XPeng Motors will be the first to be affected.
Tesla and XPeng Motors
However, it must be said that this just proves how formidable XPeng Motors is.
The hardest-hit area affected by this round of Tesla price cuts can be broadly identified as the market between RMB 250,000 and RMB 450,000. This includes XPeng P7, BYD Han, NIO 5 Series, and 6 Series, among others. Although the number of models is not excessive, it is definitely not insignificant. Moreover, most of the models are domestic new energy vehicles. The one with the greatest effect is undoubtedly XPeng.
The XPeng models affected by Tesla’s price cuts are the P7 and G9, respectively. The P7 is XPeng’s sales leader, with an average market share of around 50% for the brand. The G9 is XPeng’s flagship model. Its importance is such that XPeng is willing to adjust the price within the first three days of its launch. On closer inspection, the prices of these two models are almost exactly distributed within RMB 250,000 to RMB 450,000, which is a direct targeting. How much of a grudge does Tesla have against XPeng?“`
As a industry giant, Tesla will not lower its prices to strike at specific opponents. What it cares about is its own interests and prospects. The key issue lies with Xpeng, the local new energy vehicle manufacturer that comes closest to Tesla in overall strategy.
The new energy vehicle market priced around 300,000 RMB is extremely popular, and it seems that many models that may be impacted by Tesla’s price reduction wave, like Li Xiang One and Huawei’s Wanjie. But carefully sorting out the competition, the “Li Xiang Hua”（Ideal, Nio, and Huawei’s Wanjie）that Meituan’s Wang Xing has praised to the skies, are actually avoiding direct competition with Tesla in product design.
Nio’s ET5 is primarily affected, but Nio’s business model uses a battery swapping approach, which is key to resolving users’ charging anxiety; Ideal’s L8 and the soon-to-be-retired ONE are primarily affected, but these two models have 3 rows of seating and extended range, allowing for driving without charging; Wanjie’s two models are within the scope of Tesla’s price reduction wave, but M7 and M5 are believers in Ideal’s extended-range model and can also drive without charging.
Every time Tesla reduces its prices, Xpeng always ends up bearing the biggest pressure. However, Xpeng does not shy away from competition with Tesla. Will future EVs be extended-range, battery-swapping, or fast-charging? Will mainstream markets have three-row or two-row seating? Xpeng’s approach to these questions is that of a pure internet person, driving technology and market directly from the core.
There is no right or wrong route, only inevitable advantages and disadvantages. Xpeng is destined to bear greater competition pressure than Li Xiang Hua, but by focusing directly on the core market, Xpeng is the bravest and deserves respect.
Tesla’s Fork in the Road
“`## Tesla is Facing a Fork in the Road
Regarding Tesla itself, according to the media outlet “Garage 42”, this price reduction is the first “promotional price reduction” in Tesla’s history in China, because Tesla’s previous price reductions were always due to cost reductions. However, before this price reduction, the price of lithium, a battery raw material, was still rising. This theory is obviously sufficient, and Tesla is no longer as dominant as before.
Is it because of intensified external competition? As mentioned earlier, the battlefield of Tesla’s concentrated forces, the 300,000 yuan price range, is now very lively. The enemy camp of NIO + Huawei includes almost all Chinese internet giants, whether overtly or covertly.
But not necessarily. EVs are ultimately an expanding market, and Tesla is ultimately a rising behemoth. Tesla’s characteristics and status determine that it is a company dominated by itself, and its crisis and prospects depend more on internal factors rather than external influences.
The real challenge for Tesla is that it is at a fork in the road between a period of growth and a period of maturity.
At the end of last month, Tesla held its AI DAY of the year. Searching for information about this press conference will reveal that there were fewer news after the event than expectations before it. It is enough to show how awkward the press conference was. Tesla released a machine, announcing that it will be mass-produced “within the fastest 3 years,” but this unreachable product, which seems only to look “cooler,” was quickly engulfed by the internet. It is worth noting that the media frenzy caused by Tesla’s past annual launch events was at the level of Apple’s new product launch events. The cold response after this year’s launch event seems to indicate a decline in Tesla’s influence.
This is the problem that Tesla has to face. The root cause lies in the fact that the SEXY product lineup has been completed, and Tesla has lost the natural advantage of “releasing new products – eagerly anticipated by the public” that it used to have. As a result, its brand influence will inevitably become flat as the product line is completed. On the other hand, Tesla has long been the undisputed leader in the new energy market, and such achievement can make a company complacent, and then lose the drive it had earlier.
The dilemma of communication after completing the product layout is a path issue; the dilemma of drive after occupying the leading position is an ambitious issue.
Tesla will remain the big boss if it solves this problem. If it cannot be solved, Tesla will at most be the Tesla of now.
To be continued…
We cannot truly know whether Tesla can solve this problem, we can only glimpse its external performance.
If we look at Musk’s tweets, Tesla seems to be losing momentum. In recent years, Musk has been talking about political issues (red pill choice, affirming his right-wing views), virtual currencies (questioned for manipulating trends), and mergers and acquisitions of this or that company (Twitter drama and “Manchester United joke”). It seems that Musk is enjoying the influencer status that Tesla’s success has given him, and even perhaps intentionally infiltrating this influence into the political arena.
When Manchester United lost two games in a row at the start of the Premier League season in August, Musk joked about acquiring the club.
If we look at Tesla’s official statements, however, Tesla still seems to be full of vitality. A few days ago, Musk revealed during Tesla’s Q3 earnings call that Model Y and Model 3 will be upgraded, and the new models will be smaller in size and cost will be reduced by half. In addition, he set a goal that Tesla’s market value will surpass the sum of Apple and Saudi Aramco, reaching 53 trillion dollars in the future.The replacement of existing models is the only way to solve the dilemma of no new product circulation after completing the product layout, and it is also the most effective way to test whether Tesla still has desire and vitality. From this perspective, this round of Tesla price reductions seems to explain the market potential that will be exhausted before the replacement is made.
In the final analysis, the key issue is the replacement of Model Y and Model 3. This is not only the basis for external judgment of Tesla’s status, but also the key to determining Tesla’s trend in the next few years. How important is it? It’s so important that even Tesla itself doesn’t know what price it will have to pay if it messes up.
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.