Avitala sounding alarm | Electric potential

Author: Su Qin

On February 18, at a user communication conference in Avita, Tan Banhong, chairman and CEO of Avita Technology, and Yu Chengdong, Executive Director, CEO of the Terminal Business Group, and CEO of the Intelligent Car Solution Business Unit of Huawei, once again attended the event together. Unlike their last appearance earlier this month, this time Yu Chengdong represented Huawei for the first time to attend Avita’s car owner event, indicating that Huawei will no longer hide in the background for the Avita brand, but rather, start facing users.

At the 2021 SAIC Group shareholders’ meeting, Chen Hong, chairman of SAIC Group, shocked everyone by saying that “SAIC cannot accept cooperation with third-party companies such as Huawei for autonomous driving, otherwise it will become the body, and Huawei will become the soul. SAIC must grasp the soul in its own hands.” Since then, cooperation between Huawei and automakers has become an unavoidable topic of discussion. Since binding with Huawei in 2021, Avita has been very cautious, but now the situation has changed. The fledgling Avita has taken a dangerous step toward facing Huawei and directly facing users.

“As a veteran of the automobile industry for more than twenty years, I can see that Chinese brands entered the auto market with cost-effectiveness, and later SUVs drove rapid development,” said Tan Benhong, CEO of Avita, who often refers to his own years of experience in the automotive industry and his personal summary of the past automotive market. However, how could talented people like Tan Benhong, when personally operating a high-end car brand today, resort to selling their soul in the hopes of a future?

Blood transfusion

Since February, Avita has undergone three significant personnel changes. First, on February 2nd, Avita announced that Li Pengcheng had officially become the company’s vice president, chief marketing officer, and also served as the deputy general manager of the user development center. Second, on February 14th, Avita announced again that Chen Zhuo had become the company’s Senior Executive Vice President. Third, Yu Chengdong replaced Wang Jun, the original COO of Huawei’s Intelligent Car Solution Business Unit, and became the highest responsible person for coordination between Huawei and Avita. This intensive personnel appointment is the most critical personnel strategy for Avita since the brand was established in 2021.

The purpose of the blood transfusion is to target this year’s high order goal. On January 13th, at the 2023 Avita Channel Partner Conference, Avita announced its goal of reaching 100,000 orders this year. Regarding Chen Zhuo’s arrival, Tan Banhong said, “We have already started the production and delivery of the first model, and we will challenge 100,000 orders this year. The company’s development requires a large number of talents, and we must use shareholder and our own talent advantages, technological advantages, and brand advantages to ensure that we are firmly among the top camps in the SEV market.”However, it is not easy to realize such ambitions for Avita. It should be noted that at the end of last year, the first batch of locked orders for Avita 11 was only 5,000 vehicles. After that, Avita did not disclose the detailed order situation, which is estimated to be not optimistic. Without considering the changes in follow-up orders, this means that Avita’s order target for this year is to increase by 20 times.

Moreover, the market is even less optimistic this year. China Association of Automobile Manufacturers (CAAM) predicts that the growth rate of the new energy vehicle market will drop to 35% by 2023. However, even in the face of such a market situation, Tan Benhong has his own helplessness. At the end of last year, he said frankly at the opening ceremony of the Avita center in Chengdu, “Our judgment will also have an impact, so we originally said that we wanted to lower our target, but the management did not give us the opportunity to do that.”

With the intensification of market competition and the dead order target, Avita has no retreat. Tan Benhong said, “Next year (2023), President Zhu (Changan Automobile Chairman Zhu Huarong) asked us for 500 touchpoints. I personally feel tremendous pressure, but if we want to make Avita successful, we must do it.” In Zhu Huarong’s view, the top priority for Avita is the insufficient number of channels. However, is this really the case?

It is reported that from June last year to the end of the year, Avita basically completed the layout of 200 touchpoints. However, Avita’s official disclosed locked orders last year was only 5,000 vehicles. Obviously, Avita has fallen into the inefficiency of “having a store but no order”. Therefore, even if Avita increases its touchpoints to 500 as Zhu Huarong wishes this year, it may be difficult to complete the target of 100,000 orders.

The reason for having a store but no order is either insufficient product strength or shortcomings in marketing. Though backed by “CHN”- Changan, Huawei, and CATL (Contemporary Amperex Technology Ltd) which are three giants, Avita will never admit that it lacks product strength. Even if there is a problem with product strength, it is due to insufficient exploration of product strengths and insufficient marketing effort. Therefore, whether it is insufficient product strength, or marketing effort is not enough, the problem points to marketing.

Previously inadequate marketing had become the key to Tan Benhong’s review of the current passive situation of Avita, as well as the key to breaking through this situation in his view.

At the end of October last year, Wang Lin, the former Chief Marketing Officer of AVITA, was rumored to have left the company, which was later confirmed by AVITA. Although AVITA officially stated that it was for personal reasons, the industry believed that the reason for Wang Lin’s departure was due to the slow progress of AVITA 11 under her leadership.

“Yes, actually we have been saying that we are slow in the broad market. The slowness has its reasons. We prefer to be steady and pragmatic. In fact, our products have been upgraded several times, and there are many designs behind this design.” As early as the Guangzhou Auto Show in 2021, Wang Lin had explained the reason for the slow market promotion of AVITA 11, with her own grievances.

At the end of December last year, Tan Benhong appeared to have reflected and summarized the slow progress of AVITA 11 in the early stage. He said, “Compared with AVITA 11, we hope that the pace of the second car can be more compact.” In any case, Wang Lin’s departure directly declared the initial failure of AVITA’s marketing. However, can the failure of a strategy be attributed to Wang Lin alone?

The reason behind the failure may be due to the fact that the new AVITA team is in a period of just forming and is not strong enough. It may also be because the high-end brand Wang Lin yearns for using the “slow-cooking method” is difficult to adapt to Zhu Huarong’s requirement to achieve rapid breakthrough in the market. It is also possible that Wang Lin has more experience in operating mature or luxury brands such as Apple and Chanel, but is not suitable for a new brand like AVITA.

In Tan Benhong’s view, maybe the third party is more involved. This is because in the new generation of AVITA’s marketing leadership team, both Li Pengcheng, who was poached from XPeng, and Chen Zhuo, who was transferred from Changan, are veteran auto marketing people. However, can replacing them with auto veterans make it possible to achieve 100,000 orders? It’s definitely not that simple. Regardless of the situation of the new team’s formation and its combat effectiveness, how to leverage and shake the market is also a huge challenge for AVITA at present.

Therefore, the next move quietly arrives.

Embrace Huawei to Increase Sales Through Branding

Rolling back the clock to May 20, 2021, Changan Automobile released an important announcement, announcing that its holding subsidiary, Changan NIO, officially changed its name to AVITA. The announcement emphasized that AVITA will operate independently and develop independently, join hands with Changan Automobile, Huawei, and Ningde Times to create a globally leading, independently controllable intelligent electric network-connected vehicle platform, build a rich series of intelligent automobile products, and construct a “People-Vehicle-Home” smart life and energy ecology.In terms of business strategy, Changan emphasizes the independence of the WEY brand. However, the specific connotations and boundaries of this independence are not clear. For example, does WEY’s entry into Huawei’s offline channels comply with the scope of independent development? Is this contradictory to the original intention of independent development?

“If we talk about independent brand operation, our positioning revolves around our target market and target users. Our philosophy, entire emotional and intelligent, electric vehicle user needs theory,” said Wang Lin. Although slow-paced, in Wang Lin’s view, WEY’s independence is thorough. “The team I lead provides end-to-end full lifecycle services to our customers, including brand, marketing, sales, and experience, both online and offline, from mind to senses.”

Compared with Wang Lin, Tan Benhong is not so persistent in WEY’s brand independence. Survivalism is his top priority. It can also be understood that because Tan Benhong is experienced at Changan, traditional self-owned brands have always focused more on survival than brand. For example, with respect to Huawei, which is extremely sensitive to various host factories, Tan Benhong has a particularly open attitude. In October of last year, when Wang Lin was rumored to be leaving WEY, another story of WEY entering Huawei’s flagship store suddenly broke out, and subsequently, both rumors were confirmed.

One in and one out seems contradictory, but it actually makes sense.

When entering Huawei’s flagship store, WEY lost its “soul” and voices of concern arose. In this regard, Tan Benhong explained that “the model for WEY’s entry into Huawei stores is ‘people and goods are ours, the system is ours, and the venue belongs to Huawei.’ We are not just making cars for Huawei to sell, but they are helping us as our (sales) channel scale has not yet fully been achieved. However, Huawei cannot replace us completely.”

Entering Huawei’s channels may seem like a last resort to Tan Benhong, but in fact, it is completely untenable. As mentioned above, the core issue of WEY currently is low brand awareness and weak marketing, rather than a shortage of channels. If WEY enters Huawei’s channels and even obtains 100,000 orders this year, it is mostly for “Huawei Auto,” not for true WEY brand value users who truly love and support WEY.

Branding cannot be achieved at the expense of sales.

“I have been in the car industry for 24 years and understand a fundamental principle: we must follow a long-term strategy. Just like top marathon runners, the first one to run out of the starting blocks isn’t necessarily the winner. The success of a brand in the future depends on several factors such as its positioning, technology, underlying capabilities, and user perception. Each step needs to be taken carefully, one at a time.”

It’s unclear whether Tan Benhong remembers his own words, but he certainly understands the implications of his actions for the Avita brand compared to Chen Hong’s concerns for SAIC’s “soul.” Why didn’t Tan decline Huawei’s offer? Is Avita not entitled to its own “soul”? “The cultures and spirits of both companies (Avita and Huawei), including the disposition of their employees, complement each other. Driven by a common philosophy and set of values, both parties work together to provide customers with the best products.” Perhaps from Tan’s perspective, Avita is already part of the “Huawei Automotive” category.

Therefore, Avita’s entry into Huawei’s channel is better described as “relying on Huawei Automotive’s reputation” than simply renting its channels. Unfortunately, Tan Benhong’s plan did not go as planned. Because Avita’s previous partnership with Huawei was based on the HI model rather than the smart car model, Avita can only rent Huawei stores to showcase its products, without the ability to sell them or benefit from the promotion and excitement of “Huawei Automotive” stores.

Of course, the situation is fast evolving. In February, Tan Benhong met with Yu Chengdong twice. At the second meeting, Yu Chengdong even attended Avita’s user event on behalf of Huawei. Avita is “Huawei Automotive,” and its brand identity is becoming increasingly clear. Yu Chengdong stated that “Huawei has already integrated the Avita brand into its DNA, and this will not change because of any individual’s job changes.” Yu Chengdong’s every move strikes at the heart of the Avita brand.

Tan Benhong’s goal is to make Avita the centerpiece of the automotive industry, but is Chang’an Sailes? Will Zhu Huarong be the second Zhang Xinghai?

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.