Writing by | Jean
Editing by | Leng Zelin
In the US market, Rivian, which once soared to become the third largest car company in the world, is now struggling in the production capacity hell after its popularity has declined. Lucid Motors is one step behind and is expected to enter China next year, while ELMS has declared bankruptcy.
The name of “Tesla killer” spreads throughout the industry as new brands take advantage and attract capital attention, aiming at or competing with Tesla.
Although Tesla has gone global, it still faces “assassins”, especially in the Chinese market, which is the most fertile soil for new energy. For the first time, it has experienced protagonist-like “treatment”.
In 2014, Tesla started delivering Model S in China. In the two years that followed, over 200 new local brands emerged in China’s electric vehicle market, giving rise to the most “Tesla killers”.
In the midst of market noise and capital influx, most of these “Tesla killers” remained on PPT and the “selection” of China’s new energy race surpassed everyone’s imagination at a rapid pace.
With the entry of the Internet and the transformation of traditional car companies, China has launched a second “new car-making movement”. Tesla is still the target of many peers, but this time it is not just talk, but products.
Tesla’s “fortress of wealth” becomes the target
In the first half of this year, Tesla’s net profit reached USD 5.55 billion. Although not the best-selling brand in the new energy vehicle market, Tesla is the most profitable car company.
Model Y becomes Tesla’s best-selling model with 314,921 vehicles sold, followed by Model 3 with 219,098 vehicles. These two models are the absolute main force of Tesla’s sales, with a price range of CNY 279,900 to 417,900.
Clearly, this is Tesla’s “fortress of wealth”.
In Q4 of last year, Tesla’s gross profit margin reached 30.6%, and in Q1 of this year, it reached a record high of 32.9%. Ideal Auto, a new local brand with a relatively high gross profit margin, had a data of 22.1% in the first half of this year.
Although Tesla’s advantage in global scale reduction and efficiency improvement is obvious, 300,000 to 400,000 yuan is enough to support good sales and profitability, becoming an area that other car companies are vying for.
In the first round of the soft siege, most of the new local brands disappeared, and those that survived are busy keeping themselves alive. Traditional car companies are generally slow in following up with transformation. Even BYD, the most competitive brand, has non-overlapping price ranges of its sales mainstays, Song and Qin series, with Tesla.Tesla’s growth environment was relatively comfortable and met with little resistance, easily breaking through in the first round of the battle, and starting to eat up the market share of the BBA brands.
In the second round of the competition, not only did returning players who made it past the preliminaries participate, but also new players and seasoned veterans with a completely new look.
The slogan “Beat Tesla” is heard less and less, but there are more and more products competing with Tesla’s offerings.
Although manufacturers have different development strategies and needs, they all are aiming for Tesla’s wealth. For example, Nio, which is going downmarket and still climbing, and BYD, which is targeting high-end customers.
Last year, Nio’s ES8 sold more than 2,000 units in just two months, but the sales numbers continued to decline from January to July of this year, averaging fewer than 2,000 units per month, and dropping to below 1,000 units in May and June.
The high cost of the battery-swapping model requires large-scale production and share among car models, which the ES8 does not meet. But as a flagship model in Nio’s high-end strategy process, the ES8 still plays an indispensable role. However, the ES6, which overlaps with Model Y in price, also showed a downward trend in sales and is difficult to stand alone.
Before Nio launched its third brand, the ET5 with the lowest starting price would bear the responsibility of high sales volume and fill the gap in Nio’s entry-level car products to compete with Tesla’s Model 3.
The starting price of the ET5 was not close to that of the Model 3, but nearly 50,000 more expensive to maintain its “proud stance”. The battery-swapping mode is not currently affected by the subsidy withdrawal policy, and Nio is not in a hurry to launch a model in the under 300,000 yuan price range, as a large decline in price would not be favorable for maintaining the brand’s high-end positioning.
On the one hand, Nio has expanded its product line in the 300,000 to 400,000 yuan range at a lower cost than many of its competitors, which is a natural advantage that many of its peers do not have, such as BYD, which urgently needs to move upmarket.
In the first half of this year, although BYD won the global sales championship in new energy vehicles, its estimated net profit was only 2.8-3.6 billion yuan, about one tenth of Tesla’s net profit.
The Song and Qin series of models each made up the bulk of BYD’s sales, with 162,600 and 146,500 vehicles sold, respectively. Compared to Tesla’s two main models, the price difference is significant and the ability to create net profits is limited. BYD’s product pricing has been conservative for a long time, which is the fundamental reason for its weak brand.
Being associated with the BYD logo means carrying some of the parent brand’s historical baggage. The Ocean series may only be a primary cushioning solution. Although the top-of-the-line Dolphin model is priced nearly 20,000 yuan more expensive than the Model 3’s starting price, in reality, its entire price range overlaps significantly with the Han series.The intuitive factor is that BYD is worried about the recognition of the Wangchao series internationally, while the overall design of the Sea Lion undoubtedly has more advantages in globalization and youthfulness. This is more like the global version of the Han series, rather than a simple product of brand promotion.
BYD is planning a large-scale entry into the market of vehicles over 300,000 yuan, and launching a new high-end sub-brand may be more effective. Maintaining certain independence in terms of logo, technology platform, distribution channels, quality control, and brand positioning is just a matter of time for BYD, which has a solid foundation.
The current goal of mainstream domestic automakers is still Tesla’s territory. Related models such as the Avita 11 with a pre-sale price of 3.499 million yuan, the upcoming Xpeng G9, as well as the early entry models such as the Voyah, Zeekr, NIO, and Ideal, have already taken up their positions in this price range.
Everyone has abandoned slogans and prepared their “weapons” for the second siege against Tesla. Armoring to the teeth with piled materials has become the basic operation of domestic automakers. Differentiation is the core competitiveness.
Differentiated Attack of Domestic Brands
Tesla is not invincible for mainstream automakers.
Tesla’s main advantage currently comes from its pioneering: it has occupied a high-end brand position in consumers’ minds with its status as the terminator of gasoline cars and refreshing product design, which has been one of Tesla’s core competencies for a long time.
In addition, its ability to reduce costs and increase efficiency is also a factor. According to Tianfeng Securities, Tesla’s production capacity will reach 2.4 million vehicles by the end of this year. The commonality rate of parts for the two best-selling models, Model 3 and Y, is about 75%, and Tesla only has four models, so the development and maintenance costs of software and hardware are relatively low.
In terms of technology, Tesla’s self-developed three-electric powertrain has a deep starting point and is the first automaker to self-develop and mass-produce autonomous driving chips. FSD was once at the forefront of the industry in terms of computing power.
However, Musk has been unable to fulfill his promise to achieve Level 3 autonomous driving for Tesla models, and accidents caused by its autonomous driving assistance functions have occurred one after another. Regardless of whether FSD’s performance parameters are leading or not, there is no essential difference in actual use compared to L2 models.
In addition to BYD, which has started to develop autonomous driving chips on its own, other competitors have also demonstrated varying degrees of R&D capabilities. For example, Leading Ideal, which also has the ability to self-develop three-electric power systems, has launched its automobile-level AI chip Lingxin 01.
Tesla’s technological advantages have not been fully reflected, and it is also facing a host of competitors who are accelerating their development. In terms of product design, as domestic automakers have made progressive leaps forward in recent years, Tesla is no longer unique.
Tesla’s lead in areas and scope is shrinking, while competitors’ actions are becoming faster. The tactics of the two sides are clearly different: Tesla is “patching and mending” while traditional domestic automakers are “preparing for the banquet.”Most traditional domestic car makers started with low-end models and faced significant challenges in building their brands up. For instance, Changan’s UNI, BYD’s Ocean, Geely’s JiKe, and Great Wall’s WEY all have price tags that are relatively conservative, unable to achieve pricing comparable to Volkswagon’s Passat or Audi A4.
Changan Shenlan is a typical example. Leaving aside the current high cost of the hydrogen fuel cell version of the vehicle, the top-spec electric model sells for 215,900 RMB, more than 60,000 RMB cheaper than the entry-level Model 3. The fundamental reason is that Changan’s brand is in a weak position, making it difficult to compete directly with other models.
Shenlan’s body size is larger than the Model 3, its chip is equipped with the Qualcomm 8155, and its top-spec model theoretically adds 150 km of range compared to the entry-level Model 3. Even the tire specifications are one size larger than the latter, and Shenlan is meticulous in presenting its features where users can easily perceive them. It corresponds to the user’s sensitivity to price, the rigid demand for car body size, and the satisfaction of vehicle performance and visual appearance.
Shenlan’s choices are distinctive, such as its selection of the conservative L2 hardware standard for autonomous driving and a single-motor layout delivering just over 200 hp of power. Compared to the aforementioned three tiers, Shenlan allows users to spend less than 60,000 RMB while offering more grounded configurations.
This represents one approach taken by traditional domestic brands in response to Tesla’s product direction, such as BYD’s “sea lion.” Despite not using the top-of-the-line car computer chip, BYD has successfully managed to offer a higher price tag than Shenlan due to its markedly superior technology.
However, this does not apply to the emerging new forces that do not carry the historical baggage of brand recognition. They have more expansive brand positioning spaces and pricing intervals, preferring a “goalkeeper tactics” that emphasizes multi-level superior configuration with price positioning in mind.
NIO and Li Auto have long been anchored above 300,000 RMB, while the expected price of the Xpeng G9 is around 300,000 RMB, and the price of the NETA S ranges from 200,000 to 330,000 RMB.
The NETA S pure electric 650 four-wheel drive flagship version, with a dealer price close to 280,000 RMB, has several advantages in various aspects compared to the rear-wheel drive version of the Model 3. Four-wheel drive is a hard-core advantage, and the NETA S has many advantages on paper, such as Head-Up Display, front seat massage, central control size, millimeter-wave radar quantity, and 540-degree holographic image, among other features. The starting price of RMB 199,900 for the extended range version is similar to Changan Shenlan’s differentiated competition with Model 3, but its high-priced configurations crush competitors. Both intervals are targeted at products of higher prices, with a “solid defense.”### Translation
Brand differentiation is undoubtedly more apparent in the “upgrading” attacked by some brands. NIO is currently the only high-end swappable battery brand, and Li Bin’s years of brand marketing are undoubtedly successful. The ideal of range extender has deeply rooted the concept of “mobile home” in people’s hearts. With L9, it continues to attack the luxury market.
In addition, in recent years, there have been cross-industry collaborations among head manufacturers in the market. Apart from WENJIE, there is also the Avita 11 jointly developed by Changan, CATL and Huawei, which tend to anchor a certain price level of above RMB 300,000 for “standstill output”.
Whether it’s body size, functional configuration, or body design, they are all differentiated from their opponents. The obvious difference between the two products can be seen with the naked eye. Tesla Model Y has only the advantage of brand volume left. As for sales, it is not anxious about success or failure in a moment.
First of all, the collaborators are profitable manufacturers with relatively stable funds. They not only do not carry the capital pressure like the new forces, but also maintain their other profitable product lines. This creates more opportunities for the new brand.
In addition, “casting a wide net” is also the confidence of such manufacturers: Unlike new forces that can only choose one product form, traditional automakers can choose “not to be biased”. Huawei provides software, Ningde Times provides batteries, and theoretically complement each other’s advantages.
The main force in the second round of competition with Tesla is likely to shift from new forces to traditional automakers. Rather than besieging Tesla, it is more of a growth path for traditional automakers, which means they will inevitably have a tough battle with Tesla.
People often say that “Tesla is strong as iron, while new forces flow like water.” Nowadays, both new forces and traditional automakers have made unprecedented preparations in terms of brand volume, product matrix, price coverage, and product power.
Tesla continues to dominate the market with four models, and the increase in product power is not significant except that it has joined the AMD family. It doesn’t seem so impeccable as it did in the early days.
In the second round of the battle, it is difficult to tell who will become the “flowing force”.
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.