Markdown Output

Author | Leng Zelin
Editor | Wang Pan

As the bell of 2022 is about to ring, looking back at the new energy vehicle market of the previous year was much more lively than the cold winters of previous years. There were bankruptcies, rebirths, independent brands, and new entrants. Of course, there were also those who broke 10,000 vehicle sales per month. Among them, November marked a turning point when NIO, Li Auto, and XPENG Motors all achieved monthly vehicle sales of over 10,000 units for the first time.

Although they all exceeded 10,000 units, their quality was not the same. NIO and XPENG both have three models available for sale, making Li Auto’s single model particularly eye-catching. From initially being questioned to proving itself, Li Auto can indeed be a little proud.

A few days ago, Li Auto’s CEO, Li Xiang, shared a picture on Weibo with the caption “thanks for pushing me forward, will continue to work hard”.

However, there is a “brave dragon slaying” story hidden under this simple graph.

The Li One started delivery in late 2019 with sales only one-thirteenth of comparable Volkswagen models. Even after sales increased threefold in September of the following year, there was still a huge difference compared to Volkswagen. At the time, the range-extending technology adopted by Li One was even criticized as the “worst solution” by Volkswagen China CEO Feng Sihan.

However, as the saying goes, “do not underestimate young people because of their lack of experience or poverty.”

This year, the positions of the East and West rivers have been reversed. After the launch of the new Li One in May, Li Auto’s deliveries climbed several steps in a row, and in November, it even surpassed the combined sales of large SUVs of the Volkswagen brand with a terminal actual sales volume of 13,438 units.

This year’s Li One deliveries are expected to approach 90,000 units, a year-on-year increase of nearly 280% compared to last year’s delivery volume of 32,000 units. Looking back at Feng Sihan, who criticized range-extender technology last year, he is about to leave China with regrets in a situation where both North and South Volkswagen new energy vehicle sales are poor.

The popularity of Li One makes people re-examine the century-old technology of range extenders. Range extender models such as the Voyah FREE, Seres SF5, and AITO Qianjie M5 have also begun to compete for market share. I do not know if this can be considered a “renaissance” for new energy vehicles.

Interestingly, looking back at Li Auto’s development process, it seems to have both attracted some electric vehicle users and taken away a batch of gasoline vehicle users.

Expanding the User Base

When it comes to XPENG P7 or NIO ES6, you can easily find a bunch of their competitors among new energy vehicle models, such as BYD Han, Model 3/Y, etc. But when it comes to Li One, most people have already placed it as their first choice among all mid-to-large SUVs, competing with traditional gasoline models such as the Highlander and Tuowang.Currently, there are 8 cities in China that have implemented restrictions on car sales. If someone wants to buy a second or third car, they often have to obtain a fuel vehicle license through a lottery or bidding process. Meanwhile, other first and second-tier cities have been incentivizing consumers to purchase new energy vehicles through tax exemptions, subsidies, and non-restriction policies.

For those who test drive electric vehicles, they usually already know that they will be purchasing an electric vehicle before making a decision on which brand or model to choose. Tesla, XPeng, NIO, and other brands have stated that the majority of test drives involve other electric vehicles, which means that the target consumer group for brands like Tesla, NIO, and XPeng are often the same and only differ in terms of the amount of market share each brand can capture. At the same time, this target consumer group is also constantly expanding.

However, Li Xiang, the founder of Li Auto, has explored a new group of users outside the target consumer groups of brands like Tesla, NIO, and XPeng. The biggest difference is that these users are directly taken from traditional gasoline-powered vehicles.

According to a Li Auto salesperson who spoke with media outlet Guanzhi Planet, most Li ONE owners have test-driven fuel vehicles such as Toyota Highlander and Volkswagen Touareg. Therefore, even though some Li ONE owners have test-driven NIO and Tesla, a considerable portion of them have also test-driven fuel vehicles of the same level.

Furthermore, according to cumulative data from August to December 2021, luxury brands accounted for 30% of the top 10 old car brands that were exchanged for Li ONE. The top three brands exchanged for Li ONE were BMW (7.7%), Mercedes-Benz (7.6%), and Audi (6.7%). The most replaced car models for Li ONE were BMW 3 Series and Mercedes-Benz C-Class.

In addition, comparisons between Li ONE and other fuel vehicles can be seen everywhere on the internet. Has Li ONE really taken over the gasoline-powered car market? Let’s look at the sales data for Beijing in November of this year:

In the national midsize SUV market, Li ONE sold more than 8,000 units in November, exceeding the second-placed Volkswagen Touareg and even the sum of the first five models. In the sales ranking of midsize SUVs in Beijing in November, Li ONE was also ranked first.Translate to English using professional language and retaining HTML tags inside Markdown:

To know, Beijing has never been an ideal location for purchasing the Ideal ONE, as one needs a fuel car license plate in addition to their regular license plate. The city also has restrictions on driving based on the last digit of your license plate. Without the advantage of special license plates, the Ideal ONE competes on an equal footing with gasoline-powered vehicles, and its sales performance reflects its real competitiveness.

According to the number of insured Ideal ONE vehicles in November this year, the five major cities in China where car owners can enjoy favorable license plate policies include Shanghai, Guangzhou, Shenzhen, Hangzhou, and Tianjin, with a total of 3,138 insured cars, accounting for 23.4% of the total. The number of insured cars in cities that do not enjoy plate policy amounts to 10,300, accounting for 76.6% of the total. Meaning that more than 3/4 of Ideal ONE’s sales come from competing with gasoline-powered cars.

Gasoline and Electricity are not contradictory

Those who have driven an electric car know that its strengths and weaknesses are quite evident. The advantage mainly lies in the driving experience, while the disadvantage lies in the limited battery life. In contrast, most gasoline-powered cars have poorer power but stable endurance.

Looking at various reports on new energy vehicle users, the factors that lead to the purchase of new energy vehicles are nothing more than good power/quietness, low vehicle operating costs, no license plate limit, and no restriction on the road. These concerns, in turn, will never escape the issue of battery charging and endurance.

Although many car companies are introducing electric vehicles that can achieve a thousand kilometers of endurance, the truth is that the larger the battery, the higher the price, and the marginal benefits have yet to be verified by consumers.

In addition to the limitations of battery life, the current energy supplement system only further exacerbates the anxiety of electric cars’ battery endurance.

Recently, CCTV reported the issue of difficult charging in Beijing in winter. Crowded lines at charging stations that aren’t collecting parking fees, and full charging stations that charge the same as parking fees has lead to the heartache of car owners. Some car owners even get up at 4 am in the morning just to get priority charging access.

It is important to note that this is only in first-tier cities, while most of China’s charging stations are concentrated in first and second-tier cities, as well as southeast coastal cities, but the situation is worse in the western region and second/third-tier cities.

When we focus on cities, charging stations still have different layouts. Since the development of city centers is not balanced, most old residential areas are not suitable for housing charging facilities. Additionally, urban planning parking spaces lack coordination, which leads to charging poles being installed in more sparsely populated areas.

However, this causes another problem in which there are more charging stations in suburban areas, but the utilization rate is still low, and the number of charging poles in urban areas is relatively small, while charging demands tend to be higher. While the number of charging poles has reached a ratio of 3:1 nationwide as of September this year, the overall utilization rate of public charging stations is still less than 10%. This means that when it is dry, it’s so dry that people die, but when it is flooding, people also die.

On the other hand, as the temperature drops, the mileage of electric cars increases, but a natural disadvantage of EVs is battery attenuation.In the recent winter endurance test conducted by DCD, nearly 40 models achieved a range completion rate of around 50%. The EC6 (2020 version, NEDC 615km) achieved the highest range completion among those tested, with a practical range of only 336.9km.

Ideal One, a plug-in hybrid vehicle, strikes a balance between advantages and disadvantages of both electric vehicle and gasoline vehicle, which is quite different from other automakers who have adopted this technology but struggled to achieve sales like Chevrolet Volt and BMW i3.

Why does Ideal insist on developing this technology even though it remains unproven in the market? In the past, plug-in hybrid vehicles were often viewed as a product for technology enthusiasts – advanced technology would lead to high sales, while obsolete technology would result in poor sales. However, Ideal is taking a different approach: they are focused on customer experience, regardless of what industry professionals may think about this technology.

While some may dismiss Ideal One as a marketing gimmick, many car owners who have tested the vehicle have praised its dual engine design, which enables them to run electric power for city driving and switch to gasoline for longer trips with no range anxiety.

Overall, Ideal has successfully combined the advantages of both electric and gasoline vehicles and produced a hybrid that represents an ideal solution for many consumers.

Looking forward, it is widely believed that the future of the auto industry belongs to pure electric vehicles. Nevertheless, Ideal believes that ten years or more may pass before the infrastructure for pure electric vehicles is fully established, during which time plug-in hybrid vehicles like Ideal One can effectively bridge the gap.

In larger cities, the adoption rate of fully electric vehicles is noticeably higher, which can be attributed to a more progressive attitude toward consumption and infrastructure improvements. However, for smaller and more rural cities with inadequate charging infrastructure and lower acceptance of new technology, gasoline vehicles remain more popular.

In general, new auto companies tend to focus on larger cities and coastal regions for their own or joint venture operations, and such areas have seen rapid growth in the adoption of new energy vehicles.According to the data, the market share of new energy vehicles reached 20% in November 2021. The penetration rates of new energy vehicles in first-tier, new first-tier, and second-tier cities were 33.9%, 24%, and 19.8% respectively, which were basically above the average level. However, third and fourth-tier cities were mostly below 17%, and many of them had not even exceeded the single-digit level.

Just like the average salary which is often criticized by netizens, a small group of people control the majority of social wealth, while most people are just the average one.

How many cities are there in China? As of September 2020, there are 672 cities, of which first-tier, new first-tier, and second-tier cities account for only 7.4%, with a total of 49 cities. This means that there are still many cities that have not been touched by the new energy vehicle boom, and this part of the market is the long-tail market that ideal is targeting.

According to the sales situation of NIO and Ideal across the country in November this year, NIO has a high penetration rate in the Jiangsu, Zhejiang, and Shanghai area. Half of the top ten selling cities are in the Yangtze River Delta area. In addition, the top eight selling cities account for more than 50% of the total sales. In contrast, Ideal is more evenly distributed. Except for being able to sell their products anywhere with extended range technology, their product power can also support their competition with traditional fuel cars in cities that are not eligible for license plate policies like Beijing.

Overall, ideal has sold a total of 77,299 vehicles from January to November this year. The top 20 cities contribute 70% of the sales, while other cities, although they have low sales of new energy vehicles and small contributions per city, have a large quantity of sales, which contribute 22,973 vehicles.

In November, the ideal One became the first single model of a new power car to exceed 10,000 vehicles sold, and also the first Chinese brand car in the 300,000 yuan level to exceed 10,000 vehicle sales. The long-tail market that pure electric vehicles have not yet reached played a significant role in this.

In conclusion, Li Xiang’s ambition for ideal ONE is grand. Their customer profiles are clear and target audiences are concentrated, which is why ideal ONE is known as a family-oriented car. However, it is not small at all to try to gain a foothold in the new energy vehicle market through a single product, and Li Xiang has indeed done so.

Although Ideal ONE’s extended range technology may seem like “heresy”, it actually works with three legs- electric vehicles, traditional fuel cars, and the long-tail market- to help ideal win the championship.

The success of ideal ONE also prompts reflection. Perhaps the method used to achieve growth in the development process is not important, but the consumer experience is. However, many people reverse the logic, like companies that make cars using PPT, who always strive to present the process to consumers while ignoring the final result. This is also a common problem in many automakers.Consumers will not pay for how you implement things, but only pay for their end experiences.

Li Xiang has redefined the role of the product manager in the traditional automotive industry, and has explored his ideal differentiated approach in a situation where new energy homogenization is severe.