Source: Gelonghui

In 2023, the NEV circuit experienced reshaping, and no one could have anticipated this year's ups and downs at the beginning of the year.

At the beginning of the year, a fierce price war swept through the entire car market, and because of the price war, car companies are speeding up survival of the fittest in an increasingly internal market.

Some car companies are disappointed to leave, and some car companies seize the few remaining ferry tickets. Huawei used “far ahead” to prove its strong technical strength and brand recognition. Can the Xiaomi car that stepped on its tail and released the SU7 perfectly fill the final piece of the puzzle in the Xiaomi ecosystem...

In the first 11 months, domestic passenger car sales increased 9.3% year on year, domestic passenger car sales increased 2.7%, and passenger car exports increased 65.1%. China reached the milestone of the highest number of automobile exports. While you were catching up with me, car companies joined the “wave of going overseas”. There was a large fleet, and the wind and waves quietly grew louder.

Domestic sales of new energy vehicles reached a total of 8.304 million units, an increase of 36.7% over the previous year. The penetration rate (35.7%) increased significantly compared to 28.49% in the same period last year. With the increase in extended-range models, hybrids have become the new favorite of consumers this year, and the gap between sales and pure electric vehicles has doubled.

The wonderful changes experienced by the car market this year are indescribable. Just as particles continue to collide and cause fission, a new order is being re-established. It is likely that the tone of next year's price war will continue, but the two knockout games of electrification and intelligence have been merged into one. Companies that can survive must have no shortcomings in either.

01 Price war throughout the year

The 2023 price war can be described as a battle of succession, spanning the car market for all types of models and price segments.

From the price adjustments at the beginning of the year, fuel vehicles in the middle did not hesitate to cut prices drastically and get out of inventory before the policy window closed; in the second half of the year, car companies were still squeezing out discounts. By the end of the year, channels and car companies were desperately trying to catch up with sales targets, and the smoke never dissipated...

In January, Tesla took the lead in igniting the “flames of war” and launched what can be called the most vigorous concession campaign in history. The price of the domestic Model Y version was reduced by as much as 48,000 yuan. Immediately after that, AITO asked the world, Xiaopeng, and others followed suit. Ideal and BYD have launched an entry-level model with a lower price, which is also seen as a disguised price reduction.

This is still just an appetizer.

In March, the Dongfeng 4S store in Hubei was full of people. The Dongfeng Citroen C6 was directly reduced by 90,000 yuan after joint government and enterprise subsidies. The countdown to the national 6B forced the fuel car to go to storage at the speed of life and death.

Car companies may have realized that competitive barriers built up by so-called differentiation in products, services, and positioning are not as effective in the short term as cutting prices; instead, they are safer to take the lead in firing bullets. Price cuts have swept across the region and across the country. More than 49 car companies, including FAW, SAIC, Chery, Changan, Beijing Hyundai, and SAIC Volkswagen, have joined the subsidy war.

Without cutting prices or promoting new cars, it is extremely easy for car companies that move slowly to become passive.

NIO 4-5 sold less than 10,000 units for two consecutive months, and previous promises not to cut prices came to naught. In the second quarter, NIO's entire line dropped 30,000 units, and only then did sales gradually pick up.

In addition to the price war in the first half of the year, car companies were overly optimistic about the market and had a large backlog of new car inventories. The decline in policy subsidies also meant that car companies would have to make every effort to reduce costs in the future. After all, there will be no steady stream of bullets.

However, once compared to price cuts, consumers don't necessarily want to buy early and get a discount; instead, they hold coins and wait and see when the price can be cut to a minimum, which seriously harms sales and prices.

On July 16, car companies jointly signed a pledge to guarantee that prices would not be maliciously reduced, but the terms were removed after not being maintained for long. Tesla's lead “backstabbing” still brought the car market back into the atmosphere of a price war.

Entering the third quarter, in order to prepare for the “Golden Nine Silver Ten”, more than 10 car companies, including SAIC Volkswagen, Zero Run, Tesla, and Nezha, increased their car purchase rights in the form of cash discounts and increased car purchase rights.

Some car companies have adopted the form of selling new cars at reduced prices. After the hardware configuration is upgraded, the cost performance ratio is outstanding. After the September facelift, the Xiaopeng G9 dropped 46,000 compared to the old model. Jiyue 01, which just went on sale in November and reduced its price, announced a direct reduction of 30,000 yuan for the entire series. Don't forget, there's also the remodeled Tesla 3/Y, which can enjoy up to 21,000 off.

The price reduction wave in the last month clearly showed some changes compared to the first half of the year. Independent brands, new forces, joint venture brands, etc. have all entered a sprint to meet annual sales targets or clean up old car inventories.

The tension also intensified as Celis asked the M9, and Xiaomi cars took turns, bringing their own traffic password as soon as they went on sale. Facing rivals that are about to come to the market and unfulfilled sales targets, pre-emptive pressure is put on car companies to release new cars, which can easily trigger a new wave of large-scale price cuts.

There is no absolute winner in the price war. The sacrifice of price in exchange for volume can be seen in Tesla's declining gross margin every quarter. Some manufacturers are even selling cars with negative gross margins, the shares and profits of joint ventures have also been hit by a double whammy, and some car companies have been left behind.

02 Some left in a hurry, some high-profile crosses the border

In 2023, the pace of industry reshuffle continued to accelerate, the division of new car builders intensified, and joint venture brands that could not stand up began to withdraw from the Chinese market.

In the past three years, the share of foreign car companies in the domestic market has declined. The Japanese market share fell from 24.1% in 2020 to 17.6% in the first half of 2023, a drop of 6.5%; the market share of German cars has already fallen 20%. It has been replaced by domestic independent brands, whose share has already crossed the 50% watershed.

Under heavy pressure, some car companies will carry out large-scale layoffs in 2023. The news revealed includes dozens of car companies including GAC Honda, Volkswagen, Volvo, Tesla, and Kia.

With the rise of independent brands in electric vehicles, foreign car companies were finally unable to continue on the path of “exchanging market for technology” in the past. The share of foreign brands was squeezed out and lost 50% of the dividing line. Either the transformation was too late or they did not have an advantage unique to China's automobile supply chain. The changes in the price war are full of suffering.

The knockout tournament has just begun, and the new car builders, Weimar and Byton, which were the first to get out of the game, have successively fallen over financial issues.

At the end of March of this year, the debt on Weimar's account was as high as 8.95 billion yuan. Only after a long period of insolvent debt made it impossible to cover up problems such as work stoppages, production stoppages, and wage arrears. At the end of October, it officially filed for bankruptcy and restructuring.

After Byton burned up 8.4 billion dollars, it was unable to complete the construction of the production line, so it was unable to deliver a mass-produced car. What was widely discussed at the beginning was that the new forces are rich. For example, Byton's 300 employees eat 50 million yuan of snacks a year, and the price of a box of customized cards for employees is thousands of yuan...

The number of car companies left behind is still increasing. Evergrande Auto, Singularity Auto, Reading Motors, Skyrim Auto, and Ace Auto have also entered the dilemma of not being able to start a business halfway. Cash flow is the foundation on which car companies can continue to compete in this price war, and startups lack the foundation to fight a protracted war.

As the supply of new cars in every price segment increases, competition for homogeneity intensifies, and racetracks will also become more crowded. This “last ferry ticket” has led to competition among cross-border mobile phone manufacturers. After two years and nearly 10 billion dollars in R&D, Lei Jun brought “the last entrepreneurial project in his life”, the Xiaomi SU7, to the technical conference.

Mobile phone manufacturers that build cars across borders themselves bring their own traffic, and also have a huge user ecosystem. As the space for mobile phone innovation gradually shrinks to continue the new product cycle through car construction, the application scenario of vehicle linkage can exert the synergy between the two businesses. The three OS systems created by Huawei, Meizu, and Xiaomi represent the three mobile phone makers' definitions of intelligent electric vehicles.

The only thing that raises questions is whether mobile phone manufacturers have settled down enough on electric vehicle technology. Especially this year, when internal pressure is intensifying, car companies have pre-installed a large amount of high-end hardware in new cars. The competitive point is shifting from electrification to intelligence, and they can only sell at lower prices. The automobile business not only faces high-pressure competition in the short term, but also has an impact on the main business performance.

Huawei has always maintained an “ambivalent relationship” with car builders, asking the new M7 as the highlight of his “Return of the King”. Since it went on sale on September 12, it has already sold more than 100,000 units. The intelligent S7, which collaborated with Chery, ordered more than 20,000 units at the end of November, sounding the trumpet of “far ahead.”

Apart from mobile phone manufacturers that have crossed the border, the new forces have actually made mobile phones in reverse. NIO officially unveiled its first NIO Phone in September. This is just one of NIO's many “side businesses”.

NIO's investment includes not only technology research and development, but also investment in heavy assets such as power exchange stations. The revenue from power exchange stations is greatly linked to NIO Auto's sales... Li Bin issued 1.15 billion US dollars of convertible bonds in September and October in order to run for capital, and recently received a strategic investment of 2.2 billion US dollars. This is the second time in nearly five months that he has received investment from the same agency.

At the same time, NIO has also begun a round of cutting back and forth, merging departments and jobs that have been built repeatedly, changing inefficient internal work processes and division of labor, abolishing inefficient jobs, and delaying and cutting investment in projects that cannot improve the company's financial performance within 3 years. The power exchange business also dawned a turning point with NIO's cooperation with Changan and Geely.

Another new force, Xiaopeng, is also experiencing self-reflection and remodeling.

The newly appointed “Iron Lady” Wang Fengying focused the changes on the marketing system, abolished Xiaopeng's original regional system, redivided more than 20 communities across the country, integrated the channel management of directly-managed stores and dealers, and transformed competition among channels into a rally race between regions. The initial results were seen after the adjustment. G6, which was launched in September, helped Xiaopeng's sales to pick up again.

With the reshuffle of car companies and product competition, more powerful players will stand out. Starting with the continuous release of the Huawei M7/M9, Zhijie S7, and Avita 12, the domestic electric vehicle market pattern has quietly changed, and the supernew forces formed by the three “Huaxiao” mobile phone manufacturers may pose the greatest threat to “Wei Xiaoli” in the future.

03 Where do car companies go?

The “blooming” of hybrids has become a catalyst for the electric vehicle market this year, and the rise of range extensions has also attracted various independent new energy brands to compete for layout.

Last year, hybrid sales were only about one-third of pure electricity. As range-extenders successfully balanced the two major bottlenecks of pure electricity in terms of battery life and energy supplementation, the gap with pure electric sales narrowed rapidly, and the monthly amount increased from 28.8% last year to 34.3%.

Continuously launching multiple extended-range electric vehicles (L7/L8/L9) has exhausted the ideal dividends, and sales and profits have hit a double whammy. Ideal Auto sold a total of 325,600 units from January to November 2023, which achieved this year's target earlier than other car companies.

However, when they originally came out of the market with range-extenders, they would ideally run out of limelight in the 300,000+ electric vehicle market. Until Huawei debuted with the M7, it also used extended-range electric technology in terms of power. The cost performance ratio was more outstanding, and the sales volume surpassed the ideal M7 in just two months.

Huawei's positive impact on ideals is a microcosm of the energy industry. The technology is constantly layered, and the market is becoming more and more advanced. The inner volume on the surface is the price; the inside of the inner volume is the technology on the inside. In this knockout match, electrification and intelligence are on the rise.

As we compete for charging speed and range, the threshold for a faster and more durable experience continues to drop.

The Taycan, the first 800V electric car produced by Porsche in '19, was still a million-yuan configuration, and by 2023, 800V had achieved technological parity. The Xiaopeng G6 and Zhiji LS6 have downgraded 800V high voltage fast charging to 200,000 models. The Geely Galaxy E8 and Polar Fox Alpha T5 go one step further, and cars of less than 200,000 can achieve 800V.

In terms of battery technology, Ideal MEGA's 5C Kirin battery claims to have achieved a battery life of 500 kilometers after 12 minutes of charging. In order to verify the battery life of his 150 kWh battery pack, NIO Li Bin personally spent more than ten hours live streaming this month. He traveled all the way from Shanghai to Xiamen. One battery ran 1,044 kilometers.

In terms of charging, the liquid-cooled fast charging solution proposed by Huawei can reach a maximum output power of 600 kW, which is as fast as “one kilometer per second” of high-speed charging.

Smart driving is another internal field. This year, car companies have launched a “roll map” model.

Car companies' assisted driving has moved from highways to NOA on urban roads. The breadth and depth of the map added points to consumers' smart driving experience, so car companies are scrambling to speed up implementation, and the trend of opening the book is like the “Battle of the Hundred Teams” on the Internet back then.

From Xiaopeng's opening of 50 cities by the end of this year, to the ideal 100 cities, to the country's urban coverage, even BYD, which had been slow to act until now, is starting to work hard on this. On the other side, domestic L3 road tests have already been liberalized, and BMW, Mercedes-Benz, and Zhiji have all obtained conditional L3 autonomous driving road test licenses in Beijing and Shanghai.

The competition gradually heated up, and car companies started a war of words. Huawei Yu Chengdong and Xiaopeng He of Xiaopeng Motors even fought back and forth a few times over the AEB (automatic emergency braking system) issue.

Advanced intelligent driving functions are still a major differentiator between popular models and high-end models, and additional fees are required for optional and upgraded models. However, with the introduction of new models and technology cuts, the threshold for consumers to reach high-end intelligent driving technology in the future will be lower and lower.

04 How to get through 2024

In the previous 11 months, China's total automobile exports reached 4.412 million units, continuously surpassing Japan and Germany as the largest automobile exporter. It is a foregone conclusion that the export volume will remain number one throughout the year.

With the rise of domestic new energy vehicles over the years, cost-effective electric vehicles have been exported to the outside world, and fuel vehicle exports to Russia have also grown rapidly. Exports of new energy vehicles increased by 83.5%, ahead of the overall market. The average export unit price is also rising. Especially this year, more high-end new energy models are entering overseas markets.

You should be proud, but that doesn't mean you're safe; this path can't always be straight.

Chinese car companies made a big splash at the Munich Auto Show in Germany in September, but it also made many European countries and car companies feel threatened. The policy of restarting the manufacturing industry under protectionism contradicts the backward reality of traditional car companies in the transformation of electric vehicles; they can only prevent Chinese electric vehicles from entering the European market through so-called countervailing investigations. Competition under unfair rules, supply chain costs and safety are challenges that Chinese car companies need to face.

The national automobile industry is undergoing an epoch-making transformation, and the attitude of Chinese car brands in dialogue with traditional car giants is different from the past.

“Competition” is used to describe the traditional powerhouse of the car industry's proper treatment of new energy upstarts. Since this year, “reverse joint ventures” have become a scenic route in the Chinese auto market.

Multinational car companies that have been questioned and are backward in terms of smart electric vehicles have begun a marriage with new car builders. Volkswagen bought 4.99% of Xiaopeng Motor's shares for 700 million US dollars, Audi and SAIC Motor Group reached cooperation, and Stellantis Group and Zero Sports have set up a joint venture.

Another type of cooperation, such as NIO and Huawei Auto BU, formed a larger scale through open cooperation, so that the original business could achieve self-hematopoiesis. NIO has successively reached power exchange cooperation with Changan and Geely; Huawei and Changan have established a new joint venture in the field of automotive intelligence. While inviting BAIC, Celis, JAC, and Chery to join forces, they have also thrown olive branches at FAW. It is rumored that Mercedes-Benz and BMW have even received invitations.

There is no division between wins and losses, and the battle will not end after just one year of fighting. In 2024, the penetration rate of electric vehicles is expected to exceed 40%.

Domestic electric vehicles have gone through a sweet period where the penetration rate is less than 10% to 20% or more. The high degree of homogenization of products has made all price segments more crowded, and the space to gain more share in exchange for price depends more on substitution and competition. This includes not only late new brands with poor capital and technical strength, but also traditional joint ventures plus foreign car companies.

The price of lithium carbonate has experienced a one-year decline, and now the price is close to 100,000. There is not much room for car companies to continue to reduce material costs. But will price cuts stop as lithium carbonate stops falling?

This does not prevent car companies from further reducing their profit margins in exchange for shares. The overall profit margin of the automobile manufacturing industry was 5% in the first 11 months of this year. We can clearly see the impact of this year's price war. Especially in the second half of the year when sales increased, prices fell more sharply, and profit growth gradually subsided with last year. If next year's knockout tournament intensifies, then the growth rate is far from bottoming out.

This is an all-round, undifferentiated battle between electric vehicles and fuel vehicles. From the low end to the high-end market, demand will be relatively insufficient. Once production capacity is released too much, demand will appear relatively insufficient. If they stay on the table, they will have to get used to the price war.

editor/tolk