A new round of price cuts for new energy vehicles has begun again.

This time it was the honors students who took the lead$Tesla (TSLA.US)$und$Li Auto (LI.US)$Tesla cut the price of the entire series by 14,000 yuan. Ideally, it would cut the main L model by 14,000 yuan to 20,000 yuan, and the unfavorable MEGA would directly cut 30,000 yuan.

1. The starting price of the Tesla Model 3 is lower than the Xiaomi SU7 Pro

There are various reasons behind Tesla's and ideal simultaneous price cuts.

After the decline in deliveries in the first quarter, Tesla stepped up price reduction promotions. Especially after the Xiaomi SU7 entered the market, competition became more intense.

In the first quarter of this year, Tesla's global delivery volume was 387,000 units, down 8.5% year on year, down 20.2% month on month; global production was 433,000 units, down 1.7% year on year and 12.4% month on month. This is the first time in Tesla's history that production and sales have declined both year on year and month over month.

Tesla's overall price reduction strategy revealed that the previous price increase of 5,000 yuan at the beginning of April was only to stimulate customers to pick up cars in the first quarter. The interest-free installment purchase and 14,000 yuan price reduction announced later were real promotional strategies. Since production is still higher than the number of orders, Tesla may continue to cut prices in the future to maintain market competitiveness.

The advent of the Xiaomi SU7 has put significant competitive pressure on Tesla. Orders for the SU7 have exceeded 100,000 in less than a week, and the number of locked orders has also exceeded 40,000, directly competing with the Tesla Model 3.

The price of the three versions of the Xiaomi SU7 was 215,900 yuan, 245,900 yuan, and 299,900 yuan respectively, while the price of the rear-drive version after the Tesla Model 3 was reduced was 231,900 yuan, which is not only the lowest price in history, but also lower than the price of the Xiaomi SU7 Pro.

Other NEV companies have also been affected by the Xiaomi SU7 and have launched price reduction promotions to deal with it.

On April 20, Xiaopeng introduced a 500 million yuan car purchase subsidy for its G9, G6, P7i, and 2024 P5; Extreme Krypton launched a rear-drive version for 007, which lowered the starting price to 209,900 yuan, plus an optional package discount of 20,000 yuan; Geely's Ruilan Auto reduced the price of the Ruilan 9 by 20,000 yuan; and NIO also announced the introduction of a fuel truck replacement subsidy of up to 1 billion yuan.

2. The ideal price reduction has nothing to do with Xiaomi, or is it aimed at old rivals

Although the release of the Xiaomi SU7 has had an impact on the pure electric car market, it is not a big threat to the ideal extended range market and veteran players with large models. Ideally, the main reason for this price reduction is to cope with the price cuts in the world in order to increase sales and get rid of the slump in sales in the first quarter.

In the first quarter of 2023, the ideal overall performance fell short of expectations. As the ideal first pure electric model, MEGA failed to become a new engine in sales, so the ideal was supported only by the sales volume of the L series models.

The total sales volume for an ideal quarter was 80,000 units, an increase of 52% over the previous year, but this growth rate has lagged behind the market for three consecutive months, and the sales gap widened from 1808 units in January to 2,743 units in March. Therefore, it is ideal to lower the annual sales target by 20%-30% to 56-640,000 units. Even with a minimum target of 560,000 units, the sales volume of 80,000 vehicles in the first quarter was just passing.

Qunjie continues to grow in terms of sales volume and promotion, and orders for the M series model are also rising. The M7 model launched a 20,000 yuan promotion in early April, and the number of orders for the M9 model has already exceeded 60,000 units. In this context, Ideal announced an overall price reduction of 18,000 yuan to 30,000 yuan for all models other than the L6 on April 22. In particular, MEGA, which has poor sales volume, will be reduced by 30,000 yuan.

After the price reduction, the price disadvantage of the ideal L series model was relatively reduced. The lowest prices for L6, L7, L8, and L9 are 249,800 yuan, 301,800 yuan, 321,800 yuan, and 409,800 yuan, respectively, while the lowest prices for the M7, M5, and M9 in the world are 229,800 yuan, 249,800 yuan, and 469,800 yuan, respectively.

There is relatively little competition in the extended-range and plug-in hybrid large SUV markets, but as competition in the overall market intensifies, more NEV companies are still choosing to cut prices to cope with competition. On April 1, after Wanjie M7 announced price cuts, competing car companies such as Great Wall Weipai, Rantu Auto, and FAW-Volkswagen also launched price reductions and promotions to varying degrees.

The price war in the NEV market is intensifying. This will accelerate the reshuffle of the market, and also provide opportunities for car companies that can stand out and enhance product competitiveness and brand influence.

Editor/Jeffrey