The new energy vehicle industry is experiencing significant events. A netizen has announced that WM Motor has started to suspend all employees without pay. Screenshots of online chat show that WM Motor's marketing department has been notified not to work from home and not to provide N+1.
On February 15th, an employee of WM Motor confirmed the rumor of unpaid leave to a reporter from The Paper. He stated that his department no longer requires him to work on duty, and his superiors no longer assign work. His salary has also been suspended, and he himself is looking for new job opportunities. Weima is not a small enterprise. Among the new forces in China's new energy vehicle manufacturing industry, Weima is an excellent enterprise in the second tier. The delivery volume in 2021 also reached 44000 vehicles. Weima has become a dangerous horse. But it's not just the Weima family facing the crisis. At the beginning of 2022, various new car making forces in China experienced a sharp decline in sales.
On January 6, 2023, after Tesla announced a price reduction, new car making forces plunged one after another. Hong Kong stocks Xiaopeng Motors and Ideal Motors fell more than 8% during the trading session, NIO fell more than 6%, A-shares BYD rose and fell back, and Hong Kong stock BYD stock plunged and turned green in the afternoon, closing down 2.6%. Wei Xiaoli, from the first tier, felt the cold winter coming. Weima from the second tier was immediately sent to the ICU. This killer god is Tesla. Musk has long stated that Tesla still has room for price reduction and is only waiting to reach production capacity. The price war launched at the beginning of this year, Tesla is telling the new forces in China that if they want to catch up with me, you may still be a bit inexperienced. Even with a size like BYD, facing Tesla's ruthless market grab, there is no choice but to follow suit and lower prices. The first tier has collectively lowered prices, while the second tier is in dire straits. Because the first tier may still have brand power to protect the body, while the second tier has always relied on price to win. You have brand, quality, and service, and now prices are also plummeting. The second tier cannot survive. Weima's current performance indicates that he is not strong in the first place and has even been stabbed. Being admitted to the ICU is inevitable, and there is even a risk of death. Although WM Motor has achieved annual sales of over 40000 vehicles, it is far from reaching the profit balance point and has incurred losses of over billions to date. A company that has invested billions of dollars may turn into nothing in fierce market competition. That's the question, how does Tesla lower its price? Why do two companies engage in a price war? In shopping malls, price wars are the most effective means of occupying the market and cracking down on competitors.
However, the price war is not entirely driven by enterprise losses and subsidies. This kind of price war can only be fought in the early stage of the industry, such as creating the online car hailing industry, or in a short time, such as the Alipay and WeChat payment wars, which cannot be sustained for a long time. But there are many companies in the world that have gained market share through price wars. For example, Gome launched the home appliance price war, Changhong launched the color TV price war, Lenovo launched the computer price war, Wal Mart launched the retail price war, Pinduoduo launched the e-commerce price war, and so on. Price war is so simple, isn't it just about lowering prices? Who wouldn't know? If you understand it this way, then you underestimate the ability of entrepreneurs. Entrepreneurs are not just about losing money and engaging in price wars. The new energy price war launched by Tesla not only did not result in losses, but it may also make a big profit. He launched a price war based on high gross profit margins. A car, he could have earned 80000 yuan, but if he reduced the price by 30000 yuan, he could still earn 50000 yuan. He sells at the original price and sells 10000 units per month, earning 800 million yuan. He lowered the price by 30000 and could sell 20000 units in a month, making him a profit of one billion. Lowering prices may also increase Tesla's total profit. Any enterprise does not pursue the proportion of gross profit margin for a single product, but rather the increase in the total profit of the enterprise. Under this driving force, continuous price reduction and expansion of market share are the basic models for enterprise development. Saying that a company sells at a low price is destroying the market and dumping at a low price, which is completely a misunderstanding of the company. Consumers are able to obtain goods at increasingly lower prices in this round after round of price wars.
Thirty years ago, the price of a color TV was 6000 yuan, but now the price of a 40 inch LCD TV is 1000 yuan, and the currency has depreciated many times. This is the result of the price war. But there is a prerequisite for fighting a price war, which is to reduce costs. Reducing costs is the foundation of price wars. The important reason why Tesla can lower prices is that its ability to reduce costs is too strong. Musk said that the cost of Tesla's next generation car is only half of the Model 3, and the production may be higher than the total amount of Tesla's current car products. At all stages, Musk is constantly seeking cost reductions. Tesla launched the 4680 battery in 2020, which reduces the cost of the new battery by half compared to the existing 2170 battery. As the most expensive single component in electric vehicles, the battery can save Tesla about 10% of the price. Tesla's technological upgrades in each generation are also helping to reduce costs. Taking battery cells as an example, from Panasonic to LG, to CATL and self-made batteries, the cost has been reduced. From Model 3 to Model Y, the amount of adhesive used for battery filling has been reduced by about 2/3. The construction cost of Tesla's Shanghai factory has been reduced by about 65% compared to the Model 3 production line in the United States. In addition, Tesla is researching the optimization of features that users rarely or almost never use in electric vehicles, in order to further simplify the structure and electronic architecture of electric vehicles. As a result, the maximum reduction in comprehensive production costs can reach 54%.
Tesla is still redesigning the components of its battery and motor systems, and will also remove features that car owners generally do not use in software, allowing Tesla to operate factories in a more streamlined manner, reduce material and component inventory, and lower component prices through further communication, cutting transportation and logistics costs. According to estimates, Tesla's average production cost per car in 2017 was $84000 (approximately RMB 570000), which has decreased to $36000 (approximately RMB 240000) by 2022. And 'expansion' mainly dilutes costs through large-scale production and increased sales. Investing upstream, constantly seeking breakthroughs in raw materials and production processes, and searching for the most efficient production base, Tesla's ability to continuously reduce costs enables it to launch a price war. Weima finds it difficult to survive in the face of such enterprises. Tesla is a fierce beast, while WM Motor is just a newborn cub that can't even walk. Not only WM Motor, but all new energy companies in China, except BYD, may have to avoid the sharp edge of giants like Tesla and first see if they can survive on the edge of the world's new energy market. Without a certain scale and sufficient capital, it is difficult to invest on a large scale in the upstream and quickly reduce costs.
The price reduction wave sparked by Tesla is a serious blow to its competitors, as the weaker their profitability, the slower their capital accumulation, and the more difficult it is to compete on the same scale as Tesla. 4. The market is very large, can new forces in car manufacturing grasp it? For new energy vehicles, there is a huge piece of good news these days. That is, the European Parliament has passed a resolution to ban the sale of fuel vehicles in the EU by 2035. I believe that in the near future, developed countries such as Japan, South Korea, Canada, and even the United States will follow suit and introduce a sales ban schedule that is close in time. Even China's sales ban schedule should be on the way.
This is a great opportunity for new energy vehicles. Whoever can scale up first in this round will have a ticket to the future new energy market. Seeing that traditional car companies have no advantage in the new energy track, if they don't rise at this time, when will they wait? Although the cake is big, how much can it be cut into? In the field of automobiles, it's not just about selling cars that one can survive. If the annual sales volume does not reach hundreds of thousands, there is not much qualification to compete in this field. In the mobile phone industry, Apple's profits exceed all other mobile phone companies, and in the electric vehicle field, this possibility also exists. It's not just about following the right path and having a little influence that you will definitely get rich. After all, Tesla is backed by the world's largest capital market, holds the world's best technology talents and reserves, and also has a globally distributed production network. Even BYD cannot underestimate such dinosaurs. Chinese new energy companies need to work harder to find their place in this disruptive revolution of the global automotive industry.
