In the period following the Chinese New Year, the automotive industry’s greatest attention and focus have shifted to Chinese brands.
On one hand, there was the sudden “explosion” of Gaohe, announcing factory shutdowns and work stoppages, plunging into an abyss. Recent long-standing grievances between Ding Lei and Jia Yueting were brought to the forefront, creating an intense and thrilling drama.
On the other hand, BYD made a crazy move, mobilizing its main forces, including Wangchao.com and Haiyang.com, to launch the “Honour Edition” and make a full effort to achieve the ambitious goal of selling 4 million vehicles annually. Their dazzling actions were exposed for all to see.
Furthermore, the ideal MEGA from “Highway High-Speed Rail” also debuted. Despite Li Xiang’s boastful claims, coupled with far lower orders than expected, this new force in car manufacturing has proven that there are no shortcuts in producing pure electric vehicles, especially high-end ones.
As an observer witnessing such extraordinary scenes, I am both glad and excited to witness the surging tide of this era. At the same time, I can’t help but lament the fierce competition in the Chinese car market, which has reached a white-hot stage.
Given this backdrop, I would like to discuss the main character of today’s article, Tesla, which, although still powerful, seems to be showing signs of fatigue. This is because, based on its performance in China in February, its sales at the end-user level appear to be far below expectations.
01
Are Discounts a Well-Kept Secret?
Last month, after releasing an explosive 2023 annual financial report, Li Xiang once again made a prediction: “In the fourth quarter of this year, the top three brands in the new energy vehicle market priced above $27,800 will account for 70% of the market share. It won’t be CR5 anymore, but rather a concentrated CR3, even more concentrated than traditional fuel vehicles, similar to smartphones. Let’s wait and see.”
So, which three brands was he referring to?
Based on the current industry trend and BYD’s strategic move to give up the market priced above $27,800, the answer points directly to Li Xiang’s Ideal, Wanjie, and Tesla.
However, in my eyes, despite the rapid progress of the former two, the latter, which once had an absolute advantage, has become the least stable player.
As evidence, according to the statistics from the China Passenger Car Association, Tesla sold a total of 60,365 new vehicles in February. Considering that their main models were only the Model 3 Refresh and Model Y, it seems decent at first glance.
But looking deeper, there was a nearly 16% month-on-month decline and an even larger 19% year-on-year drop, reaching the lowest level since December 2022 and hitting a 14-month low. Regardless of whether it is acknowledged or not, Tesla is truly facing internal and external challenges in the Chinese car market.
To make matters worse, this American automaker is not turning a blind eye to the predicament. As early as January this year, Tesla had already implemented a round of official price reductions.
The latest price for the rear-wheel-drive version of the Model 3 is $34,200, a reduction of $2,157. The latest price for the long-range version of the Model 3 is $39,800, a reduction of $1,600.
In contrast, the latest price for the rear-wheel-drive version of the Model Y is $36,000, a reduction of $1,044. The latest price for the long-range version of the Model Y is $41,600, a reduction of $626. The price of the Performance version of the Model Y remains unchanged at $507,000.
In recent days, Tesla has continued its discount strategy and launched a spring limited-time promotional campaign for its two models in China.
Among them, customers who purchase available stock of the Model 3 and Model Y rear-wheel-drive versions can enjoy a limited-time insurance subsidy of $1,113. Customers who purchase any Model 3 or Model Y in-stock vehicle can also enjoy a limited-time benefit of specified paint, saving up to $1,392.
In addition, customers who purchase available stock of the Model 3 and Model Y rear-wheel-drive versions can also enjoy a limited-time low-interest financing policy with an annual interest rate as low as 1.99%. In other words, customers can save up to approximately $2,311 on the Model Y.
However, even with these efforts and displays of sincerity, the response has been lackluster, and many consumers are unaware of Tesla’s various actions.
Of course, for those who are always willing to mythologize Tesla, they attribute the lower-than-expected February sales to the impact of the Chinese New Year holiday and the increased hesitation of potential customers. In other words, Tesla’s dominance remains unchallenged.
But what I want to say is, “Don’t blindly indulge in self-illusion. We must face the problems.”
02
Price Reduction Imminent
In this paragraph, I want to discuss two cases.
At the end of last year, when Ji Ke 007 was officially priced at $29,000 to $42,000, it caused a small shock in the automotive industry.
At the end of last month, when the all-new Ji Ke 001 was officially priced at $29,000 to $42,000, and played with “zero-cost purchase” and standard equipment as full configuration, it undoubtedly made another strong impact on the Chinese car market.
To some extent, the “twin stars” formed by Ji Ke 007 and Ji Ke 001 belong to the brand’s Model 3 and Model Y, respectively.
On the other hand, at a user communication meeting a few days ago, Li Bin, the CEO of Wei Nuo, personally revealed that their first product will directly compete with Tesla’s flagship Model Y, but at a lower price.
Yesterday, the internet was the first to reveal clear spy photos of the first pure electric SUV from “Alps.” In addition to the exterior design, what is particularly eye-catching is the prominent words on the rear window of the vehicle that say, “Better than Mung Bean Y.”
Clearly, the marketing gimmicks and topic value are off the charts.
During the earnings conference call for 2023, which ended on the same day, Li Bin provided more information about “Alps.” “The first product does directly compete with the Model Y and is swappable. We have cost and performance advantages, and the cost is about 10% cheaper than the Model Y, which will be reflected in the pricing.”
The firepower is fully unleashed.
Soon, Li Bin revealed the roadmap for “Alps”: brand launch in the second quarter, first product release in the third quarter, and official deliveries in the fourth quarter. “Alps” will use a shared swappable battery network, have separate stores for sales channels, but after-sales maintenance will be integrated with Wei Nuo.
Furthermore, Li Bin specifically mentioned, “The sub-brand will focus on pursuing sales volume rather than gross profit.” According to the internal information currently available, Wei Nuo is making all preparations for “Alps,” and personnel are being gradually shifted to the brand.
As for the fundamental purpose of discussing these contents, it is an attempt to express that ambitious Chinese automakers are eagerly eyeing Tesla’s “cake,” and Ji Ke and Wei Nuo are just typical examples among them.
This year, this American automaker’s position in China can be described as being truly surrounded on all sides, facing significant pressure from all dimensions.
So, it begs the question, how can Tesla break free from this quagmire? When the product appeal is becoming increasingly bland, a more determined price reduction may be the only way out for them.
After all, no one wants to refuse a Model 3 priced at $27,800 or a Model Y priced at $30,600.