China's new energy vehicle (NEV) market is currently embroiled in a chaotic price war!

The price war has been ongoing from 2023 to 2024, and it shows no signs of slowing down or coming to an end. In this fierce battle, players with insufficient funds and limited resources have already been eliminated.

Statistics indicate that in 2023, approximately 52,500 NEV-related enterprises went bankrupt, marking an increase of about 88% compared to the previous year, a situation that can be described as littered with casualties.

So, who will emerge as the ultimate victor in this life-and-death struggle?

The smoke of the price war is rising everywhere.

In 2023, the NEV market experienced at least three rounds of price wars throughout the year.

At the beginning of the year, Tesla initiated the battle by significantly reducing the prices of its Model 3 and Model Y, setting a record for the lowest prices in history.

Domestic mainstream automakers responded in kind, with BYD, Wuling, NIO, XPeng, and others successively lowering their prices.By December, BYD once again reduced prices across its entire lineup, and various new forces in car manufacturing also introduced cash incentives ranging from 10,000 to 50,000 yuan.

Advertisement

Entering 2024, the battle remains fierce.

In January, more than 16 car manufacturers including Tesla, XPeng, Zhiji, Leapmotor, and Ji氪 lowered the prices of certain models or strongly promoted limited-time cash incentives and other promotional policies.

On March 3rd, XPeng Motors announced a limited-time discount of 20,000 yuan for the entire G6 series, starting at 189,900 yuan.

According to statistics, on March 1st alone, at least 9 car manufacturers announced price reductions or cash incentives.

Overcapacity, selling at a loss to attract attention

Car manufacturers are all fighting fiercely, and in the final analysis, they want to exchange price for volume.

In economics, price is determined by the relationship between supply and demand.

In 2023, domestic new energy vehicle sales were approximately 7.74 million units, a year-on-year increase of about 36%, but the sales of most car manufacturers were far from expected.

According to announcements, only BYD, Li Auto, and LanTu achieved their sales targets, with Ji氪 at 85%, Leapmotor and XPeng at about 71%, NIO at 64%, and Nezha at only 43%.Behind this data is the fact that the production capacity of new energy vehicles has become significantly excessive, and the domestic market can no longer absorb it.

Within just two years, Tesla's production capacity has increased from 600,000 to 1 million vehicles, and BYD's new energy vehicle production capacity has risen from 800,000 to 2.5 million vehicles.

The production capacity planning of the new force representatives, "Wei Xiao Li," also steps up year by year, all above 1 million vehicles.

In 2023, according to calculations, the domestic production capacity of new energy passenger cars has reached 13.46 million units.

It is calculated that last year's production capacity utilization rate of new energy vehicles was only 57%.

Under normal circumstances, the standard for normal production capacity is 79% to 83%, and below 79% is considered overcapacity.

In 2024, competition will be even more fierce.

The forecasted increase in market demand is 2.1 million vehicles, while the planned delivery volume of only BYD, Li Auto, and Wenjie has increased by 2.3 million vehicles.

On March 28, Xiaomi released the SU7 model, which locked in more than 70,000 orders in less than a month and increased the annual delivery volume to 100,000 vehicles, taking away another piece of the cake.

Faced with such a situation, lowering prices to seize the market and fighting to the death against competitors is the simplest and most brutal means to increase sales volume.Some time ago, the price of domestically produced battery-grade lithium carbonate has dropped from a high of nearly 600,000 yuan/ton to about 101,500 yuan/ton.

Battery costs account for a significant portion of the manufacturing cost of new energy vehicles, and the more than 80% reduction in lithium carbonate prices has provided room for the prices of new energy vehicles to decrease.

Despite this, many car manufacturers are still operating at a loss.

In the new energy vehicle industry, only a few companies such as Tesla, BYD, Li Auto, and Aion are profitable, while others are incurring losses, and everyone is generally struggling.

For example, NIO, a leading company among the new forces, has lost 86.6 billion yuan in 6 years, with an average loss of 110,000 yuan per car sold. What does this mean?

Currently, NIO's market value is about 8.4 billion US dollars, which is equivalent to about 61.3 billion yuan in RMB.

This means that the money NIO has lost is more than 20 billion yuan higher than its current value.

So, here is a question: the profit margins for new energy vehicle manufacturers in China are alarmingly low, with so many companies operating at a loss, who is making money in this industry?

Specifically in the new energy vehicle industry, we find that this is indeed the case.

For example, Tesla, as the first car manufacturer to introduce new energy vehicles, has a huge brand advantage.Tesla's profit per vehicle is approximately 60,000 yuan, surpassing Mercedes-Benz and ranking the highest in the world.

Some European manufacturers with technological advantages, who produce precision parts for new energy vehicles, are making a fortune.

For instance, the German automotive parts supplier Bosch had a total revenue of 91.6 billion euros in 2023, exceeding the market value of BYD. Of this, automotive business revenue accounted for 56.3 billion euros, which is 13 billion euros more than the combined market value of the three companies "NIO, XPeng, and Li Auto," with a profit margin of 5%.

There are about 29 top 100 companies in the automotive parts field in Europe, with the highest global proportion. In addition to Bosch, there are companies like BASF and ZF.

In conclusion:

China's new energy vehicles are now accelerating their overseas expansion, but we need to be aware that we have benefited from some demographic dividends. If other countries increase tariffs, how much room will our car manufacturers have left?

China has CATL, which has technological advantages, but there are not enough companies like this.

In the future, we should cultivate more similar companies and increase investment in those areas that can provide higher profits.