When the sound of the price war in the car market becomes louder and louder, everyone is talking about “reducing costs and increasing efficiency”.
In this increasingly difficult period, it seems that all car companies are pursuing more market share, and do not hesitate to reduce prices, low prices, or even sell cars at a loss.
The closed-loop logic is that after enough cars are sold, “economies of scale” can spread the cost equally and eventually make a profit.
This expectation for the future, coupled with the anxiety that “if you don’t grab the cake now, you will not be qualified to sit on the card table in the future”, it will help more car companies to embark on this “enough right” path.
But there are also many enterprises that sit on the sidelines and scoff at economies of scale.
When the market has no bottom line price war, sell a car, lose a car, the more you sell, the more you lose? Once upon a time, an executive of a joint venture car company said, “I earned 2.
1 billion US dollars globally in the first quarter of this year.
I can afford the Chinese market.
Do your local companies have the financial strength to play?” You burn to death first, and then I can wait to come in and grab the market.
” Admittedly, the market environment is ever-changing, some people are willing to price war, some people oppose price war, the market choice is just.
But the most fear is that the uncontrollable “inner volume”, the market Bad money drives out good, car companies do not polish products, only engage in speculation, and finally consumers pay for low-quality products.
Do not rush to refute, after the full competition in the market, it will be very fierce, and even “a few dead” will not stop.
Xiaopeng didn’t want to die, so MONA 03 made his debut at a low price.
Wei Lai didn’t want to die, Ledao L60 rubbed his hands.
Zero run and Nezha didn’t want to die, they were all trying to test down.
It doesn’t matter whether they approve of economies of scale or not, because in the final market, winners take all.
But the lessons of the past are vivid, and they must understand that the one who made the mistake will be eaten dry and wiped out, and there is no possibility of making a comeback.
Today, the competition in China’s automobile market is already a red sea, especially the new car-building forces with a weak foundation and low brand recognition have stood at the crossroads of fate.
Should we choose scale effect to increase popularity? Or do you want to strengthen the profits and keep the wealth? There is really not much time left for choice.
If the price is reduced, can there be economies of scale? Can the logic of losing money and grabbing market share first, and then reducing costs and increasing efficiency to make a lot of money on a large scale? In economics, scale effect is derived from the decreasing marginal cost, and the cost of the enterprise includes fixed cost and variable cost.
after the expansion of the production scale, the unit product cost will decrease and the sales profit margin of the enterprise will increase.
In the auto market, the simple understanding is that as car companies sell more cars, the cost of developing this car is gradually diluted, so there is a saying that “make money by economies of scale to benefit consumers.
” In fact, it is understandable to call it smoothing costs, but the problem may be that under the background of constantly testing the bottom line of prices, many car companies are selling cars at a loss, and scale effects have begun to “deform”.
Just imagine, when a car is sold below cost and each car loses money, what is the use of a large quantity? Especially after the scale becomes larger, the slow speed of information transmission, information distortion, management bureaucracy and other disadvantages, but give rise to more problems, resulting in “diseconomies of scale”.
“if the sales volume of many brands is lower than the cost of raw materials, then there may be other demands, either for listing, financing after listing, and some sharing brought about by the capital market, or for local governments.
Some factories need to sell to a certain scale and do some re-employment.
” In the face of the widespread scale effect theory in the market, Great Wall Motor Chief Executive Officer CGO Li Ruifeng said bluntly: “but if you sell 100000 for 150000 cost, the remaining gap will be filled by capital financing and government subsidies, that is, drinking poison to quench thirst.
” Yes Great Wall Motor prefers to make money standing up rather than selling cars at a loss.
And this stubbornness brings, in addition to hard-line cross-country, pickups and other market segments, other market share has been constantly snatched, while losing a lot of cake.
However, it is not right to make profits to maintain the healthy development of the enterprise.
According to the first half results of Great Wall Motor, the net profit from January to June in 2024 was 7.
079 billion yuan, up 419.
99% from the same period last year.
the gross profit was 18.
962 billion yuan, up 60.
82% from the same period last year.
the average income per bike was 164800 yuan, up 29900 yuan from the same period last year.
and the net profit per bike was 12800 yuan, up 10100 yuan from the same period last year.
In contrast, the new car-building forces who sell cars at a loss are likely to lack strength.
There is no doubt that traditional car companies have the strength to fight a price war, and joint venture car companies also have the strength to fight a price war.
Data for the first half of the year show that BYD, Geely and the Great Wall are among the top three in their ability to make money, while new car-building forces such as Xiaopeng have made no unexpected losses, which can be seen with the naked eye.
Obviously, car companies that can only sell cars at reduced prices will not go far.
Of course, if at this stage, there are still car companies that are not “sincere” in building cars, then they deserve to be eliminated.
One thing that must be recognized here is that if car companies want to reduce prices to play economies of scale, they must have strength and strategy.
Otherwise, a careless move is likely to wear away the brand power that has been accumulated for a long time.
Beware of “survivor bias”.
There are several core points in China’s auto market: internal volume, price war raging.
high-end pure electricity is not easy to sell.
smart driving war is imminent.
want to sell cars to increase the range.
CEO to engage in live marketing.
In particular, with the arrival of the era of new energy vehicles, the strong attack of Huawei and Xiaomi has brought more flashpoints to the whole market.
However, is the price war necessarily the best market competition? Zhiji must be a breakthrough? A taxi is the future of new energy? Can CEO live streaming convert trading volume? In November 2023, ideal Automobile Chairman Li Xiang said publicly: China’s own brands, car companies that still adhere to multi-gear PHEV, will change to the technical route of adding programs in the next year or two.
This judgment can be tested by 2025.
Now this prophecy is coming true step by step.
Ideals, boundaries, zero runs, Avita and other new car-building forces, and even Geely, the Great Wall, are turning fast or slowly.
It is conceivable that in addition to solving mileage anxiety and energy anxiety for consumers, it is also considered to “cut costs”.
Last year and even before, expensive batteries were the main contradiction in the new energy vehicle market, and even Zeng Qinghong, chairman of Guangzhou Automotive Co., Ltd., stepped forward to “lift the table” with the Ningde era.
As a result, extended range models are in the name of new energy, reducing battery costs and ruthlessly.
Make a fortune hard.
, Then the question arises.
Is the sold well of ideals, boundaries, and zero-running really just by increasing the range? I think not.
Some people once joked that refrigerators, color TVs and large sofas are the core technology.
But consumers are not stupid.
They can distinguish between refined decoration and rough housing.
As for the controllability, mechanical quality, quality and other aspects of the car itself, shouldn’t they all be achieved?, The key point lies in the establishment of the brand.
Everyone used to say that the brand label of Ideal Car is Family Dad Car, NIO Automobile’s brand label is high-quality service, and Xiaopeng Automobile’s brand label is intelligent.
Looking at it now, the reason why Xiaopeng Automobile is lagging behind is not because the intelligent brand label has been tied up? If the industry sells well, the Huawei brand will work hard again.
if Xiaomi sells well, the Lei Jun brand is “burning”.
Today’s competition in the automobile market is ultimately brand competition.
The only way to own the market is not to cut prices, but to truly build and own a brand.
Why?, Very simply, people’s needs will not be limited to a certain level of Maslow’s needs.
With the development of technology, society, and the market, people’s pursuit of cars will not be bound by various product forces, but they will definitely be favored by a certain brand spirit to gain self-recognition and social recognition.
The “survivors” we see now have actually accumulated brand power through various methods, and continue to deepen and develop, capturing the minds of consumers and gaining recognition.
The scale effect we mentioned in a lot of space earlier requires even more support from brand power in order to achieve twice the result with half the effort and be effective.
Otherwise, everyone will not recognize its brand.
No matter how many cars are sold, they will still be “consumables” of the times and will eventually be submerged in the torrent of this era.
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