Text | Praying Mantis Observation
Author | leo Chen
Regarding the recent domestic auto market, the biggest change is the wave of brand price cuts, and there should be no other. The price reduction started from new energy vehicles, initiated by Tesla, and gradually spread to fuel vehicles, forming 30 auto brands to join the price melee.
Against the backdrop of a tightening auto market, how do auto companies survive in the melee? Among them, how do leading car companies resist competition? Coincidentally, both Great Wall and Geely have announced their latest financial reports, and both of them have made new strategic changes not long ago, which is very suitable for bringing in problems to analyze together.
Behind the "anxiety" of selling cars, established car companies can still make money
As for the price reduction of fuel vehicles, some analysts pointed out that it is because the National VI B emissions are about to be implemented, which puts pressure on major car companies to sell cars quickly. After all, as early as 2019, when China VIA was launched, there was a large-scale phenomenon of price reduction and inventory clearance.
However, during this period of time, there have been constant news of price cuts in the market, and dozens of car companies and various models have been involved. The reason behind the price cuts seems not so simple.
The direct reason is not difficult to imagine, the essence of price cuts is a "collective anxiety" of car companies. Some car companies believe that sales have been poor in the past or worry about future sales declines and customer loss. So in order to grab customers and pursue sales at the expense of profits, second-tier and even foreign luxury brands are constantly overdrawing their brand power with varying degrees of price cuts.
The possible difference is that second-tier brands have a worse life and more aggressive price cuts, while overseas luxury brands have a basic reputation here, and consumers will inevitably pay for conservative price cuts.
Just taking such short-term promotions will not solve long-term problems.
On the one hand, car companies with poor sales choose to cut prices, which can only help them "live longer". If the products cannot return to a reasonable premium and gross profit margin, car companies will never get profits. After all, maximizing profits is the key The key to survival in the future; on the other hand, making up for the lack of technology and product strength is the way to high-quality growth in the future. Violent price cuts are self-degrading and unsustainable.
However, we also found that there are some positive signals in the market, from established domestic car companies. In terms of data, the three represented by BYD, Great Wall, and Geely Automobile have not been "fatally threatened", but have always been the "top three" of private car companies, continuing the "three-legged confrontation" pattern into the new energy era.
Among them, BYD's performance can be said to be "hurricane". In 2022, the revenue will be 424.061 billion yuan, a year-on-year increase of 96.2%; in the same year, the net profit attributable to the parent company will be 16.622 billion yuan, a year-on-year increase of 445.86%.
In the whole of last year, BYD sold 1,868,500 vehicles, a year-on-year increase of 152.46%; in the first two months of this year, a total of 344,996 vehicles were sold, a year-on-year increase of 84.98%. BYD has become the number one car company in domestic sales in one fell swoop. It has been shouting for so many years to catch up with the joint venture, and now it has completed lane changing and overtaking on the new energy track.
Compared with BYD's "hurricane", both Great Wall and Geely performed "seriously", doing a good job of balancing sales and profits.
For Great Wall, last year’s revenue was 137.34 billion yuan, and the net profit attributable to shareholders of listed companies was 8.266 billion yuan, a year-on-year increase of 22.90%. The annual sales volume was 1.0617 million vehicles, and the penetration rate of intelligent models reached 86.17%. Great Wall is still performing stably, and is the only car company among the three that has achieved net profit growth for three consecutive years.
Geely's revenue is higher than that of Great Wall, reaching 148 billion yuan; but the profit level is lower than that of Great Wall's 8.266 billion yuan, and the net profit attributable to the parent is only 5.26 billion yuan. In addition, Geely sold a total of nearly 1.433 million vehicles last year, an increase of 8% year-on-year.
The independent "top three" has always been the head of the auto market, which is reflected in the performance level. Unlike new forces that are suffering huge losses, established auto companies can hold on to their "basic market" and find "growth markets" in adversity. After experiencing the era of fuel vehicles, they have accumulated profound accumulation in technology, manufacturing and branding. Although it is impossible to judge where their upper limit is, the lower limit is not low at all.
"Followers" seek change, Great Wall and Geely are eager for a "hurricane"
Stepping into the era of new energy, BYD won the championship in one fell swoop and became the biggest recipient of dividends. The Great Wall and Geely are "followers" from a certain perspective.
Geely has won the top sales of Chinese brand passenger cars for five consecutive years, but will give up the top spot in 2022. At the financial report communication meeting not long ago, Geely executives admitted frankly that the performance in 2022 was not satisfactory. "We lost the No. 1 position in China's passenger car market, and were widened by a relatively large gap by our excellent peers (BYD)."
Great Wall Wei Jianjun also said in 2016: "Great Wall Motors is only a follower of new energy vehicles."
But today, everyone wants to stand in the center of the stage, and the "followers" will not be followers forever in their hearts. Great Wall and Geely have always had insight and forward-looking vision, and have been seeking changes. In the field of new energy vehicles, Great Wall and Geely are eager for a "hurricane".
At present, Great Wall and Geely have each completed the ecological transformation of the new energy strategy and turned to new energy in an all-round way.
Geely once again emphasized the positioning differences and product planning of each of its brands in the field of new energy. Specifically, Geely, Lynk & Co, and Jikr will be the three most important brands of Geely Automobile's independent business, while Geometry has returned from an independent brand to a product series under the Geely brand. Through sorting out and combining innovative businesses vertically and horizontally, Geely will rebuild a "new Geely".
The Great Wall is also aggressive here, and its smart new energy strategy revolves around at least these two cores:
The first is to stabilize the basic disk of the product matrix. Great Wall integrated Euler and Mech Dragon, Wei Brand and Tank respectively, and proposed a strategic route of focusing on Haval, returning to large single products, and focusing on the main channel.
In the past, the Haval H6 was the most important car in the history of Great Wall, and it also established the status of Great Wall in the world. The ultimate price-performance ratio and excellent quality control capabilities make the Haval H6 a national legend in the SUV market. It has won the top sales in China's compact SUV market for a total of 100 months.
The Haval brand is Great Wall's most powerful "trump card". Now, the Haval brand will continue to become Great Wall Motors in the next stage of strategic transformation.
The Haval brand has also reorganized the relationship between fuel products and new energy products. The plug-in hybrid products equipped with Hi4 technology will use a new product line alone, which is divided from the H series and dog categories of fuel vehicles. This effectively avoids being regarded as an accessory of the fuel version. When consumers compare new energy vehicles of the same type, it can better reflect its technical and cost-effective advantages.
Obviously, on the one hand, this shows Great Wall's determination to "break through" in the new energy market; on the other hand, it is also reflected in the transformation. Great Wall has a precise plan, emphasizing the overall concentration of "cannon fire" to seize the new energy market.
The second is to improve the growth of user experience. In addition to the product matrix, Great Wall is to grasp user needs and use technological innovation to serve a good user experience.
The previously mentioned Hi4 intelligent control four-wheel drive electric hybrid technology is one of the representatives. According to the official statement, this set of electric hybrid technology can identify different forms of road conditions, and use intelligent modules to adjust the dual motors on the front and rear axles and the special hybrid engine, and finally present 9 kinds of pure electric two-wheel drive mode, pure electric four-wheel drive, and series mode. Smart switching of modes.
In short, from the user's point of view, this is a set of "four-wheel drive experience, two-wheel drive price, four-wheel drive performance, two-wheel drive energy consumption" technology. So for car buyers, it is a real exchange of lower costs for higher product value.
As far as the industry is concerned, on the one hand, technologies like Great Wall are not "self-indulgent", but the result of sinking one's heart; to influence their minds.
At the Great Wall Motors Smart New Energy Dry Goods Conference last month, there were frequent highlights in aspects such as intelligence, smart cockpit, and smart driving technology. Together, they build up the overall picture of Great Wall Motor's "technology", and as long as we are careful, we can realize that the end point of all "technology" is to improve user experience.
To build a "forest ecology", can the Great Wall win with long-termism?
"Technology" also enhances the core competitiveness of car companies, but it is certainly not the whole picture of a car company.
At present, with the tide of price cuts and the tightening of the auto market, established auto companies can remain stable as a "giant ship", which is inseparable from the persistence in technology, and even more inseparable from the ability to "systematize" operations. We believe that only "systematization" can achieve internal win-win, and work together to move forward, instead of "walking with a limping leg" forever.
Behind this, "forest ecology" is an answer sheet handed over by the Great Wall. When we further dig out the potential and differences between "forest ecology" and the industry, it is generally reflected in two major aspects: "dare to think" and "dare to do".
"Dare to think" can be understood as the development of the product itself. Great Wall has formed a three-track parallel system of hybrid, pure electric, and hydrogen energy, and has five complete vehicle brands, Haval, WEY, Euler, Tank, and Great Wall Pickup, to meet different market demands.
"Dare to do" can be understood as an industrial ecological action. Great Wall has built an energy system of "photovoltaic + distributed energy storage + centralized energy storage" and completed the whole value chain layout of "solar-battery-hydrogen-vehicle power". It has broken through 20 years in the field of perovskite photovoltaic % photoelectric conversion efficiency.
Products, industries, and technologies are closely connected at multiple levels. From this, we can see that there is a virtuous cycle of "iterative chains" in the "forest ecology", which ultimately enables each other to promote each other and develop together. This is also the essence of forest ecology where.
"You can see both the forest and the trees." Based on the forest ecology, the Great Wall can truly get rid of the anxiety of involution. It has been "three pillars" with BYD and Geely for a long time, and is at the head of the industry.
We are also pleased to find that long-termism is their common trait. Reject short-term price wars and insist on long-term value wars, so that technological innovations can continue to emerge and enterprises can stand at the forefront.
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