Analysis of the relatively narrow high-end pure electric vehicle track at this stage

After getting the new energy production and some insurance data in September, most car companies have reached a consensus this year to expand into the C-end and high-end. From January to August this year, the high-end and low-end squeezed each other, and the relatively weak demand on the B-end may be the normal state for the healthy development of new energy vehicles. Under this normal mode, many problems are exposed. As this wave of pure electric high-end becomes a track that everyone wants to do, more and more car companies will try to get pricing power.

01. Competition in high-end products

I will first take out the interesting parts of September, mainly focusing on the 250,000-350,000 and 350,000 models. As shown in the figure below, I think there are still several basic characteristics. The high-end and C-end dominated situation in the first half of 2020 is mainly based on the relaxation of purchase restrictions in first-tier cities and the fact that wealthy families have not had a big impact on their income in this round. In fact, removing some A00 vehicle distribution, these cars were sold in these places this year. The effect of opening stores in first-tier cities is immediate, which is also the fundamental reason why new car manufacturing focuses on first-tier cities and has achieved relatively good results.

Figure 1: The top few cities accounted for 30% of the registrations in August

1) Models priced between RMB 250,000 and RMB 350,000

In September, the main production of Model 3 was the long-range version. After the subsequent model priced at 249,900 yuan was equipped with LFP, it had a great impact on the models with similar pricing. Among them, the production of the rear-wheel drive version of Xiaopeng P7 was 2,891 units, the front-wheel drive version of Han BEV was 3,863 units, and the four-wheel drive model was 882 units. Because they are so close, this pricing strategy really puts a lot of pressure on the models nearby.

Figure 2: September 250,000-350,000 RMB segment (X axis: wheelbase, Y axis: price)

2) Segments above 350,000

A large batch of Tesla's production in September were long-range versions. Due to its own service system, energy supply system (battery swap) + 100kwh replaceable futures, NIO is currently very happy to deal with the backlog of orders, ES6 3268 units, ES8 1623 units. The gameplay in this range is actually not very affected by Tesla's price drop. The real challenge will be when the subsequent Model Y starts to increase in volume around 2021.

Figure 3: The range of more than 350,000 in September (X axis: wheelbase, Y axis: price)

This downward pressure on prices does not only apply to models in the same price range. For the 150,000-200,000 and 200,000-250,000 price ranges below, overall production this year is not particularly easy. In other words, we can foresee that the starting prices of Tesla's Model 3 and Model Y will go down further in 2021. To match them, we cannot just rely on the basic parameters of the three electrics, but we must work on the corresponding functions and selling points. The downward squeeze is very uncomfortable. Note: The marks of these two price ranges should be the prices before subsidies. After the subsidies, the actual prices of the two ranges will go down a lot. To be precise, they should be 120,000-180,000 and 180,000-220,000.

Figure 4 Consideration of the next two segments

The weak insurance sales of Model 3 in September (the price reduction in October was also adjusted based on sales) actually shows that everyone is competing for a very narrow market, and the result is various collisions.

Figure 5 Model 3 insurance weakness in September

02. Production and registration data

The outstanding feature of this year is the synchronization of new energy passenger vehicle production and registration data. In August, the number of domestic new energy passenger vehicles insured was 92,000, which was 3,400 less than the overall production in August. It is expected to be around 110,000-120,000 in September, which is also closely following the registration data. From January to August 2020, the cumulative number of new energy vehicles registered was 451,000. The main feature of this year is the shift from last year's large B-end market. Taking last month as an example, the insurance market accounted for 18.5%, individual users accounted for 67.9%, and units and other users accounted for 13.6%, which has never happened before.

Figure 6: Registration and production from January to September this year

Comparing the models of new car manufacturers and Tesla, we can see that they are now in a better state of targeting private mid-to-high-end markets, while the B-end models that were popular in China from 2017 to 2019 have declined a lot.

Figure 7 Output of major new car companies in September 2020

If we compare the private insurance from January to August, excluding the A00 model, with the previous models, it will be very clear.

Figure 8 Vehicle types registered by private parties from January to August 2020

Figure 9: Vehicle types that can be ordered by both private and B-end customers from January to August 2020

Of course, as the economy improves, B-end taxi demand and online car-hailing demand will always be gradually released. Policy guidance has enabled this part to be released within a period of time in 2020. This part will follow the economic recovery, but in the long run, it may indeed be in a subordinate position.

Figure 10 Comparison of private and B-end market demand with last year (China Power Battery Industry Observer August report)

Summary: In fact, if we compare the data carefully, September is a turning point. On the one hand, the A00 level continues to increase, and on the other hand, the demand for B-end recovers, which makes us feel a relatively fierce year-on-year growth. However, for the situation looking forward, the differentiated capital for long-term survival is the most important. So many companies are engaged in new energy, and they all want to become bigger and stronger. After all, it is impossible for every company to be satisfactory.