2003: Starting with Foreign Trade

Chapter 1006 BYD VS Wei Lai
The new energy vehicle market in 2021 was on the eve of a major explosion, or rather, it was already in the stage of explosion. However, if we were to talk about which type of new energy vehicle made the biggest splash in the market, the range-extended electric vehicle would certainly be the one with the most controversy.

Range-extended electric vehicles entered a period of explosive growth in the first half of 2021. Although there was a lot of controversy in the market, user acceptance was getting higher and higher, and sales were getting better and better.

"To talk about popularity, we have to look at how it's been highlighted by its peers."

Currently, there are four range-extended electric vehicle (REEV) models on the market: Weilai L1, Voyah, Seres SF5, and one from BMW. As the first model to be launched, the Weilai L1, a six-seater SUV with advantages such as large space and long range, accounts for 85% of the sales in the range-extended electric vehicle market.

With over 30,000 units delivered in just six months, this is a model with an average selling price of 338,000 yuan, which is even higher than the average selling price of the Model 3.

A single model has contributed billions in revenue to Weilai, so how could it not be valued by the market, and how could it not be envied by its competitors?

Last year, the big names in the pure electric vehicle market all touted range-extender technology, but they didn't make much of a splash in the pure electric field. This year, they changed the SF5 to a range-extender model and praised it extensively at the launch event, stating that range-extender technology is currently the most suitable for the domestic market.

In addition, last month, Boatman Brother criticized range extenders, calling them a waste of time and energy. Mr. Wei from Great Wall Motors also criticized range extenders on various occasions.

The pressure brought by the arrival of the US is enormous for any domestic new energy vehicle manufacturer.

The semi-annual report card is out. Among the top ten deliveries of single new energy vehicle models, Tesla occupies two spots, BYD occupies one spot, Wuling occupies one spot, Xiaopeng occupies one spot, and the remaining five spots are dominated by Weilai.

The ET5, ES3, L1, Aion S, and Exeed S01, which has been delivered for less than two and a half months, especially the Exeed S01, has already reached 40,000 units in less than two and a half months of delivery, directly breaking into the top three.

In particular, the Exeed S01 has put tremendous pressure on the market. As the first A-class sedan priced at 200,000 yuan in the US, the Exeed S01 set a record for the fastest delivery of over 10,000 units since its launch, and set a new benchmark for pure electric vehicle configurations under 150,000 yuan.

In the high-end version, Exeed S01 even retains L3 capability through hardware pre-installation, supporting future OTA upgrades.

In terms of charging, it is also the fastest charging in its price range. The technological advantage that BYD Qin EV previously established has vanished in front of Exeed S01, putting great pressure on the boatman.

In the area of ​​hybrid power, which BYD prides itself on, Wei Lai has torn a hole in BYD's business by using the unreasonable approach of range-extended electric vehicles.

If things continue like this, BYD will be in great danger.

The large-scale delivery of the Exeed S01 has generated a huge market response, with the biggest impact on BYD. BYD, which had changed consumers' minds with the Han series, originally had the opportunity to make great strides this year.

However, the Exeed S01's disruptive impact in the pure electric vehicle market has led to BYD losing ground in the mid-range pure electric vehicle market, a passive image in the intelligent vehicle sector, and forced adjustments to its technological roadmap.

"In the domestic market, only one leading company is allowed to exist. There cannot be two leading companies. BYD is facing an all-round impact from the future. If it cannot make a breakthrough, then BYD's crisis will be very serious."

June deliveries of the Exeed S01 continued to reach new highs, indicating that Exeed is making good progress in ramping up production capacity. There is almost no doubt that this model will exceed 100,000 units delivered this year, making it the fastest new energy vehicle in China to reach 100,000 units delivered.

In early July, when various companies released their new energy vehicle delivery figures, BYD's stock price was severely impacted, while its competitor, Weilai, saw its stock price rise steadily. A few days later, an analysis report in the securities market attracted significant attention.

The article is titled "A Battle Between BYD and Weilai".

This year is a key year for BYD's transformation. The Han series in the Dynasty series has brought huge traffic to BYD and also provided direction for BYD's research in the pure electric vehicle field. The planned Ocean series will be an important foundation for BYD to break into the pure electric vehicle field, threaten the future, and even challenge the domestic new energy vehicle sales champion.

In the first half of this year, Brother Boatman frequently attended various public occasions, talking about technology and the future of the industry. Compared with Tan Jincheng, the chairman of the top-selling company in China, Brother Boatman seems to consider himself more of an industry leader.

Boatman Brother also uses a lot of aggressive rhetoric when dealing with his peers. When commenting on Tesla, he quoted Tan Jincheng's rebuttal on Twitter mocking Musk's statement that safety is the greatest luxury.

When evaluating new players, he dismissed them, saying that survival was the most important thing for them. He also criticized Wei Lai's comments that range extenders were pointless and made some minor flaws in the Xingtu S01.

As for tech companies like Xiaomi and Huawei that are venturing into the automotive industry, Chuanfuge also displays great confidence, and he is equally aggressive in his approach to battery technology.

In short, Boatman Brother went all out in the first half of this year, criticizing everyone from gasoline cars to emerging forces, to successfully transformed new energy vehicle companies, and even his peers in the battery industry.

All of this is for BYD's sales. As the most successful new energy vehicle company in the industry, BYD is full of ambition.

However, with just one model, Wei Lai brought BYD's pure electric vehicle line back to square one.

"The sales of the Exeed S01 are the best response to BYD's challenge in the pure electric vehicle field. BYD has always had the ambition to become the leader in the domestic new energy vehicle market, and even the world's new energy vehicle market. The biggest challenge or threat is the presence of Tesla and other electric vehicles in their path."

“Whether in terms of market share or product pricing power, BYD has an absolute advantage in new energy vehicles priced below 20 yuan. In the high-end pure electric vehicle sector, BYD has also successfully secured a place in the market, which was previously dominated by Tesla, thanks to the explosive growth of the Han EV.”

"Everything seemed to be going in the direction of Brother Boatman's plan. BYD's market share in the pure electric vehicle field was challenging the two giants, but the Exeed S01 dealt them a fatal blow."

As the first true A-class sedan from Weilai, Weilai's first foray into BYD's territory caught its competitor off guard, causing BYD to lose its pricing power in this market.

The hasty price reduction of BYD Qin DM series and the occasional vehement remarks of "Boatman Brother" are the best proof of this.

"For BYD, if it cannot surpass Weilai and become the leader in the domestic new energy vehicle industry, it will face a series of structural crises, which is not an exaggeration; of course, they still have the opportunity to transform now."

Compared to the actual consumer market, the capital market takes a different, or rather, more pragmatic, approach to issues.

The main reason why Buffett and domestic and foreign investors are optimistic about BYD is its long-term investment in the new energy field, its high level of technological accumulation and first-mover advantage. Based on the trend of electrification, it will eventually have a breakthrough.

And when the explosion happens, that's when the capital market reaps the rewards.

However, the emergence of Weilai changed everything. If BYD cannot add the halo of being the top seller, then their brand premium will decline, and their path to high-end positioning will be quite bumpy.

Perhaps one day, BYD will become a cost-effective utility car brand, just like Kia and Hyundai in the era of gasoline cars—the technology is not bad, but the brand value is difficult to improve.

With the trend of electrification, the automotive industry chain is becoming more mature, and the competition is becoming more intense. In the end, it all comes down to the brand's premium pricing power, just like in the mobile phone market, where Xiaomi is desperately trying to go high-end and improve its brand image.

In the capital market, BYD's current price-to-earnings ratio is around 40, and the market has high expectations for BYD. However, once it becomes an "ordinary car company", BYD's price-to-earnings ratio will inevitably approach that of traditional car companies such as GAC and SAIC, returning to a PE ratio of around 10 to 20, and its financing ability will decline.

In terms of supply chain advantages, its capabilities will inevitably be weakened, turning it into a company like Xiaomi that relies on the supply chain for survival, resulting in declining profit margins.

Industry research reports have conducted several template analyses of BYD, but all of this is based on the premise that BYD cannot break through the technological barriers of Tesla and other companies in the pure electric vehicle field.

The first template is Volkswagen in the era of gasoline-powered cars. Although it was large in scale, its profit margin was thin. This is one of the best templates for BYD.

The second template is Huawei in the mobile phone industry, which has strong technology but is limited and retreats to niche markets. The third template even gives Nokia, which, like Nokia, wins in the present but loses in the future.

Regarding BYD's changes, the analysis report also gave four key factors. The first is a breakthrough in the high-end market, as it is clearly not enough to rely solely on the Han series to open up the mid-to-high-end market.

Tesla's brand premium goes without saying. In the mid-to-high-end market, with five models—ET5, ES3, ES6, ES8, and L1—offering both pure electric and range-extended electric options, Tesla has firmly secured its position in consumers' minds.

BYD still has a lot to do to break into the high-end market. The second point is to catch up in the field of intelligent technology, which BYD is already working on. As previously mentioned by Brother Chuanfu, BYD has organized a team of thousands of people to increase its R&D efforts in intelligent technology.

The third and fourth points are about accelerating internationalization and betting on technological routes. In terms of internationalization, WILI has already taken a step ahead of many domestic car companies.

In terms of export volume, Weilai cannot compare with OEMs such as SAIC, Chery, Great Wall, and Changan. However, in terms of the quality of its exports, Weilai is the highest. Its pure electric vehicles can compete with Tesla in sales in Europe, which is a quality that no other domestic car company can match.

SAIC has the largest export volume, but they mainly export MG brand vehicles. This is similar to Tesla producing in China and selling to Europe. Chery, Great Wall and Changan, on the other hand, mainly export low-end gasoline vehicles.

In addition to the positive news of acquiring Ford's German factory, another major positive development for Weilai in June was that Weilai, like Tesla, was now allowed to trade carbon credits in Europe.

Carbon credits are a great thing at present, especially in Europe where carbon emissions are very strict. Being allowed to trade carbon credits can bring huge benefits to the country.

Currently, one point in Europe is worth around 1000 euros, which is pure profit. In addition, even if they don't sell them, Weilai can use these points to help its partners to obtain more benefits.

For example, BMW, the automaker with which Weilai currently has the largest cooperative foundation, has accelerated its electrification transformation based on the strict carbon emission standards of the German government and Europe. However, their sales in the field of new energy vehicles only account for 13%.

Whether in the European market or the domestic market, the credits earned by Weilai, which accounts for nearly half of the sales, are very useful to BMW. With these credits, Weilai can form a closer cooperation with BMW.

These are all benefits brought about by the increase in WIL's pure electric vehicle exports in Europe.

Last year, Fiat Chrysler purchased credits from Tesla for 200 million euros to alleviate emissions pressure. According to data from international analysts, Tesla's credit revenue in Europe this year is expected to be between 100 million and 150 million euros.

As for Wei Lai, the expected revenue is between €0.6 billion and €7 billion. July 15-16, Shanghai Stock Exchange.

A car forum titled "New Starting Point, New Strategy, New Pattern" was held by the China Association of Automobile Manufacturers. The forum was attended by Boatman, Tan Jincheng, the chairmen of Changan and FAW, as well as CEOs of emerging car companies such as Li Bing.

This is a high-level meeting.

"Hey kid, did you see that research report?"

After not seeing each other for several months, Boatman's gaze toward Tan Jincheng became increasingly complicated. Before such a high-level meeting, a research report on the capital market directly compared BYD and Weilai, and it was unfavorable to BYD. What did he think?
“I saw it, but Uncle, please don’t misunderstand. This wasn’t something we instructed. If you think it’s affecting you, you can do public relations to get it shut down. Besides, I also think this research report is exaggerated.”

Tan Jincheng still maintained the respect due to the boatman. He was an industry senior, and while people could mock and be sarcastic in competition, they remained the same in private.

This matter was not actually caused by Tan Jincheng, but it could indeed cause a misunderstanding. After all, Tan Jincheng has always had a very strong network of connections in the capital market. Currently, the competition between Weilai and BYD in the market below 20 yuan is very fierce.

The Qin DM, Qin EV, and the Ocean series, which is currently being promoted, are all targeting this market. Just like how BYD used a matrix strategy to deal with Tesla's high-end market, BYD is also adopting this model to counter BYD's impact on the market below 20 yuan.

Price cuts, matrix strategies, confrontations, and verbal sparring were the biggest highlights of the competition between the two companies during this period. Tan Jincheng did not make many statements in front of the media, but the newly appointed CEO, Wei Lai, did not hold back in his verbal battles with the media.

As netizens jokingly put it, Li Xiang seems to live on Weibo, responding promptly to any news about Wei Lai.

"I believe you when you say that. We believe you wouldn't have been so ruthless."

The boatman chuckled. What he feared most was Tan Jincheng's actions in the capital market. Weilai had been making constant moves in the capital market this year, yet it was still able to maintain a good cash flow. Besides the fact that their new energy vehicles were sold directly and had higher prices, Tan Jincheng's capital operation capabilities were something that no competitor dared to ignore.

Not to mention that he also has two other large companies with abundant cash flow. Whenever there is a cash flow shortage, he doesn't even need to raise funds; he can solve the problem internally, which is something BYD does not have.

If Tan Jincheng were to launch an attack on BYD in the capital market, it would be a very troublesome matter.

In the first quarter of this year, BYD's operating cash flow reached 96.5 billion yuan, which improved somewhat, but its investment cash flow was negative 145 billion yuan. The share issuance in Hong Kong in January and the application for an IPO to spin off its semiconductor business in June were also aimed at alleviating cash flow problems.

Fortunately, BYD's share issuance in Hong Kong had already been approved before the Exeed S01 was released; otherwise, it's hard to say how much the value would have shrunk.

Technology, capital, and market are three factors that no company can afford to ignore. BYD has always had a strong ability to operate with capital, otherwise they wouldn't have been able to achieve such a large scale. However, they are also afraid of monsters like Wei Lai.

Tan Jincheng was taken aback: "It's not that serious. It's normal for everyone to play a little trick when competing fairly, but it's not necessary to go to such extremes."

"Haha, to be honest, I feel different every time I look at you now, or rather, I feel more and more threatened. But don't be careless, we are also improving."

"Of course, Uncle, you and your predecessors have always been our role models."

In the capital market, "getting rid of" competitors does not benefit you at all; on the contrary, it is easy to make enemies and bring backlash. What you need to do is to win against your competitors head-on.

As for being eliminated by the market in the competition, well, that's your own fault.

"President Tan, President Wang, hello both of you. Have you thought about what to say today?"

While chatting with the boatman, Li Bing came over. These three fellow townsmen in the automotive circle had gathered together once again, but compared to Tan and Wang, Li Bing could only be considered a "junior".

Tan Jincheng doesn't care about asserting his status in front of powerful figures, but that doesn't mean others will look down on him.

"I bet you're trying to sell your battery swapping service."

Of the three leading emerging forces, Wei, Xiaopeng, and Wenjie, Wei is basically on the verge of collapse, while Xiaopeng and Wenjie are thriving. Although both of them are still suffering heavy losses, their sales have indeed increased.

In the first half of the year, Li Bing delivered sales figures of nearly 4.2 vehicles. This was even under the premise that they could not obtain chips. In 2021, battery swapping and range extenders were both quite popular, and these two can indeed solve a lot of range anxiety problems.

In addition, Wenjie's stock price has also performed very well. In addition to the benefit of sales growth, it is also due to Li Bing's hype ability. This guy is also a frequent visitor to the hot search and is as active on the Internet as Li Xiang.

In the first half of the year, Wenjie's revenue exceeded 140 billion yuan, with a gross profit margin of 19% per vehicle. Through last year's fundraising, its cash reserves reached as high as 470 billion yuan. It can be said that 2021 was the most comfortable year for Li Bing.

With a global bull market for new energy vehicles and a frenzy of capital, Li Bing is expected to deliver 10 vehicles this year. The relatively few competitors in the high-end market and the differentiation brought by battery swapping make this year a shining year for him.

However, it's hard to say what will happen in the future.

"That's right, everyone is promoting their own products. So let me guess, Mr. Tan will probably talk about Exeed or L1, and Mr. Wang will probably talk about battery technology."

So-called car forums do discuss some future industry trends, but each car company's boss has their own agenda, and it's mostly about promoting their own products.

The Exeed S01 and L1 are currently the two most discussed models from Exeed in the market, representing Exeed's achievements in pure electric and hybrid vehicles. Meanwhile, the boatman has recently been arguing with the CEO of Ningde, which has generated considerable discussion.

However, Ningde's CEO did not come today, but he will participate in the meeting via video link when the formal meeting begins. It is estimated that his prepared remarks are also aimed at Brother Boatman.

"It looks like I'm taking on three people at once."

The boatman did not deny Li Bing's conjecture, but gave Tan Jincheng and Li Bing a half-smile. BYD mainly promotes lithium iron phosphate, while Ningde Times mainly promotes ternary lithium, and he also heard that they have made breakthroughs in sodium lithium batteries.

Li Bing, on the other hand, is playing the battery swapping game. Both are disputes over different battery technologies, and the arguments are ultimately about market dominance.

"Doesn't that prove BYD's strength?"

Ningde, Wenjie, and Xiaopeng, who was not present, are known as the "Weilai Group," a powerful alliance that, together with Weilai Auto, forms a strong technological alliance in the domestic new energy vehicle market and monopolizes most of the sales.

From the battery supply chain to charging models, to intelligent technology and complete vehicles, everything is putting immense pressure on other automakers.

Just like that analysis report, it's not just BYD, but other automakers including joint ventures. If they want to make a mark in the domestic new energy vehicle market, they must accelerate their pace.

Time is running out for them.

The three were chatting and laughing, and were photographed by reporters on the scene, despite the fact that there is competition among the three companies and that there are more and more competing products.

The reporters at the scene found it very interesting to see Boatman and Tan Jincheng chatting and laughing. Just two days ago, the executives of the two companies were still arguing on Weibo, and Boatman had personally mocked Wei Lai quite a bit.

However, what surprised the reporters was that Tan Jincheng, as the key figure in Wei Lai, has rarely commented on his competitors in recent years. The last time he clashed with Musk on Twitter was when Musk started it.

The behind-the-scenes social interactions among industry leaders, their clashes over technical approaches, Huawei's Versailles-like approach, and their complaints about the chip shortage became the main highlights of this conference. Tan Jincheng's speech was also quite interesting.

We didn't talk about the Exeed S01. This thing is now almost crushing everything except BYD, so there's nothing to talk about. Talking too much about it would be a bad thing.

"Actually, there are a lot of controversies surrounding range extenders, but have you ever thought about this: the Weilai L1 has broken the monopoly of BBA in the high-end market, and we are quite proud of that."

"Whether range extension is excessive or outdated is not important. What is important is that we have redefined the demand for high-end luxury."

A very glaring statistic: taking the mainstream luxury models priced between 30 and 50 yuan in China in 2020 as an example, the three major German luxury car brands (BBA) accounted for 82% of the domestic sales, while all other car companies combined accounted for less than 20%.

They have the price and the sales volume; the most lucrative segment has been completely taken by BBA (BMW, Mercedes-Benz, and Audi).

In the first half of this year, this figure dropped to 70%, with the biggest winners being Weilai and Tesla. As Weilai L1 continues to break records, the market position of BBA (BMW, Mercedes-Benz, and Audi) in this field will further decline.

"Through its own efforts, Wei Lai will eventually, in a few years, make consumers, when talking about cars priced above 30 yuan, not necessarily think of domestic brands first, but at least put domestic brands on their list of considerations."

"Of course, we also hope that more and more high-end domestic brands will emerge. Perhaps when our younger generation grows up, when they think of cars, the first thing they will think of is not joint venture brands or BBA (BMW, Mercedes-Benz, Audi), but our domestic brands."

When it comes to Versailles, Tan Jincheng is no less impressive.

(End of this chapter)