2003: Starting with Foreign Trade

Chapter 1023 "Taking Over Pricing Power That Doesn't Belong to Us"

"The reality is far more complex than Mr. Tan described; Wei Lai faces very serious problems."

In front of the camera, Tan Jincheng appeared relaxed. To outsiders, being sued by Tesla even seemed to make him proud, but in reality, it was far from that.

Weilai has its own overseas expansion plan and the ambition to become one of the industry leaders. Just as Tesla does not take traditional car companies such as BBA seriously, Weilai is similar. In the eyes of Weilai's overseas expansion team, there is only Tesla.

As we all know, the best way to deal with large companies is through antitrust investigations. Once a company is targeted by an antitrust investigation, it will suffer greatly. Musk's move may seem reckless, but it is actually the most fatal blow.

"Our first priority is to win this case with all our might, and win it spectacularly."

In traditional industries, monopolies often mean price increases. Monopolistic companies use price increases to obtain more profits. In other words, monopolies in traditional industries often manifest as inflation.

For example, real estate, land, etc.

Monopolies in the technology industry are somewhat different. Technology is a manifestation of productivity progress. When a technology company reaches the point of monopoly, many products are often launched to the market by lowering prices, which is a form of deflation.

Intelligent manufacturing is a manifestation of the technology industry. Ultimately, WILI's goal is to sell its products at a lower price. The Starway S01 and Star River P1 are WILI's demonstration of its technological strength.

However, it is not qualified to be called a monopoly, but it certainly has the qualifications to be a monopoly. In the field of power batteries, Jinshidai has a global market share of 32.6% of installed capacity.

In the field of new energy vehicles, although Weilai lost its sales champion position to Tesla, which has been incredibly strong this year, it still occupies more than 10% of the global new energy vehicle market share.

Tesla and Wray are the only two companies in the world with a market share of more than 10% in the new energy vehicle market, and Wray's success is even more impressive considering that it had zero sales in the North American market.

Weilai holds a very important position in the two most core areas of the new energy vehicle market.

The entire year of 2021 was the most prosperous year in the history of new energy vehicles, and it may be the most popular year ever. It is unlikely that such a grand occasion will ever be seen again.

It's not just a sales boom; the capital and policy environment is also very favorable for the new energy industry. In terms of capital, global investment in new energy this year has reached a staggering $7550 billion.

Of this, approximately US$2730 billion was invested in electric vehicles and related infrastructure. This capital frenzy was accompanied by policy support, and most domestic consumers believed that electric vehicles were something only our country was developing.

However, this is not actually the case. Regions including Europe, America, Southeast Asia, and the Middle East are very friendly to new energy vehicles. Among them, Europe offers the most generous subsidies, simply because environmental protection has become a hot topic worldwide in recent years.

The subsequent impression that we are the only ones involved in electric vehicles is, besides being deliberately created by the media, mainly because, under the background of massive subsidies in Europe and the United States, only one company has emerged that is truly competitive.

Unlike here, it's flourishing in all directions.

The booming new energy industry is most evident and dazzling in Tesla and Elon Musk himself. The explosive growth in production capacity of several global Gigafactories, driven by the Shanghai Gigafactory, has relieved Tesla of any production capacity concerns, which is reflected in its outstanding financial reports.

Tesla had $50 billion in free cash flow throughout the year, was profitable for ten consecutive quarters, and its cost per vehicle dropped to $3.5. Its gross margin once reached over 30%, leading Musk to boldly declare at the shareholders' meeting that Tesla's annual sales are expected to reach 2000 million vehicles by 2030.

With sales of 2000 million vehicles, that represents 25% of the global market share in 2020 and 77% of our country's market share. You can see how proud Musk must be.

In October, Tesla reached a historic moment. On October 25, Tesla's stock price surged 12.66%, and its total market value exceeded one trillion US dollars. By November 4, Tesla's market value had soared to 1.235 trillion US dollars, setting a record in the automotive industry.

Musk's personal wealth has soared to over $1200 billion in less than a year.

Although Tesla experienced a consumer rights protection incident like the brake gate at the beginning of the year, which dealt a certain blow to its image, it still did not affect Musk's already high popularity and status as the most popular person in the world.

From the Gigafactory to the expansion of FSD testing, to the growth of its energy storage business, and the expansion of its charging network, Tesla's development speed, driven by Wall Street capital, is unmatched by any other company.

Wei Lai's rise was also rapid, with a market value exceeding 1.3 trillion yuan, approaching China Merchants Bank and ranking sixth in the A-share market. However, the influence of A-shares is ultimately somewhat lacking compared to US stocks. Tan Jincheng, who is also the richest man, is relatively more low-key.

After reaching the pinnacle of wealth and industry status, it's difficult for anyone to avoid psychological changes, including Tan Jincheng. This is even more pronounced in the emotionally unstable Musk.

Beneath the euphoria of his peak, undercurrents were surging. From the forced donation incident to his eldest son being tricked into believing he was transgender, Musk's mentality underwent a significant change.

In terms of business management, Musk used to be somewhat idealistic, but as Tesla's production capacity and sales continue to explode, there are clear signs that Musk is shifting towards realism.

In several earnings calls, facing supply chain crises and FSD technology bottlenecks, Musk made no secret of his strategic adjustments, shifting the focus of fourth-quarter deliveries to cost control and demanding that overtime pay no longer be paid to meet quarterly targets.

Internally, chip design has begun, delaying the Cybertruck mass production plan. At the same time, Musk has also begun to focus on localized production and policy compliance, and has become less resistant to dealing with data privacy regulations in the EU and here.

The more realistic Musk is clearly more terrifying and competitive than the idealistic Musk. His antitrust lawsuit, though seemingly unreasonable, is a deadly move.

At present, Wei Lai's top priority in Europe is dealing with the lawsuits. However, while dealing with the lawsuits, Wei Lai did not sit idly by and also filed a lawsuit against Tesla in the European Court.

On December 20, Wei Lai also filed an antitrust investigation lawsuit against Tesla. On this basis, Wei Lai also added a lawsuit for unfair competition. This dispute over charging standards has begun to enter the next stage.

It's quite interesting to think that the most valuable car company in North America and the most valuable car company in the Eastern market are fighting an antitrust case in Europe.

"Tesla is forging ahead in 2021, but it's not without its risks."

After losing its sales champion title, Weilai went all out in the second half of the year. First, it used the Xinghe P1 to shout the slogan of equal price for oil and electricity. This is not just a simple slogan, but a revolution that can cause an earthquake in the industry.

With the simultaneous and tacit price reductions by Weilai and BYD, hybrid technology brought prices down to par with comparable gasoline vehicles, completely breaking the monopoly of joint venture brands in the A-class car market.

The automotive market after September was quite brutal due to the entry of the Galaxy P1. In order to cope with the impact of the Galaxy P1 and other models such as the BYD Qin, joint venture brands led by Volkswagen and Toyota had to adjust their pricing strategies.

Lowering prices to survive has become the only way out for joint venture brands. The once high-end BBA (BMW, Mercedes-Benz, and Audi) have had to lower their prices. Although the competition is still limited to the Chinese region, Weilai's strategy has never concealed its intention to enter the European market.

Weilai can readily extend its strategy of equal pricing for electric vehicles to the European market. This equal pricing will not only bring down the price of electric vehicles, but could also trigger an industry revolution and reshape the global competitive landscape.

Two companies from the East, one proclaiming the slogan of equal pricing for gasoline and electric vehicles, and the other tacitly following suit, have caused the first to suffer, which is the traditional gasoline vehicle industry, but it has also had a significant impact on Tesla.

In the first half of the year, Musk was unchallenged, but in the second half, the industry transformation initiated by Musk was not just a price war, but a revolution in technology, industry, and cognition.

Smart cars priced around 100,000 yuan have broken the ceiling for pure electric vehicles and rewritten the rules of competition. From a long-term strategic perspective, Weilai has built an ecological closed loop of hybrid, pure electric, and energy storage, including the opening of charging piles.

While Tesla enjoys immense success, its main business still relies on automobiles. If Tesla fails to reduce battery costs or launch models priced below 20 yuan in China, its global market share may be gradually eroded by other companies.

For Tesla, it's not just about mastering hybrid technology. There's also the explosive popularity of the Exeed S01, a pure electric vehicle with a huge influence in China, and its price has been brought down to below 20 yuan.

The cost of the Exeed S01 has already been analyzed by major automakers, and its gross profit margin is also transparent. Judging from the gross profit margin, there is still room for the Exeed S01 to be discounted. Currently, due to its hot sales and the launch of a new car, the Exeed S01 does not have any price discounts other than some basic preferential policies.

However, this didn't stop its sales. Pure electric vehicle manufacturers, including Tesla, were quite passive in dealing with the impact of the Exeed S01. Lowering prices meant that the discounts were too small and offered no advantage. Not lowering prices was also not an option, but at the same time, they had to guard against Exeed S01 price cuts. Apart from forcing other automakers to quickly launch models with equivalent configurations and similar prices, they couldn't think of any good promotional methods for their existing models.

Tesla faces an even greater dilemma. Tesla has always positioned itself as a high-end brand. Although it can still maintain sales during major promotions, before the bottleneck of FSD technology is resolved and there is no progress in the promotion of Level 3 and above intelligent assisted driving, future Model 3 and Model Y users may well turn to Exeed S01.

Aside from brand power, both cars have intelligent driver assistance systems, but one costs only 10 to 15 yuan while the other costs more than 20 yuan. How will consumers choose? Musk really doesn't dare to gamble.

Tesla ZG is already planning a large-scale price reduction for the Model 3 and Model Y. In this round of competition with Tesla, Tesla ZG plans to launch a major promotion during the New Year's Day period.

From imported to domestically produced, Tesla's two best-selling models, the Model 3 and Model Y, have actually undergone several rounds of price reductions in China. However, all of those were based on Tesla's proactive strategic adjustments. This price reduction is more of a passive one.

The passive price reduction also means a decline in profits. This is why Tesla's stock price has fluctuated significantly since the beginning of December. In the week before the European anti-counter-lawsuit was filed, Tesla's stock price fell by more than 8% in a single week.

In the capital markets, the threat posed by the US to Tesla has been recognized, and Tesla is not as invincible as Musk claims.

By engaging in a competitive technological "fishpond" approach and extensively licensing their fast-charging technology to European and North American automakers, Weilai is shifting its focus from product export to standard setting, posing the most fundamental threat to Tesla.

Conversely, although Weilai has also recently faced resistance from Tesla and is also embroiled in lawsuits, its stock performance has been far better than Tesla's. In addition to the fact that its technological moat has been initially established, the most fundamental reason is that Weilai has gained a certain degree of pricing power.

“Most industries cannot avoid price wars, but how to wage a price war depends on the company’s strength. Whether to passively follow suit or actively initiate it is very crucial.”

December is coming to an end. In addition to dealing with lawsuits in overseas markets, the most crucial thing for Weilai is to sprint for year-end sales. This year has been a glorious year for Tesla, but it has also been a glorious year for Weilai.

"We can proudly say that we have gained a certain degree of pricing power for electric vehicles in China, which is very important for domestic cars."

In the smartphone wars of yesteryear, Apple remained undefeated largely because, in addition to its product strength, it controlled the pricing power in the smartphone market, forcing other brands to consider Apple's lead when launching new models.

If you price your products higher than Apple's, you won't be able to sell them. If you price them too low for similar specifications, consumers will question them, which puts you at a disadvantage in the competition.

The same applies to the automotive industry. In the era of gasoline-powered vehicles, joint venture brands held the pricing power. Starting in 2019, Tesla began to lower the price of its domestically produced Model 3. These proactive price reductions changed Tesla and the pricing rules of the domestic new energy vehicle market.

When competitors release new cars, they benchmark against the Model 3. When the Model 3 lowers its price, other models are forced to follow suit, and even new cars that haven't been released yet need to have their own unique rules.

The new energy vehicle market may seem to be booming, but in essence, the pricing power is still in the hands of foreign brands. In the early stages, Weilai played more of a follower role and did not have much say in pricing.

Starting with the initial price of the ET5 in Europe, Weilai began to try to gain some pricing power, challenging Tesla in terms of configuration and price for the first time. Although it did not have the same influence as the Model 3, the ET5 sold very well, which gave the entire Weilai team confidence.

The emergence of the Exeed S01 marks the first time that WILTECH has truly grasped the pricing power in the pure electric vehicle sector. When WILTECH is able to reduce the cost of its mature L2 intelligent assisted driving system and pure electric vehicles, it can bring the price of pure electric vehicles down to a level that most consumers can accept even without any subsidies.

This means that Wei has already arrived.
"From lithium mines to batteries to complete vehicles, the closed loop of the entire industry chain allows us to compete with Tesla on cost. What we need to do is to take over the pricing power that has never belonged to us and make new energy vehicles truly ours."

"If we can do it in the mobile phone industry, we can do it in the automotive industry as well."

Years of hard work and development have yielded results. Companies like Huawei and Xiaomi have been able to control their own pricing power. Huawei, in particular, no longer needs to consider Apple's pricing for high-end phones. Although they are still compared to Apple, that is just normal market behavior and they will not be unable to sell their products as before if their prices exceed those of Apple.

Xiaomi has been working towards the high-end market in recent years. Although it is difficult to change their brand image in the short term, the price of their high-end flagship models has indeed increased, and it has not had a significant impact on sales. This shows that they have been quite successful.

This shows that the first Xiaomi car will not be cheap. Xiaomi, which is determined to be high-end, actually needs the car business more than Huawei. They have worked hard for many years, how could they possibly produce a cheap car to destroy all those years of hard work?

The tricks Lei Jun plays on the internet are actually about gradually raising consumer expectations and comparing prices with Apple and Tesla in an attempt to establish Xiaomi's high-end image.

The mobile phone industry is an example of this. In the automotive industry, Wei Lai has gradually regained our own pricing power through his own efforts. When local companies cannot control pricing in an industry, there is no such thing as development.

All the prosperity was just an illusion, just like how we could only make low- to mid-range models in the era of gasoline-powered cars.

Weilai currently has many popular models, but so far only two models have a real market position. One is the range-extended L1. Behind the jokes about the refrigerator, TV and big sofa, the Weilai L1 has driven down the sales of BBA (BMW, Mercedes-Benz, Audi).

At the same time, it has also established its position in the range-extended electric vehicle market. If you want to play the range-extended electric vehicle market, you have to keep an eye on the new or modified models of the Weilai L1 and Weilai L series. Even a strong competitor like Chrysanthemum is still in this situation. They dare not directly challenge the Weilai L1 in terms of price.

The annual delivery volume of the L1 exceeded 90,000 units, and this single model brought in more than 26 billion yuan in revenue for Weilai. In the 2021 automotive market, the L1 is a classic case in the history of the automotive industry.

Besides the L1, another model with a prominent market position is the Exeed S01. Since deliveries began in April, 50,000 vehicles have rolled off the production line in four months, 100,000 vehicles in six months, and the total delivery volume in three quarters has reached an astonishing 120,000 vehicles.

To use a self-media joke, the sales forecast for Exeed S01 next year is still a bit conservative. Exeed S01 in 2022 is fully capable of reaching 20 units in sales for the whole year. If it is coupled with some discounts, such as a slight price reduction, then 20 units in sales seems a bit conservative.

The fact that a Volkswagen model can become a huge hit in its first year on the market is not as simple as it seems on the surface. From pricing to the supply chain and production capacity, it shows that Weilai has a lot of confidence.

So what if the 3D Mark III was a hit upon its launch? It almost went bankrupt because of production capacity issues caused by Tesla. When a model becomes a huge hit and can still be delivered on time, that demonstrates the hard power behind a car company.

For high-volume models, Weilai has been able to control the delivery cycle to one to four weeks, or within one month. For high-end and customized models, the delivery cycle can be controlled to two to eight weeks. In Europe, the delivery cycle can also be controlled to no more than eight weeks.

For some large orders, such as the Aion series of ride-hailing vehicles, even with supply chain disruptions, delivery can be completed in no more than six months. As Tan Jincheng said in an interview, in terms of delivery cycle, Weilai is at least two years ahead of its peers.

In terms of sales, BYD is catching up quickly, but in terms of delivery time, BYD is far behind. Especially at the end of the year, production at the Changan factory was disrupted, which extended the delivery time of some of BYD's popular models to as long as half a year.

As for other "prospective cars" including joint ventures and emerging brands, there's no need to mention them. They hold one launch event after another, generating more and more buzz each time, but when it comes to when the cars will be delivered, they all fall silent.

The Exeed S01 is a testament to WILAY's comprehensive strength and a major symbol of WILAY's complete integration of its industrial chain. It is with this strength that WILAY dares to challenge Tesla's market position.

Tesla and Musk clearly understand this. In the domestic market, they don't have many good options other than improving quality and lowering prices, but in the European market, they must do everything they can to stop the US from entering the market.

With the Exeed S01, Weilai gained pricing power in the mass market; with the Weilai L1, Weilai held pricing power for range-extended electric vehicles; and the Galaxy P1 was Weilai's attempt in the hybrid market.

On January 1, 2022, Tesla officially announced a price reduction for the Model 3 and Model Y in the ZG region. The price of the Model 3 rear-wheel drive version was reduced by 14,000 yuan, and the performance version was reduced by 18,000 yuan, bringing the starting price down to 265,900 yuan. The price of the standard range version had already been reduced to 235,900 yuan.

As for the Model Y, the price reduction is even greater, with the rear-wheel drive version reduced by 2.8 yuan and the four-wheel drive version reduced by 3.7 yuan, bringing the starting price down to 28.89 yuan. This adjustment was made a full ten months ahead of Tesla's internal strategy.

The countersuit filed by Wei Lai and the significant price adjustments to two best-selling models resulted in a 14.4% drop in Tesla's stock price over four consecutive trading days, wiping out $1273 billion in market value.

"Tesla's high valuation needs to be re-evaluated."

Domestically, Li Xiang, CEO of Weilai Group, responded on Weibo to Tesla's sharp decline over four consecutive trading days, stating that the antitrust investigation is something Weilai is unwilling to face, while if Musk is the last person he wants to face, it is probably the decline in Tesla's stock price.

At the start of 2022, both sides went all out, exchanging blows and going all out.

(End of this chapter)