2003: Starting with Foreign Trade

Chapter 1053 The Chain Reaction Brought About by the Tacit Understanding of the Three Giants
The final price of the Lavida after discounts was set at 97,900 yuan, maintaining its competitiveness against the Exeed, Galaxy and Qin series without too much impact on profits. However, a discount of 40,000 yuan is a huge blow to existing customers.

In the used car market, the pricing system for gasoline-powered vehicles is almost collapsing. The residual value of three-year-old models such as Nissan Sylphy, Toyota Corolla, and Volkswagen Lavida, which are priced similarly, is declining by 5% per week. Some used car dealers are even refusing to accept hybrid models of these brands.

These are all chain reactions brought about by price reductions. In addition, traditional suppliers of gasoline vehicles such as Bosch and Denso have already planned to lay off employees. Bosch in Wuxi plans to reduce its production capacity by 30%.

This is just the initial chain reaction brought about by the price reduction; the actual impact will be greater and last longer.

However, the price reduction of gasoline vehicles is still somewhat veiled. Neither Nissan nor Volkswagen has made a public statement on the issue of price reduction. Instead, it is led by dealers, mainly because they are afraid of resentment from customers.

In terms of guidance price, the Lavida will be priced between 12.09 yuan and 15.19 yuan, which is a slight reduction from the current price. However, in some cities and some stores, the final price after discounts can even be as low as 8.99 yuan.

For users who know nothing about cars, there can be a price difference of more than 30,000 yuan between them and those who know the market. This pricing system is quite chaotic, which is one of the reasons why gasoline cars don't sell well.

In the past, people had few choices and didn't feel the impact of chaotic pricing. But now people have more options. Compared to gasoline cars, electric vehicles have more transparent pricing. In fact, electric vehicles can now have a unified national price, with the price range varying mainly due to local subsidies.

The new pricing structure for Lavida was finalized on New Year's Eve and simultaneously sent to all major dealerships. Upon receiving the email, the dealership owners instantly felt that this thing wasn't so appealing anymore.

On New Year's Eve, Tanjia Village presented a completely different scene. People were free to move around, and the village's richest family had returned home for the New Year. This year, Tanjia Village was filled with the festive atmosphere of the New Year.

Young people working away from home, and even some families who have settled down, almost unanimously returned to their hometowns, except for those who were truly unable to come back.

"There are quite a few people. How many people are there in the village now?"

Around nine o'clock in the morning, the ancestral hall was bustling with people. In this small mountain village in southern Anhui, there is a centralized ancestral worship ceremony on New Year's Eve. The time varies from village to village. In Tanjia Village, the ceremony starts promptly at ten o'clock in the morning, after which each household goes to worship their ancestors.

"Many people have returned this year, but the village population is indeed quite large, currently around a thousand people in about three hundred households."

This is quite a large scale for the village. Village chief Tan Liyan was in a good mood. On the day Tan Jincheng returned to his hometown, he first went to the village committee and donated a sum of money to the village committee in his personal capacity.

As a unique entity in the county and city, Tanjiacun Village is not lacking in funds or attention, but Tan Jincheng's donation has special significance. The donation to the advanced village committee has also greatly promoted his subsequent work.

As expected, human joys and sorrows are all different. This Lunar New Year's Eve was a very painful and confusing time for gasoline car manufacturers, dealers, and competitors such as Exeed, Galaxy, and Qin series. However, for the villagers of Tanjiacun, it was a very happy year.

"This year, everyone is more present than in previous years. You can tell by looking around; there are many more people wearing glasses."

Tan Jincheng's friend, Tan Liyan's brother Tan Liqing, smiled and pointed to the young people standing in the ancestral hall, each representing a different role. Most of them looked very young, and some still looked like they hadn't woken up yet, probably because their parents had pulled them up.

Tan Jincheng nodded and smiled. He understood the universal love and concern of parents.

How many elderly people passed away at the end of the year?

"There are indeed quite a few in the village, but overall it's not bad. After the ancestral worship ceremony, I'll send a list to Mr. Tan's house."

The sudden reopening caused some chaos, which is hard to explain, but we still have to ask, because like Dong Ge, Boss Tan, who finally got to go back to his hometown, also had to give red envelopes to these elderly people.

This is nothing new in the countryside; it's a kind of traditional culture. Basically, every big boss who returns to his hometown does this, and it's been like this for decades.

"Just have your son deliver it. You're all busy during the Lunar New Year, so you don't need to stay with me all the time."

From the 27th of the twelfth lunar month when he returned home until New Year's Eve, Tan Jincheng's villa in his hometown received many guests every day. Among his relatives in the village, few were employed by the system, so the village chief provided a lot of help in dealing with people.

"Haha, it's alright, it won't cause any trouble. The village committee doesn't have much to do during the Spring Festival."

The richest man in the country, the head of a leading company in the automotive industry—is that someone anyone can get close to? Let alone a village chief like him, even someone several levels higher wouldn't have an easy time meeting Tan Jincheng.

If it weren't for the ties to his hometown and his brother's encouragement, he wouldn't have had this opportunity at all. He doesn't need to do much; he just needs to show his face around Boss Tan a few more times recently.

At this point, you have to be shameless, not shameless.

"Alright, come over to my house with your brother on the afternoon of the first day of the Lunar New Year and have dinner together."

Although he had returned to the village, Tan Jincheng's schedule was very tight. The only free time he could spare was the first day of the Lunar New Year. According to the customs of his hometown, people usually do not visit relatives on the first day of the Lunar New Year, especially in the morning. He planned to use this morning to visit his family.

In the afternoon, there will be some receptions, and there will be some interviews scheduled afterward. He will have to leave his hometown on the third day of the Lunar New Year.

The brothers Tan Liqing and Tan Liyan exchanged a glance, their eyes filled with surprise, especially Tan Liqing, whose childhood friend was now very different from Tan Liqing, and there was no possibility of them ever crossing paths again.

But it was enough that the other person remembered him on this rare reunion day. He didn't expect to get anything out of this friend. Given his level of education and the industry he worked in, the benefits he could get were very limited.

It's better to preserve this beautiful memory; it might come in handy in the future. Besides, with the wealth he's accumulated over the years as a contractor, while not enough to make him extremely rich, it's more than enough to live comfortably.

"Don't turn the beauty filter on too much."

While Tan Jincheng was chatting with people he knew in the village, several bold young people took photos of him with their mobile phones. Boss Tan did not mind this. This spontaneous traffic was a supplement to the company's marketing and publicity.

"Okay, okay, Mr. Tan, can we take a photo together?"

A young man who was leading the charge was surprised to find that Tan Jincheng was joking with him. In Tanjiacun, there were many people who benefited from Tan Jincheng, and there was a special fund in his education fund dedicated to the village's education.

In Tanjiacun, although Boss Tan is not as high-profile as Dongzi, everyone knows that the good life they have now is brought by this young man who is no longer young, and it would be a lie to say that they are not grateful.

Before Tan Jincheng made his fortune, more than 80% of the young and middle-aged people in Tanjia Village worked or did business outside the village, mostly in the clothing industry. After Shanchi set up a factory in the county, these people either worked in the factory or did business in the industrial chain, and their lives became much more stable.

"Okay, but like I said, don't overdo the beauty filters. I don't want my face to become so thin that I won't recognize myself."

"Absolutely, we'll use the original camera to take the pictures."

After some playful banter, Tan Jincheng did not participate in the subsequent ancestral worship ceremony. This was partly because people had already begun to gather, and to avoid causing a disturbance, he was not allowed to stay any longer.

On the other hand, he also had to go back to handle some official business.

The joint price reduction by Weilai and BYD has had a significant ripple effect. Following the price cuts of the two best-selling models, Lavida and Sylphy, another major joint venture brand has also lowered its terminal price.

The Dongfeng Citroën C6's price has been halved to 12.19 yuan after subsidies, directly impacting the A-class car market. Other gasoline car brands have also frequently adjusted their terminal guide prices, resulting in a dazzling array of price reductions that have broadened consumers' horizons.

"When did joint venture brands, once so prestigious, begin to engage in such passive price reductions?"

No matter how the Spring Festival Gala is modified, it is no longer able to attract public attention. The price war in the automotive industry before and after the Spring Festival has completely gone beyond its usual scope. Apart from the panic-driven response of the gasoline car series, the attitude of another new energy giant, Tesla, is what the market is most concerned about.

With a projected sales volume of 180 million vehicles in 2023, how should Tesla's two best-selling models respond to the pressure from the upcoming launch?

Tesla didn't keep the public waiting long. On January 22, the first day of the Lunar New Year, Tesla's official website showed that all domestically produced Tesla models had been reduced in price. The starting price of the Model 3 was reduced to 229,900 yuan, and the starting price of the Model Y was reduced to 259,900 yuan.

Both models have record low starting prices.

"Wei Lai has no intention of starting a price war, but after the reduction of national subsidies, the cost of new energy vehicles should not be passed on to consumers. Last year's price surge was harmful to both the industry and consumers."

When Tesla officially announced the price cut, Tan Jincheng also accepted a telephone interview with CCTV Finance Channel.

This price war, which was seen as initiated by Wei Lai, lasted only seven days from January 15th to January 22nd. With BYD and Geely quickly following suit, the entire automotive market was thrown into complete chaos.

The public opinion surrounding Wei Lai's actions has become polarized during this period. Some media outlets and consumers have a positive attitude towards the price war initiated by Wei Lai, while other media outlets have criticized Wei Lai's actions, believing that they are harmful to the industry.

"Next year, our sales volume will exceed 186 million vehicles, and our total sales volume will approach 250 million vehicles. The advantages of large-scale production have reduced our per-vehicle cost by 15%, which allows us to offer discounts to consumers."

"We also hope that our peers can accept the reality of price reductions. A mass-produced consumer product should not be out of reach."

According to data disclosed in Weilai's financial report, in 2022, Weilai reduced the overall vehicle cost by 22% year-on-year through self-developed electric drive systems. According to industry estimates, after the Ningbo factory ramped up its production capacity, the per-vehicle manufacturing cost of the Exeed S01 dropped to 8.5 yuan, and the per-vehicle cost of the Xinghe P1 dropped to 8.3 yuan, demonstrating a clear cost advantage.

"Using technological dividends to replace policy dividends will be the trend in the future automotive market. The Exeed and Galaxy series are indeed targeting the market of Nissan Sylphy and Volkswagen Lavida."

During the telephone interview, Tan Jincheng did not hide Wei Lai's ambition.

In 2022, the Nissan Sylphy sold 42 units and the Volkswagen Lavida sold 35 units. The Exeed S01 is fully capable of becoming such a best-selling model. By leveraging its pricing power, Exeed can reshape the rules of the A-class family sedan market and force gasoline cars to follow suit with price reductions.

Pricing power has always been fundamental to profits.

Unlike other car companies, Weilai's biggest advantage actually comes from the cooperation of its dealers. Other dealers, due to their huge inventory, will not have much impact on the car company's sales even if they offer large discounts.

Distributors under the Weilai system have very low inventory costs, so price reductions will not have a significant impact on their profits. On the contrary, they will benefit from Weilai's success. Therefore, distributors are very cooperative in dealing with price reductions.

The Yuechi series, which has the highest inventory, has been actively controlling production capacity since last year. This year, due to special circumstances, production capacity has been reduced significantly to do everything possible to reduce dealer inventory.

"Production capacity is indeed the biggest problem after the price reduction. Coupled with the production restrictions during the Spring Festival, it will definitely have some impact on our delivery. We also hope that our users will give us more time so that we can try to solve this problem before the end of the first quarter."

When answering a CCTV reporter's question about production capacity, Tan Jincheng gave a truthful answer.

According to Weilai's backend data, the number of orders for the Exeed and Galaxy series will surge throughout January, with the number of Exeed series orders likely to exceed 80,000 vehicles in a single month, which will cause some problems for Weilai's delivery.

With the continued surge in orders, the inventory cycle for the Exeed series will rapidly decrease to 0.5 days, and the delivery cycle will inevitably be greatly delayed. This is currently the biggest problem for Exeed.

"Industry restructuring is inevitable. All other companies can do is respond proactively and face the upcoming market competition by upgrading their technology."

In the brief interview, Tan Jincheng appeared very confident.

Price cuts are not all the same. To put it bluntly, this is a war without gunpowder launched by Weilai, a struggle for pricing power in the A-class sedan market. The Exeed S01 has been on the market for nearly two years. After making preparations in terms of technology, scale, and strategy, Weilai has officially launched an attack on the pricing power of joint venture brands.

There are many criticisms of Weilai, the most common being that it disrupts the market, disregards the livelihoods of dealers and used car dealers, and arbitrarily dominates its market position; to put it bluntly, everyone understands the purpose of Weilai's price reduction this time.

If the price adjustments of the ES and L series can be attributed to the market behavior of the company itself, then price reductions are inevitable when high-end prices can no longer be maintained, and none of the BBA (BMW, Mercedes-Benz, Audi) can avoid this.

However, among A-class pure electric vehicles, the Exeed S01 has obvious advantages. There are not many similar competitors, and it has chosen to actively lower its price, which is aimed at the gasoline vehicles dominated by joint venture brands.

Wei Lai's strategy of sacrificing short-term profits for long-term market share, consolidating its dominant position in the new energy vehicle market, and using its cost advantage to crush gasoline vehicles, has accelerated industry consolidation. This was fully exposed after an interview with CCTV Finance.

"Why hide it? There's no need for that."

The financial channel was very accommodating, arranging a phone interview with Tan Jincheng immediately, and even giving him ten seconds of screen time in their 7 pm news, which shows how significant the impact of this price reduction was.

In fact, in the battle for pricing power, the three giants, Wynn, BYD, and Tesla, did not communicate at all, but they all maintained a tacit understanding.

In addition to the significant price cuts on the Qin series, BYD has also adjusted the prices of several other models, including the Song series. Tesla, which was originally expected to be less affected by this price war and existed relatively independently, has also significantly adjusted the starting prices of its two high-volume models.

In terms of the magnitude of price reductions, Tesla has the largest reduction, with the Model 3 rear-wheel drive version seeing a price cut of 3.6 yuan.

With the penetration rate of new energy vehicles exceeding 40% in first- and second-tier cities, the 15 to 20 yuan price range has become the focus of competition. Consumers are paying less attention to driving range and charging convenience, and intelligent configurations are becoming a new weight in their car purchase decisions. Against this backdrop, new energy vehicles have the ability to compete with gasoline vehicles.

The tacit understanding among the three giants is based on this point.

"Gasoline-powered cars will certainly not be completely eliminated, but the shift in pricing from gasoline-powered cars to new energy vehicles is inevitable for the industry. As for who holds the pricing power, it is not that important."

Pricing in the automotive market is not as absolute as in the mobile phone industry. Few companies can monopolize pricing power in a certain price range; instead, they often exist in alliances.

For example, in the gasoline car market, BBA (BMW, Mercedes-Benz, and Audi) monopolizes the pricing power of luxury models in the 40 yuan range, while Porsche and Ferrari represent another high-end segment. Consumers are accustomed to choosing a car model based on the question of why similar competing products are more expensive than these models.

In the 10 to 20 yuan price range, for a long time, Volkswagen (both FAW-Volkswagen and SAIC-Volkswagen) and the three major Japanese brands dominated consumers' price perception. Price benchmarks often represented status.

It is difficult for any single company to monopolize a certain price segment. After all, there are so many car models on the market and such a large annual sales volume that no single company can handle it all.

“The term ‘pricing power alliance’ may not be commonly used, but it does exist. What the three of us are currently doing is exactly this.”

The three leaders had never communicated, nor could they possibly communicate, since they couldn't afford to give anyone leverage over them. Tan Jincheng only dared to mention these things to Gu Qingqing in private conversations.

Behind the price reduction is actually the division of pricing power among the three giants in various price ranges. Weilai dominates the pure electric vehicle market in the 10 to 15 yuan range, while BYD dominates the hybrid vehicle market in this price range, or rather, the entire hybrid vehicle market.

Tesla, on the other hand, clearly values ​​the 20 to 30 yuan price range more to maintain its high-end image. After all, their model range is limited, and controlling the pricing power in these two price ranges means truly establishing themselves in the automotive market.

The car market without qualifiers.

On the third day of the Lunar New Year, Tan Jincheng and Gu Qingqing were the first to embark on their journey home. Tan Lihua and his wife, Tan Jinyue, and their two children would stay in their hometown for a while longer, as the couple's holiday was coming to an end due to work.

"Is it alright to leave them at home?"

Before getting on the bus, Gu Qingqing was still a little worried. Tan Jinyue still had some impression of her hometown, but their two children had no impression of it at all. Although they were usually very busy with work, they had never really left home.

"What does it matter? Spending a few days in my hometown isn't a bad thing."

Twelve-year-old Tan Jinchuan is at the peak of his energy. Since returning to his hometown, the novel things have made him run all over the mountains and fields. His daughter, Tan Jinqin, is a little quieter, but the new things also make her restless.

The two children significantly increased the workload for the security team, but this is something they will all have to face in the future, so consider it an early adaptation.

"Alright, let them have some fun, just make sure they're safe."

Since Tan Jincheng didn't care, Gu Qingqing had nothing to say.

"This is definitely no problem."

With millions of dollars in security costs every year and comprehensive support, it would be truly ridiculous if something happened in their own hometown.

This price war involves not only companies, but also local governments. Take Hubei Province, a traditional hub for gasoline-powered vehicles, for example. Their subsidy policies for gasoline-powered vehicles are quite generous, and Citroën's significant price reductions are supported by them.

The price cuts by German and Japanese brands have prompted other joint venture brands to join in, resulting in a fierce battle among joint venture brands throughout January and a highly chaotic market for gasoline-powered vehicles.

"Given this trend, sales in the first quarter might not be good."

The chaotic market prices have exacerbated consumers' wait-and-see attitude. No one can guarantee that the price won't drop tomorrow after they buy today. Therefore, they are more inclined to choose new energy vehicles.

However, the new energy vehicle market is also quite chaotic. After the three giants, Geely, Changan and other brands lowered their prices, other car companies were forced to follow suit. The disadvantage in cost became very obvious in the price war.

Throughout January, more than 40 car manufacturers participated through government and enterprise subsidies, direct price reductions by manufacturers, and dealer discounts, creating a fierce battle across all sectors, from new energy vehicles to gasoline vehicles, and from mainstream brands to luxury brands. The scene was quite lively.

Among the BBA (BMW, Mercedes-Benz, Audi), Audi has been the slowest to electrify. The starting price of the A4L has been reduced to 26.98 yuan, and the Q5L has been discounted by 8 yuan. FAW-Audi has also added government and enterprise subsidies in Jilin Province, reducing the starting price of the Q3 to 18 yuan.

Among the emerging electric vehicle manufacturers, Li Bingwenjie is the most ruthless. Some of his models offer discounts of up to 10 yuan, forcing Seres, a brand with a large fan base, to follow suit.

"This is spectacular! Boss Tan's move is no less significant than the ride-hailing and food delivery war of yesteryear. I just wonder who the final winners will be?"

The battle between more than 40 mainstream brands is extremely rare in the history of the global automotive industry.

(End of this chapter)