Recently, Xiaopeng Motors has become a price butcher in the domestic car market. On the evening of January 23rd, Xiaopeng Motors officially announced that the Xiaopeng P7i Pengyi Edition will receive a maximum discount of 50000 yuan, with a comprehensive discount price of 289900 yuan and a starting price of 208900 yuan for all models.
For this price reduction, Time Weekly contacted the relevant person in charge of Xiaopeng Motors, but as of the time of publication, no response has been received.
A reporter from Time Weekly noticed that Xiaopeng Motors had already lowered prices three times last month. On December 8, 2023, Xiaopeng P7i launched XNGP limited time opening benefits, with a maximum discount of 26000 yuan for the entire series, while the Max version only starts at 224900 yuan. On December 11th, the 2024 Xiaopeng G9 launched a limited time purchase policy. From December 8th to December 17th, orders for the 2024 Xiaopeng G9 can enjoy a discount of up to 19000 yuan. On December 18th, the entire Xiaopeng G6 series was reduced by 10000 yuan, and the selling price dropped to 199900 yuan.
In the past price war, Xiaopeng Motors has been in a passive state of competition. Now, it has lowered prices four times within two months and has chosen to initiate a price war at the end of the year in an attempt to seize the market opportunity.
As CEO He Xiaopeng of Xiaopeng Motors has said, price competition is inevitable, and in the future, Xiaopeng will also aggressively occupy the market in related pricing.
Senior analyst in the automotive industry, Mei Songlin, told Time Weekly reporters that overall sales have been relatively low since the beginning of 2024, and manufacturers are concerned about falling behind. Some manufacturers have quickly taken action, lowering prices to increase sales, "unlike before, we will wait and see."
Lowering prices lowers Xiaopeng's overall gross profit margin
From the financial report data, price war is one of the important reasons affecting the performance of Xiaopeng Motors.
According to the 2023 third quarter report of Xiaopeng Motors, from the first quarter to the third quarter of 2023, Xiaopeng Motors has experienced negative gross profit for three consecutive quarters.
In the third quarter of 2023, the gross profit margin of Xiaopeng Automobile was -2.7%, and the gross profit margin of automobile sales (i.e. the percentage of automobile sales gross profit or loss to automobile sales revenue) was -6.1%. In 2022, Xiaopeng's gross profit margin was as high as 11.5%, while the gross profit margin for car sales was 9.4%.
Xiaopeng Motors stated in its financial report that there are two main reasons for the year-on-year decline in gross profit margin: firstly, inventory impairment related to G3i, which had a negative impact on the gross profit margin of automobiles in the third quarter of 2023 by 2.9 percentage points; The second reason is the increase in sales promotions and the expiration of subsidies for new energy vehicles.
Meanwhile, Xiaopeng Motors had a net loss of 9.028 billion yuan in the first three quarters of 2023, and a net loss of 3.89 billion yuan in the third quarter, an increase of 63.60% year-on-year.
Although profitability has declined, Xiaopeng's cash flow is still sufficient, which may be the confidence of Xiaopeng Automobile's four price reductions in less than two months.
As of the end of the third quarter of 2023, Xiaopeng Automobile's cash reserves amounted to nearly 36.5 billion yuan, an increase of 2.74 billion yuan compared to the previous quarter, a month on month increase of 8%.
In addition, Volkswagen's investment in shares has also enriched Xiaopeng's pockets. In July 2023, Volkswagen announced that it would increase its capital by approximately $700 million (approximately RMB 5 billion) to Xiaopeng Motors and acquire approximately 4.99% of its equity.
After the transaction is completed, Volkswagen will receive an observer seat on the board of directors of Xiaopeng Motors. In December 2023, Xiaopeng Motors announced that it had successfully issued 94.0793 million shares of Class A common stock to Volkswagen Finance Luxembourg S.A., a subsidiary of Volkswagen. This means that the cooperation transaction between Xiaopeng and Volkswagen has been completed.
On the other hand, Xiaopeng Motors continues to promote cost reduction in multiple fields, providing support for its fierce price war.
He Xiaopeng once pointed out that Xiaopeng Motors is efficiently implementing cost reduction projects in multiple fields such as power systems, vehicle hardware, and supply chain. By the end of 2024, it is expected to achieve the goal of reducing costs by 25%. Cost reduction measures are not only conducive to significantly improving product competitiveness, but also will significantly improve the company's gross profit margin in 2024.
At the same time, under the leadership of President Wang Fengying, the customer satisfaction and collaborative combat capabilities of Xiaopeng Automobile's marketing service system continue to improve. Since the second half of 2023, Xiaopeng Automobile has begun to accelerate the transformation of its business model in channels, accelerate the survival of the fittest in its sales network, and introduce dealer partners at a faster pace, accelerating the expansion of market share in second and lower tier cities.
Xiaopeng Motors stated that the increase in product sales, the promotion of cost reduction projects in multiple fields, and the efficiency improvement of sales channels will continue to reduce the R&D and sales management expenses of Xiaopeng Motors.
Fight a price war to seize the opportunity
From the previous rounds of price wars in the domestic car market, it can be seen that the car companies that take the lead always have an advantage.
In 2004, under enormous pressure from a surge in inventory, car companies hoped to exchange price for quantity. In May 2004, many mainstream companies such as Shanghai General Motors and Shanghai Volkswagen took the lead in lowering prices. In September 2004, Beijing Hyundai announced a complete price reduction for its products, leading to multiple rounds of price wars in the domestic car market.
The result of the aforementioned car companies taking the lead is that Shanghai General Motors ranked first in domestic sales in June 2004, and Beijing Hyundai ranked fourth in domestic sales in October 2004.
The same goes for the price war in 2023. In January, Tesla fired its first shot at price reduction, with the Model 3 starting at 229900 yuan, becoming the lowest selling Tesla model in history, and the Model Y starting at 259900 yuan. This allowed Tesla to sell 603700 vehicles in the domestic market in 2023, ranking second in the country.
Afterwards, Wenjie fueled the situation and closely followed Tesla's price reduction. The adjusted selling price of the WENJIE M5 EV starts at 259800 yuan, and the adjusted selling price of the WENJIE M7 starts at 289800 yuan, with both starting prices reduced by 30000 yuan. In the end, Wenjie achieved sales of 94400 vehicles in 2023, achieving 94.3% of its annual sales target of 100000 vehicles.
After the launch of the Xiaomi SU7, which will achieve mass production in the first half of 2024, it may further disrupt the traditional domestic automotive industry, which requires car companies to constantly tighten their belts and face challenges at any time.
"Now we can truly understand what 'time waits for no one' means. Technology companies not only impact the automotive industry with technology, but also change the automotive industry with market and competitive strategies," Mei Songlin told Time Weekly reporters.