In recent times, the China Automobile Dealers Association's Passenger Car Market Information Joint Conference, referred to as the "Passenger Federation," has unveiled its latest statistical data detailing the fluctuations in China's passenger car marketAs of December 2024, the cumulative retail sales for passenger vehicles in the country reached an impressive 22.894 million units, marking a year-on-year increase of 5.5%. According to Cui Dongshu, the Secretary-General of the Passenger Federation, "The trends in the national automotive market for 2024 exhibit a U-shaped growth patternThe second half of the year will see a significant boost in trade-in and scrapping subsidy policies, which will propel a year-on-year growth of 5.5% for the entire automotive market." This registration of growth coincides with 2024 being dubbed a pivotal year for China's new energy vehicle (NEV) sector.

The data reveals that retail sales of new energy vehicles surged to 10.899 million units in 2024, witnessing an impressive year-on-year spike of 40.7%. The penetration rate of NEVs reached 47.6%, a 12% increase compared to the previous year

Notably, the NEV market experienced a significant breakthrough in the latter half of 2024, with a penetration rate that surpassed 50% in five consecutive monthsJuly 2024 marked a historic moment where domestic sales of new energy passenger cars outpaced those of traditional fuel-driven vehicles for the first timeBy November 2024, China's production of new energy vehicles also surpassed the annual threshold of 10 million units, a world-first achievement.

The booming sales in NEVs have intensified competition among automakersBrands such as Nezha and Jiyue have recently struggled under financial pressures, and the industry has entered what can only be described as a fierce "survival of the fittest" phaseIn fact, there have already been several brands that have exited the electric vehicle race over the past few years; within two years globally, dozens of automotive companies have been eliminated in this brutal market, with almost 100,000 job losses recorded.

The assertion made by He Xiaopeng, "In the next decade, only seven automotive brands will survive," seems to gain traction as time progresses

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The year 2024 has seen three dominant trends emerge within the electric vehicle industry: breaking boundaries, bankruptcies, and fierce price warsThe overall competition in the electric vehicle sector can be characterized as "order amidst chaos," amplifying the intensity of the elimination round within the industry.

In a metaphorical sense, the slogan "Swimming in a sea of blood, until the waters turn blue," prominently featured in Xiaopeng Motors' third-quarter 2024 report, encapsulates the predicament facing electric vehicle brands in 2024.

As the new year kicked off, two industry giants, Tesla and BYD, took the lead by slashing the prices of their Model 3 and Model Y vehiclesBYD quickly followed suit by declaring that "electricity is cheaper than fuel," effectively repositioning their model prices into the less than 100,000 yuan range.

According to insights from "Fun in Business," price reductions typically follow a playbook that includes direct price cuts, subtle enhancements in specifications, and more obscure financing schemes offering "zero down payment and zero interest." Such tactics are aimed at giving consumers the feeling of reaping benefits even if prices are not directly lowered.

A Beijing resident, known only as Becky, shared her views, stating, "Buying a car now feels like it's 'free'; you can drive home without paying a down payment upfront

This sense of immediate gratification is incredibly appealing."

For many participants in this price war, the outcomes have been a mix of joy for some and sorrow for othersBYD seems to have emerged as the primary benefactor of this pricing battleBy the end of the first half of 2024, SAIC Motor Corp's wholesale sales reached 4.013 million units, while BYD announced their 2024 figures at 4.272 million unitsThis led to BYD dethroning SAIC Motor's 18-year reign as the largest domestic automotive group, marking themselves as the new champion in annual sales for 2024. Furthermore, in the third quarter of 2024, BYD reported revenue of 201.1 billion yuan, outperforming Tesla's quarterly revenue of approximately 180 billion yuan (251.82 billion USD). Through economies of scale, BYD swiftly countered the profitability challenges posed by price cuts, with their gross profit margin recovering back to 22% after a brief slip in the second quarter of 2024.

The "three giants of new power," namely NIO, XPeng, and Li Auto, have faced varying degrees of impact from these changes

In the third quarter of 2024, NIO's, XPeng's, and Li Auto's gross profit margins stood at 13.1%, 8.6%, and 20.9%, respectivelyWith a benchmark of 20% regarded as healthy for the automotive manufacturing sector, only Li Auto managed to barely meet this standard, capitalizing primarily on models with extended-range capabilities.

The pricing war has also led to significant fluctuations in average transaction pricesStatistics from "Dolphin Research" indicated that the average transaction prices for NIO, XPeng, and Li Auto all dropped during the third quarter, falling below market expectationsThis decline has been influenced by two key factors: a higher proportion of the lower-priced models in the brand's lineup and an increase in promotional activities.

The repercussions of the price war vary significantly across brandsFor those positioned at higher price points, the impact on profit margins has been considerable

In contrast, low-priced brands find themselves grappling with the dilemma of having "no room left for reductions."

An example can be seen with GAC Aion, which experienced cumulative sales of 374,884 units in 2024, a notable 21.9% decrease compared to the same period in 2023. This sales drop coincides precisely with when BYD introduced models below the 100,000 yuan price bracketGAC’s gross profit margin was a mere 7% in the third quarter of this year, starkly contrasting BYD's margin of 20%— exemplifying how opting for volume without profit can backfire.

As we head into 2025, the price war shows no signs of abatingReports suggest that by the end of December 2024, both BYD and Tesla announced a slew of discountsBy January 7, over 30 automobile companies had rolled out limited-time promotions, with more than ten brands introducing "backstop subsidy" plans.

Cui Dongshu, Secretary-General of the Passenger Federation, stated that the scale of new energy vehicles is witnessing explosive growth

The increase in unit sales has significantly lowered per-unit costs, and the competitive landscape remains unstable; thus, it is anticipated that the "price war" will continue intensely into 2025.

Lin Shi, Secretary-General of the China-European Association for Intelligent Connected Vehicles, underscored how BYD and Tesla's persistent discounts are likely to create a catfish effect in the domestic market, intensifying competitiveness within China's automotive sector.

A statement made by Lei Jun, about Xiaomi's ambitious goals for entering the vehicle market, was once met with skepticism when he stated, "If we can't position ourselves in the top five globally, we won't survive." Yet, amid the multiple knockouts within the electric vehicle industry, the narrative has increasingly leaned towards a "winner takes all" scenario.

"The changes in the competitive landscape for electric cars cannot be separated from the maturation of electric vehicle technology," opined Korin, a seasoned industry expert

He continued, "The price war is the result of the growing maturity of electric vehicle technology, which enables automakers to control costs more efficientlyFor consumers, the rarity of electric vehicles is diminishing; therefore, whether it's due to market pressures or proactive price strategies, the price war is bound to become a prevailing trendI firmly believe that the price wars in the electric vehicle segment will persist into next year."

Moreover, Korin voiced agreement regarding the "winner takes all" perspective, elaborating that with batteries replacing engines, the differentiation compared to traditional internal combustion engines has largely reducedPreviously, various factors surrounding a fuel engine, from materials to technology, influenced the final driving experienceIn contrast, contemporary battery technology predominantly focuses on durabilityThus, the distinction between high-end and regular electric vehicles often pivots towards the smart technology implemented rather than electric functionalities, emphasizing the more manageable domain of software development

Consequently, one observes many electric vehicle enterprises developing diverse sub-brands and models across lower to higher price ranges.

As the industry pivots towards a "winner takes all" consensus, 2024 has seen electric vehicle manufacturers stepping out of their comfort zones with an increased focus on cross-industry expansion, the adoption of new pricing strategies, and diversification of automotive models.

Key brands like BYD, XPeng, and NIO lead this effort in breaking pricing boundariesFollowing BYD’s initiation of the price war, new entrants began to penetrate previously unattainable price segmentsNoteworthy among them are XPeng’s MONA M03 and NIO’s L60, both venturing into the electric vehicle market below 100,000 yuan.

This format of introducing lower-priced models can be seen as a clever maneuver within the ongoing price battleKorin articulates, “Rather than continuously slashing prices on existing models, it's more strategic to simply launch new, lower-priced offerings.” The intent behind breaking through pricing thresholds is intuitive: capturing a broader market share.

With BYD entering the sub-100,000 yuan segment, traditional players like GAC Aion found themselves grappling with fierce competition for customers

Similarly, consumers who previously compared XPeng’s P7+ with models like Tesla’s Model Y are now redirected to potentially more affordable alternatives.

Success can often be traced back to awareness and recognition; a product that draws attention from consumers who hadn’t previously considered that brand reflects effective market penetration, leading to the recruitment of an entirely different audience demographic.

As brands continue to break barriers in pricing, models, and technology, companies like Leap Motor have made notable advancements within their product line, particularly with the launch of their C10 and C16 models in 2024. From a promising start, Leap Motor recorded significant milestones, seeing monthly sales cross the 20,000 units threshold for the first time in June, surpassing 30,000 units in August, and exceeding 40,000 units in November, thus meeting their annual sales goals ahead of time.

The launch of the C10 and C16 has been pivotal for Leap Motor, which, with prices starting at 128,800 yuan and 158,800 yuan respectively, provide strikingly similar aesthetics to the likes of Li Auto's models while offering a significantly lower price point, thus capturing market interest effectively.

During XPeng's AI Technology Day event on November 6, 2024, He Xiaopeng announced a groundbreaking initiative called the "Kunpeng Super Electric System," signifying a new electric technology platform

The audacity behind this name symbolizes significant aspirations, with "Kun" representing advanced range-extending systems using next-gen technology, while "Peng" stands for XPeng's pure electric framework.

He Xiaopeng has previously expressed a shift in perspective—“If a business is to thrive in global markets, it needs alternative energy solutions, which includes adopting range-extending hybrids; additionally, achieving a driving range of over 1000 kilometers necessitates integrating power systems beyond simple pure electric.” His philosophy underscores a more adaptable market strategy that embraces diversification while retaining focus on core product growth.

The traction for range-extended and hybrid vehicles is evident, with data showing impressive retail figures in October 2024, where combined sales of hybrids and range extenders reached 522,000 units, closely rivaling the 673,000 units sold as pure electric vehicles

The growth in hybrid vehicle sales, which increased by 107.7% year-on-year, alongside the 55.2% increase in range extendable vehicles, highlights a market trend of exploding demand.

In the early days of the electric vehicle industry, proponents of pure electric vehicles touted them as the definitive futureHowever, market dynamics reveal an explosive growth trajectory for both plug-in hybrids and pure electric models, especially as hybrids performed strongly in rural and emerging regionsCurrent statistics reveal a 22.4% penetration rate for plug-in hybrids in mainland China, with adoption rates in rural and county markets closely mirroring urban areas.

Li Auto epitomizes the dual break-through model in terms of technology and product offeringsWhile sales of its MEGA model have not met expectations, the brand continues to innovate by launching future pure electric models and enhancing its charging network by setting up more supercharging stations.

Inside Xiaomi's automobile evolution lies the interesting unveiling of the Xiaomi SU7 Ultra, which boasts a pre-order price of 814,900 yuan

This entry into the market illustrates a strategic venture into cross-segment positioning; the SU7 Ultra redefines its identity towards a racing model and encompasses training courses as part of marketing effortsThis shift deviates from the earlier critiques that dismissed Xiaomi’s automotive ambitions as those of an outsider stepping into a complex industry“The SU7 Ultra is a repositioning of the brand’s image,” Korin elaborates, suggesting that Xiaomi logically plans to launch vehicles priced between 200,000 to 300,000 yuan down the line, which might incorporate technologies first found in their upper-tier models.

The foray into high-end electric supercars by the "new forces" has been noted by Lin Shi from the China-European Association for Intelligent Connected Vehicles, who pointed out that while each surge in electrification opens avenues for new market entrants, ultra-high-end electric models are yet to dominate; however, they offer a disruptive opportunity for reshaping market dynamics

Future market opportunities hinge more on the unique brand messaging and experiences brought about through technological innovation—diversification and escalated performance enhancing consumer differentiation.

Entering 2025, while the automotive industry might witness a continued uptick in overall sales, a consensus of intensified competition looms over the landscapeThe days of brands camouflaging their inadequate sales performances with clever narratives might soon be numbered as companies confront the stark reality of market existence."How do we sustain survival?" is now the prevailing question for every automotive brand.

Today, an automobile company's longevity hinges primarily on three metrics: blockbuster vehicles, gross margins, and solid cash flowFor illustration, take a look at Jiyue Automotive, which serves as a case study in reverse progression—without a signature model in their lineup, the company faltered when its capital chain broke, illustrating the existential crisis that can accompany a lack of market traction.

Conversely, BYD's case serves as a counter-example for a "sell the vehicle and make profits" approach

With BYD managing to outstrip Tesla's total sales for 2024 while also achieving a healthy third-quarter gross margin of 22%, alongside operating cash flow of 213 billion yuan and a cash reserve of 66.32 billion yuan, they exemplify the balance between volume and profitability.

In the thick of this competition are brands that are "selling cars but not making money." For instance, SAIC-GM-Wuling, long labeled as a "divine vehicle," launched 1.54 million cars in 2024, of which 800,000 were electric vehicles, reflecting a remarkable 63% growthYet, when analyzing their financial performance for the first half of 2024—reporting a total revenue of 32.963 billion yuan with a net profit of only 970 million yuan—the situation reveals a troubling low margin in the production lineAn analysis suggested that a model like the Wuling Hongguang MINI EV could be operating with margins as slim as 2%, leading to a precarious business situation as reliable growth becomes increasingly strained.

While Wuling finds itself constrained within a low-cost model, NIO's difficulties stem from its multi-faceted business structure

Manufacturing vehicles, conducting research on chips, producing smartphones, and operating battery swap services all entail significant expenditures; the first-generation battery swap stations incurred costs upward of 3 million yuan, with later models ranging between 1 to 2 million yuan eachNIO's extensive network of over 2,800 battery swap stations has amassed infrastructure costs of around 5 billion yuan, exclusive of ongoing operating expenses and battery reserves.

This sustained high-cost framework has led NIO to accrue losses since its inception, amounting to 96.013 billion yuan, a figure comprising the losses from 2016 to 2023 and the first three quarters of 2024 totaling 15.53 billion yuan.

The process for an automotive company to transition from deficit to profitability stands as a contest of cash strength, colloquially known as who can afford to endure.

Fortunately for NIO, their financial structure is relatively robust, boasting cash and equivalents amounting to 42.2 billion yuan by the third quarter of 2024. This is a significant advantage shared by Xiaomi, under the backing of a potentially lucrative conglomerate, despite Xiaomi's automotive division facing a net loss of 1.5 billion yuan in the third quarter of 2024; the overarching liquidity of Xiaomi's parent group, showcasing cash reserves of 151.6 billion yuan, positions it as a dominating force in financial stability.

The modern electric vehicle sector has cemented its reputation as a volatile landscape, capable of propelling companies to the heights of success one moment and plunging them into dire circumstances the next

A single flawed model release or misguided strategy shift can require many quarters to rectify—and for a company precariously hanging at the edge of survival, that period is alarmingly prolonged.

Recently, the Passenger Federation published predictions for the national passenger car market, suggesting that retail sales in China will hit 23.4 million in 2025, marking a 2% increase year-over-yearIt's projected that 13.3 million new energy passenger vehicles will be sold in China, amounting to a growth rate of 20%, which will push the retail penetration rate above 57%. Secretary-General Cui Dongshu anticipates that the sales landscape for 2025 will follow a trajectory of a lower first-half followed by stronger growthHe noted, "The first quarter may see a negative growth of about 3%, significantly influenced by the Spring Festival holiday, with losses soaring above 10%. Contrasting this, we forecast considerable growth in the fourth quarter as policies for vehicle recycling and trade-ins, alongside the diminishing impact of tax cuts for new energy vehicle purchases, are likely to accelerate growth."

In essence, 2025 will see new energy vehicle manufacturers delving deeper into realms of transformation, poised to discover who can emerge victorious in generating profits from the next blockbuster vehicles