Xiaomi SU7 enters the market with a surge in orders, reshaping the automotive industry: Can the leader maintain its strength?

Xiaomi SU7's listing as a hit disrupts the industry, while under the "price war" trend, it has once again triggered a series of price cuts, making the automotive industry in 2024 full of "gunpowder scent".

Before the launch of Xiaomi's new car, the automotive industry has experienced multiple rounds of price wars. Traditional car companies led by BYD (01211) and new forces in car manufacturing led by Nio have intensified market competition. Although the industry is in turmoil, survival of the fittest prevails, with stronger players maintaining competitive advantages, gaining larger market shares, and also achieving substantial profits. As of now, major car companies have successively released their annual performance reports, let's take a look at their performance.

From the revenue perspective, SAIC Group ranks first in the industry (domestically) with 744.705 billion RMB, BYD ranks second with 602.315 billion RMB, and among the new forces in car manufacturing, Li Auto successfully broke through to enter the billion-yuan revenue club, ranking sixth in the industry with 123.851 billion RMB. In fact, joint venture brands of SAIC and GAC account for a large proportion, while looking at independent brands, BYD, Geely, and Great Wall's revenue scales stably rank among the top three in the industry.

It is worth mentioning that BYD is the leader in new energy brands, with an annual sales volume of 3.0244 million vehicles, a market share as high as 31.9%. Geely and Great Wall's penetration rates of new energy vehicles are also accelerating, with Geely's penetration rate reaching 29% and market share exceeding 5%. In addition, new forces in car manufacturing are all new energy brands, with different positioning in price ranges, but all expanding their product ranges to widen market shares.

Surprisingly, the prices of most traditional car companies have risen per vehicle, with Dongfeng Group's per vehicle price increasing by as much as 26.5%, and Geely, Great Wall, and GAC all experiencing varying degrees of increases. In fact, traditional car companies have a wide range of models and are all pursuing high-end strategies, such as SAIC's launch of IM Motors, GAC's launch of HiPhi, and Geely's launch of ZEEKR brand, which have significantly impacted price reductions, leading to price increases per vehicle. On the other hand, due to the single model focus, new forces in car manufacturing have seen significant decreases in prices per vehicle under price wars.

BYD saw a 8.3% decrease in price per vehicle in 2023, with a 63% increase in sales volume, leading by a wide margin in market share. Most importantly, with a strong industrial chain support, it achieved the best profit level in the industry, realizing a net profit attributable to shareholders of 30.041 billion RMB for the year, which is 2.13 times that of the second-placed SAIC (14.106 billion RMB). In addition, new forces in car manufacturing are basically in a loss-making state under the trend of price wars, with XPeng recording a loss of 10.373 billion RMB, with a loss rate of 33.82%, but the company still has over 37 billion RMB in cash reserves After the annual report, the sales data for the first quarter of 2024 has also been released. BYD still leads the industry in sales volume and growth rate for new energy vehicles, with sales of 302,500 vehicles in March and 626,300 vehicles in the first quarter. Sailesi has emerged as a dark horse in the industry, with monthly sales exceeding Li Auto with Huawei's support, reaching 37,500 vehicles in March and 114,100 vehicles in the first quarter. Xiaopeng is facing challenges recently, with its vehicle pricing concentrated in the mainstream battlefield of 200,000 to 300,000 RMB. With the iteration and launch of new models by major car companies, the G6 has also faded, falling behind other new forces in the first quarter.

Xiaomi will be the "unstable element" in the industry landscape. On March 28th, Xiaomi's SU7 was listed and delivered, receiving nearly 90,000 orders on the first day. According to market information, the order lock-in rate exceeded 40%, and currently, the earliest delivery date for locked orders is after 2025. Despite being on the market for a week, the enthusiasm remains high, with a large number of people still queuing up to enter stores for test drives. According to publicly available weekly sales data, in the first week of delivery, the delivery volume exceeded 1,000 vehicles. If its production capacity can be significantly increased, the company's monthly delivery volume will undoubtedly lead among new carmakers.

The industry's elimination round has entered the second half, and no one wants to follow in the footsteps of Weimar and HiPhi. However, 2024 is destined to be an extraordinary year. On one hand, the subsidy for new energy vehicles is decreasing, and regional subsidies are gradually being phased out. On the other hand, intelligent driving has come to the forefront led by Xiaomi and Huawei. Cost-effectiveness and fan effects determine the upper limit of space. In order to gain a larger market share, continuous price reductions by other car companies have become an inevitable trend.

The leaders remain strong, and the capital market has provided an answer. BYD, as a leader in new energy vehicles, has consistently dominated the sector's market value, with a market value exceeding 600 billion RMB in both A-shares and H-shares, more than double that of SAIC Group, and higher than the total market value of other peers (excluding Li Auto). Li Auto's breakthrough from losses to profits has been recognized by the market, with a market value of 258.7 billion Hong Kong dollars ranking second in the sector, surpassing the total market value of other new carmakers.

Currently, the new energy vehicle market structure remains unstable, and any car company has the potential to become a dark horse. This is mainly because the overall penetration rate of new energy vehicles is still less than 50%, leaving ample room for growth and the possibility for brands to rise to the top, especially Xiaomi's cars. At the same time, price wars are accelerating brand elimination. Brands with weaker financial strength and lack of product competitiveness are expected to be eliminated from the market. The trend of market share concentration is reminiscent of the smartphone era