Consumer Insights | New forces rebound strongly: NIO and XPeng's battle of cost-effectiveness

NIO Inc. USD OV released its latest financial report last night, surging 14% in the US stock market.

Similarly, XPeng's stock price has been soaring recently. In addition to major shareholder He Xiaopeng's significant increase in holdings, the latest product MONA M03 has exceeded 60,000 in sales, successfully establishing a strong presence in the 100,000+ price range.

The new forces that seemed precarious in the first quarter seem to have returned to a positive growth track.

The operational changes of these key companies all indicate an important signal -

"The strong rebound of new forces and strategic changes of traditional forces have formed a new pattern for the 2024 automotive consumption: the trend of new energy and intelligent driving is set, and cost control will be the key to victory. The industry turning point will become clear in 1-2 years."

Performance Improvement, Guiding Positivity

NIO Inc. USD OV (9866.HK) delivered a very strong financial report.

In the second quarter of 2024, the company achieved historical highs in delivery volume and revenue. The company's revenue in the second quarter reached 17.45 billion RMB, surpassing the market's expected 17.38 billion RMB;

Operating loss was 4.7 billion RMB, better than the market's expected 4.86 billion RMB;

Gross profit margin of 9.7% exceeded the market's expected 8.74%;

The third-quarter guidance of 61,000-63,000 vehicles exceeded the market's expected delivery target of 56,770 vehicles, with monthly deliveries surpassing 20,000.

The capital market has seen the emergence of a turning point for NIO Inc. USD OV.

Source: NIO Financial Report

In the subsequent earnings conference call, Chairman and CEO Li Bin expressed a more optimistic long-term guidance:

"The long-term monthly sales target is to reach 40,000 vehicles and achieve a gross profit margin of 25%."

Also performing well is XPeng (9868.HK), with a growth of over 30% from August 15th to date. Thanks to XPeng's excellent second-quarter report, major shareholder He Xiaopeng's increase in holdings, and strong new car sales performance.

1. XPeng's second-quarter revenue was 8.11 billion RMB, a year-on-year increase of 60% and a quarter-on-quarter increase of 24%;

2. XPeng's second-quarter gross profit was 1.14 billion RMB, a quarter-on-quarter increase of 34.6%, turning a loss into a profit year-on-year;

3. Net loss attributable to common shareholders was 1.28 billion RMB, a significant narrowing of 54.2% year-on-year;

Compared to the previous struggle of monthly sales below ten thousand, XPeng's most significant fundamental improvement comes from the recovery of sales growth. Expanding sales volume can help resolve many business obstacles, such as user confidence. The company's third-quarter guidance of 41,000-45,000 deliveries is expected to exceed the company's guidance, benefiting from MONA's high popularity.

Chairman and CEO He Xiaopeng also increased his holdings by 1 million shares of Class A common stock at HKD 27.13 and approximately 1.42 million American depositary shares at USD 7.02 from August 21st to 23rd in the Hong Kong stock market.

"And plans to further increase holdings in the company."

Source: Company Announcement According to social media reports, XPeng Motors MONA M03 held a celebration banquet last night to celebrate exceeding 60,000 orders. XPeng Motors CEO Wang Fengying even "drank" her first glass of wine to celebrate the key victory of XPeng MONA.

After two years of laying low, Wang Fengying reorganized XPeng's supply chain, rebuilt sales channels and mechanisms, and simplified product SKUs, a process similar to the experience of domestic new forces in the past two years: facing challenges head-on and rebounding strongly.

Reshaping Products, Sales Rebound

To continue achieving leapfrog performance upgrades, both NIO and XPeng understand that they must proactively adjust their product strategies. "Price reduction" is the most crucial five words.

Starting with NIO, they returned to a monthly sales volume of 20,000 starting from May and have remained strong since. The most important adjustment was the launch of the new "BaaS" policy in mid-March:

1. Battery leasing fees were reduced from ¥980 and ¥1680 per month to ¥728 and ¥1128 per month, respectively, and the monthly ¥80 battery protection fee was canceled, effectively offering a 35% discount;

2. "Rent 4 Get 1 Free" promotion;

3. From the second to fifth year after purchasing a car, for every standard range extension leasing fee paid, ¥460 can be deducted from the battery buyout fee, with a maximum deduction of ¥22,080, and 60 battery swap vouchers are also given for free with the car purchase.

Since then, NIO's sales volume has rebounded, surpassing the most dangerous moment. Cost-effectiveness is still key, especially when there is some pressure on the overall macroeconomic situation, forcing even high-end cars to engage in price wars.

Source: Company Announcement

Li Bin also announced that NIO's economical brand "LeDao" officially launched on September 19th and will start deliveries by the end of September. It is expected that LeDao L60 will deliver "20,000 units" in the fourth quarter.

This means that, building on its existing momentum, NIO is expected to aim for a monthly sales target of 30,000 units in the fourth quarter.

In 2025, Li Bin also shared a bigger story:

"The third brand Firefly will achieve sales and deliveries in 25 years; the third factory will start construction and officially commence production in September of the 25th year."

As a result, NIO will break free from the constraints of being "high-end" and comprehensively deploy a product matrix ranging from ¥140,000 to ¥800,000, stimulating sales to further optimize the gross profit margin of the automotive business, ultimately achieving the goal of turning losses into profits.

Wang Fengying once again demonstrated strong insight by maximizing the cost-effectiveness of Mona, making it XPeng Motors' strongest trump card in the second half of the year.

In August, XPeng Motors delivered 14,000 vehicles, a year-on-year increase of 3% and a month-on-month increase of 26%. At the end of the month, Mona M03 was launched with three new models priced at ¥119,800/¥129,800/¥155,800 respectively. To date, cumulative orders have exceeded 60,000 units, playing smart driving in the ¥100,000+ price range, effectively hitting the pain points of users. The sales growth brought by Mona is expected to drive XPeng to target a monthly sales volume of 20,000 units in September.

At the same time, XPeng Motors has better control over cost reduction, with the cost of smart driving solutions decreasing from over ¥25,000 to just over ¥10,000, and the overall BOM cost reduced by 25%. In the fourth quarter, the P7+ is also expected to be the first to be equipped with XPeng's pure visual solution After the overall sales volume expanded in the second half of the year, XPeng's gross profit margin guidance for the third quarter is around 15%.

After the new forces reorganized their product strategy, the significant rebound in sales has already indicated that "cost-effectiveness" will be the most important strategic weapon for all players in the next stage.

Industry Battle Intensifies

At the Chengdu Auto Show these days, signals are being sent with the unveiling of Passat at 130,000 yuan, Magotan at 120,000 yuan, Camry at 110,000 yuan, Accord at 120,000 yuan, and Volkswagen's new A-level SUV at 79,900 yuan: the industry battle has heated up. The most brutal elimination round has begun, and the people dining at the table will change.

SAIC Group's interim report shows that the company even experienced a single-quarter loss in the second quarter. Among the Japanese "Big Three," Honda's sales in July fell by 41%, Nissan by over 20%, and Toyota fared slightly better with a 6% decline. However, the industry trend that is tightening its grip is pushing traditional car manufacturers to seek change.

In the first half of the year, China's passenger car market saw a year-on-year increase of 3.6%, with a total of over 230 million vehicles in circulation. The penetration rate of New Energy Vehicles (NEVs) has exceeded 50%. A counterintuitive point is that once the industry penetration rate surpasses 50%, the trend will accelerate rather than decelerate. Taking Norway as an example, after NEVs exceeded a penetration rate of 50%, it quickly reached 80%-90%. The most important reason for this is that the accelerated improvement of infrastructure will further attract new users' choices.

A lesser-known fact is that among the top 10 monthly sales of passenger cars in China, the camp of fuel vehicles now only includes the Volkswagen Lavida and the Nissan Sylphy.

Over time, the camp of fuel vehicles will fall into a vicious cycle - price reductions to promote sales, damaging dealers, accelerating the depreciation of used cars, and gradually eroding the customer base. This applies to both high-end and mass-market brands, whether Chinese or international.

German manufacturers are still struggling.

Volkswagen is considering closing its German factories to further reduce costs and enhance competitiveness. The market's understanding is that the world's second-largest carmaker is preparing to go all-in on China, leading to a surge in JAC Motors' stock price.

Mercedes-Benz is not as decisive, but is also investing in China with ammunition worth 140 billion RMB to further enrich the lineup of localized passenger cars and commercial vehicles. By 2025, they will launch a new China-exclusive all-electric long-wheelbase CLA model, a long-wheelbase GLE SUV, and a new luxury all-electric MPV. Notably, the long-wheelbase GLE SUV is the first new model developed under the leadership of the Chinese team. This shift once again confirms that the Chinese industrial chain has firmly occupied the commanding heights of the global new energy vehicle market, becoming a "must-win battleground" for all players.

The real battle will begin in 2025. The "last player at the dining table" is about to be revealed