Who is the ideal real opponent in the field? | Insights from Dolphin Research

Ever since the debut of the Wanjie New M7 at Huawei's launch event in September, this new model has become the focus of attention for the market and consumers.

Currently, the Wanjie New M7 has not only brought about hot topics and market prosperity, but also a substantial number of orders. During the National Day holiday, Yu Chengdong, Chairman of Huawei's Car BU, stated that on October 6th alone, the Wanjie New M7 had already reached 7,000 pre-orders. Since its release on September 12th, the New M7 has already exceeded 50,000 pre-orders.

There is no doubt that the Wanjie New M7 has become a true hit, and the upcoming Wanjie M9, which is awaiting its launch, is highly anticipated. As other competitive models shine, with similar extended-range technology and consumer positioning, and most models offering similar choices, will Wanjie finally have a true competitor?

1. Wanjie faces a true competitor

This year, Wanjie has been enjoying high sales and profit growth.

In the first half of this year, Wanjie and BYD were the only new energy vehicle companies that maintained high sales and positive growth across the board. Wanjie's monthly sales have increased from 15,000 to over 30,000, with a year-on-year growth of over 200%. It has become the first among new players to establish a leading position in the new energy vehicle market. This year, not only has Wanjie's sales grown significantly, but its profitability has also greatly improved. It achieved a net profit turnaround from negative to positive starting from the fourth quarter of last year, setting a new historical high for two consecutive quarters. Of particular note is that its gross profit margin reached 21.8% in the second quarter, surpassing Tesla, the leader in the new energy vehicle industry, for the first time with its 18.2% gross profit margin. As the first new car manufacturer to achieve monthly sales of over 35,000 units and enter a profitable state, Wanjie is now facing a new challenge: how to respond to the rapid rise of its competitor, Wanjie.

The question is, does Wanjie have enough strategies and resources to cope with this competitive pressure?

2. The second confrontation between Wanjie and Wanjie

This is not the first confrontation between Wanjie and Wanjie. In fact, their first head-to-head battle last year already brought considerable trouble to Wanjie.

The Wanjie M7, which was launched in the second quarter of 2022, achieved a breakthrough from 3,000 to 10,000 units in less than half a year, causing a significant drop in Wanjie's sales in the second month of its release and even surpassing Wanjie's sales for several months last year. However, despite the rise of its competitor, Wanjie has not lost its market position. Instead, it has solidified its performance with three models: L7, L8, and L9. Meanwhile, the performance of the Ideal brand has not been as enduring as expected, with a significant decline in sales volume this year, only maintaining around 3,000 to 6,000 units, in stark contrast to last year's rapid growth.

Faced with the overwhelming pre-orders for the new M7 model from Ideal, which has reached over 50,000 units in less than a month, almost approaching last year's total sales, Ideal indeed needs to be vigilant. This strong recovery of the Ideal brand implies that competition will become more intense, and Ideal needs to be fully prepared to respond. On the one hand, although Ideal has performed well in monthly sales, soaring from 15,000 units to 36,000 units, the growth in monthly sales in the third quarter has slowed down and almost stagnated.

This is not only because the market demand is approaching saturation, but also related to Ideal's production capacity. Currently, its production bases in Jiangsu and Changzhou have an annual capacity of about 400,000 units, so the monthly sales of 35,000 units are already close to the short-term limit. If Ideal wants to continue to increase sales and break through 40,000 or 50,000 units, it first needs to solve the production capacity bottleneck.

On the other hand, the new M7 from Ideal has not only improved in terms of range, configuration, and intelligent driving, but also lowered the price by 40,000 yuan, which puts pressure on Ideal, which has never lowered its prices. Judging from the current order effect of Ideal, it may reproduce the high prosperity after the launch of the M7 last year.

In addition, Huawei has also highlighted the promotion of intelligent driving. Especially when new energy vehicle companies are starting to promote intelligent driving functions on a large scale, Ideal has a clear advantage in this regard due to its cooperation with Huawei.

For example, Ideal has already started NOA pilot projects in Shenzhen, Shanghai, Guangzhou, and Beijing, and plans to achieve nationwide coverage of advanced intelligent driving by the end of this year. This makes consumers who are interested in intelligent driving more likely to choose Ideal products, intensifying the competitive pressure faced by Ideal.

3. Ideal needs a sense of crisis, but no need to panic

Ideal has had a smooth sailing for three quarters this year, and now it does need to have a certain sense of crisis, but it does not mean that Ideal will face a drastic drop in sales like last year.

On the one hand, the fact that the new M7 from Ideal continues to use range-extender technology actually proves that there is still huge potential and demand in this market. Therefore, Ideal has a solid market foundation in range-extender technology and maintaining its position is not a problem. However, in order to continue moving forward in a fierce competitive environment, Ideal needs to accelerate its pace in product innovation and intelligentization.

Currently, the growth rate of pure electric passenger car sales in China has approached single digits, while the growth rate of plug-in hybrid passenger car sales still maintains around 75%, and the proportion has also increased from the previous 20% to 30%. Until there is further breakthrough in the range of power batteries and fast charging technology, range-extender and plug-in hybrid models, which are more convenient, can be refueled and recharged without worries, still have a considerable market.

After BYD, new energy vehicle companies such as Geely, Great Wall, and Leapmotor have also joined the plug-in hybrid race. The range-extender and plug-in hybrid market is a big cake that is enough for major automakers to share. On the other hand, Ideals itself has not chosen to be completely tied to the range extender mode. The three range extender models, L7, L8, and L9, have already won acclaim for Ideals, opening the doors to sales and profitability. It is evident that Ideals has embarked on a new challenge by venturing into pure electric vehicle models.

Currently, Ideals has launched an 800V fast-charging pure electric solution, preparing for the energy replenishment of pure electric vehicles. The Beijing base of Ideals will also focus on pure electric vehicle models, with a planned production capacity of 100,000 vehicles. In the fourth quarter of this year, Ideals is expected to unveil its first 5C pure electric flagship model, Ideals MEGA.

However, in the field of pure electric vehicles, Ideals' performance is far from that of range extender models.

For Ideals, strong competitors will inevitably emerge sooner or later.

If Ideals can make a breakthrough in pure electric vehicle products and open up the second growth curve of sales, it will further strengthen its competitiveness. This may be the most important thing for Ideals at present.

Wenjie, who is considered a strong opponent by Ideals, is now making a comeback and once again stirring up the new energy vehicle market. Consumers have begun to anticipate the second confrontation between Ideals and Wenjie.