After Tesla launched its “price reduction promotion” in China, the market began to wait and see whether other new energy vehicle brands would follow suit. Recently, it was reported that XPeng Motors, a Chinese new energy vehicle manufacturer, was going to follow the move. Aside from the latest G9 SUV model, the final payment of G3i, P5 and P7 models would be reduced by 14,000-20,000 yuan ($1,991 – $2,844). At the same time, some vehicles that have been in storage for a long time will be offered at special discounts.
On November 14, in response to the above news, a spokesperson for XPeng Motors told Chinese media, “Only the structure of users’ rights and interests was adjusted, and the proportion of the final payment was increased. Compared with the rights and interests of each model, it was flat or slightly decreased, so there was no price reduction at all.” At the same time, the spokesperson added, “this structure adjustment has not yet been announced”.
XPeng Motors delivered a total of 5,101 vehicles in October, which marks a decline for the last four consecutive months. At the end of October, XPeng G9 started large scale delivery as planned, with a total of 623 units delivered. In the last two months of 2022, the firm urgently needs to introduce new strategies to increase sales so as to achieve its target for the year.
Tesla’s preferential policy was issued on October 24, with a reduction in price by up to 37,000 yuan, which made many car companies very passive. Not long after, Tesla launched an insurance subsidy scheme for a limited time on November 8, with the final payment reduced by 8,000 yuan until the end of the month, and the final payment reduced by 4,000 yuan throughout the month of December.
However, Tesla can cut prices because of its own profit margin exceeding the industry average. According to its financial report, the net profit of the company in the third quarter was $3.29 billion. Given its total delivery was Tesla 344,000 units in the third quarter, the single car profit was about 69,000 yuan. This is beyond the reach of other car companies.
A related person in charge of commodity strategy for a car company told media, “The production cost of new energy vehicles is not low now, especially the battery, which accounts for nearly half of the cost of vehicles, and the procurement price of batteries has not dropped this year. Given the costs, it is unrealistic for other new energy vehicle companies to keep up with Tesla’s price reduction.” The person added, “Of course, some new energy vehicle companies may give up some profit margin considerations in order to complete the sales task”.
Previously, it was reported that, in response to Tesla’s price reduction, AITO, an EV brand jointly built by Huawei and Seres, had instituted a price reduction of 8,000 yuan. There are also many people in the industry who believe that this is the first independent new energy brand after Tesla to reduce their prices, and it marks the beginning of an industry-wide price cut. Regarding this, AITO said that it is not a price reduction, adding “since the early morning of October 24, the company has cancelled the original financial interest subsidies, differentiated gifts and other services in various sales stores, and gave insurance worth 8,000 yuan to some current vehicle buyers.”