EkaLore uses the Alien Invader framework to look at companies that seemingly come out of nowhere to dominate a market space. As a group, they come from another market or geography, confound their competition by not playing by the “rules,” and suck the most profitable business out from underneath their competition.
How will the Chinese market react to Tesla’s recent price reductions? As you can see from the chart here, the Chinese market produces a lot of the Plug-In EVs in the world. Two of the top three manufacturers are based in China. Volume does not equal perfection. Part two of EkaLore’s piece Alien Invasion – Tesla Price cuts takes a quick look at what’s going on in the Chinese EV marketplace.
Chinese vehicle enterprises have also seen challenges with margins and rising costs in the Chinese domestic market. Whether or not Challenging Times to continue to affect their capacity to manufacture and grow in the local market space is unknown. The long-term survivors of the fierce competition are uncertain, even though the Chinese market has more than 20 enterprises that can potentially sell more than 60 models. Chinese nameplates or overseas controlled brands (like Volvo or Polestar) have proven they can compete successfully in domestic markets. Attacks into foreign markets like North America, EU, and maturing markets in Asia, present opportunities for expansion in the EV industry, where Chinese manufacturers have key technology and manufacturing advantages.
In 2022 of the 26.86M vehicles sold in China, 6.89M (25.6%) were NEV/EV vehicles with 73% of those battery-powered.
Manufacturer | Total NEV/EV Vehicles | Total NEV/EV Vehicles | Cumulative EV |
BYD | 1,863,494 | 911,140 | (active since 2008, now transformed to EV only platforms) |
NIO | 289,556 | (all) | 289,556 |
Li Auto | 133,246 | | 257,334 |
XPeng | 120,757 | | 258,710 |
Some reports point to two key Chinese EV advantages allowing them to compete on reduced pricing by Tesla. (Forvia) The first advantage is an overall platform design, development, and production process yielding at least a EURO 10,000 advantage per unit compared to existing high costs in European EV manufacturing. Second is a faster time to market. The VW Executive for China has acknowledged, “We give ourselves more time because of our quality standards, but we could be faster," (Brandstaetter). Chinese enterprises get to market in 2.5 years, whereas VW takes 4. VW is striving to reduce its time to market with strategies such as China-based R&D.
The combined advantages of volume production, lower platform costs, and faster time to market than most competitors will provide Chinese enterprises some room to fight back against Tesla’s pricing reductions. Additional invasions of Tesla’s key markets by Chinese (BYD, Nio) in the USA and EU may intensify competition pressures on the other competitors (GM, Ford, Stellantis, Toyota, VW, BMW, MB).
Look for the next part of our series concerning Tesla’s price reductions and the effects it will have on its competition – www.ekalore.com/alien-invaders
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