Betting big on the high-end luxury market

Author: Meng Huiyuan

Editor: Chen Dengxin

Layout: Annalee

Since August 20, AITO has been constantly active.

First, it finalized an equity transaction with Huawei worth up to 11.5 billion yuan. Immediately after, it unveiled the Kunlun Extended Range technology the next day, live-streamed it for over 12 hours, and announced the presale price of 700,000 yuan for its limited-edition joint-branded model. Finally, it announced a signing with Qatar AL ATTIYA Automobile Group...

Obviously, deepening cooperation with Huawei is an attempt to join forces and cope with fierce competition. Riding on the wave of extended-range electric vehicles (EREVs) is a strategy to boost sales. Collaborating with luxury design masters is a way to strengthen the high-end brand image. Promoting AITO's "new luxury" concept in the Qatar market is an attempt to accelerate its overseas expansion. However, can AITO's frequent moves help it turn the tide under pressure?

Betting big on the high-end luxury market

"The appearance and interior design are so appealing at first glance," said Chen Lin, an AITO 11 owner, explaining why he chose the vehicle. "Beauty is justice, after all."

Due to the excellent driving experience, Chen Lin's appreciation for AITO has continued to grow. He promptly paid attention to AITO's recent significant moves but expressed some regret after learning about the new models. "Although the pure electric driving experience is excellent, having extended-range technology would be an added bonus. Unfortunately, I just bought my car recently, so I can't replace it," he said.

Not only car owners but also the public have shown interest and anticipation towards AITO's recent moves. Since the brand's inception, it has rarely been this active:

Firstly, it officially announced deep cooperation with Huawei. According to the Equity Transfer Agreement signed between AITO Technology and Huawei, AITO Technology will purchase a 10% stake in Shenzhen Yinwang Intelligent Technology Co., Ltd., held by Huawei, for 11.5 billion yuan. After the transaction, AITO Technology will hold a 10% stake in Yinwang, while Huawei will retain 90%. The agreement also outlines a comprehensive upgrade of strategic cooperation between Changan Automobile and Huawei in five key areas: brand and ecosystem, cloud and AI technology, green energy, internationalization, and industrial chain.

Secondly, it unveiled its self-developed Kunlun Extended Range technology. This technology primarily addresses core issues such as slow acceleration, noticeable noise at idle and low speeds, and slow charging in EREVs, providing a driving experience similar to that of battery electric vehicles (BEVs). According to plans, AITO will release its mid-sized SUV model, AITO 07, in the fourth quarter, offering both BEV and EREV versions. AITO 07, its third model, will be launched within the year and delivered by the end of the year. Meanwhile, AITO 11 and 12 will also receive EREV versions.

Thirdly, it launched the AITO 012 with a presale price of 700,000 yuan. This limited-edition model, jointly created with Dior men's wear artistic director and Fendi women's wear and haute couture artistic director Kim Jones, is based on the AITO 12 and limited to 700 units globally.

Lastly, it announced a signing with Qatar AL ATTIYA Automobile Group. The partnership aims to promote the deep implementation of AITO's "new luxury" concept in the Qatar market. AITO has designated 2024 as its inaugural year for overseas expansion, focusing on three major overseas regions and planning to enter more than 30 countries in Southeast Asia and the Middle East, aiming to open over 90 official AITO dealerships.

Comprehensive strategic cooperation upgrades, the implementation of self-developed technologies, enhancing the high-end image with limited editions, and further accelerating overseas expansion – each of these moves underscores AITO's ambition to fully commit to the high-end luxury market.

Facing pressure, seeking a breakthrough

AITO's brand positioning as a global high-end smart electric vehicle brand reflects the high expectations placed on it by Changan Automobile.

Since its inception, AITO has launched two pure electric models: AITO 11 and AITO 12. The official price range for the former is 300,000 to 390,800 yuan, while that for the latter is 265,800 to 400,800 yuan, both targeting the mid-to-high-end consumer market.

Relevant data shows that AITO sold 27,600 vehicles in 2022. As of July this year, it had sold 32,655 vehicles, significantly outperforming last year but still trailing popular brands. Financial reports reveal that from 2020 to 2022, AITO's net losses were 150 million yuan, 210 million yuan, and 2.015 billion yuan, respectively, with a year-on-year increase of 83.55% to 3.693 billion yuan in 2023. Changan Automobile's annual report for last year also shows that its total long-term equity investments amounted to 2.27 billion yuan, with AITO accounting for 1.22 billion yuan alone.

Changan Automobile attributes this to AITO still being in a strategic investment phase, with significant resource investments in product development, brand promotion, channel building, and technical talent recruitment.

Indeed, for a sub-brand that embodies the hope of high-end development, substantial initial investment and continuous funding are inevitable. As Zhu Huarong, Chairman of Changan Automobile, said, "As Changan's most important strategic brand carrier, AITO represents the company's direction towards high-end development."

Facing a passive position in the market competition, it is imperative for AITO to find a powerful breakthrough. To some extent, AITO's frequent moves reflect Changan Automobile's continued emphasis on the brand's development potential and confidence in leveraging high-end technology to boost sales.

In Zhu Huarong's words, "The next three years will be crucial for AITO to establish itself as the 'number one new luxury brand.' As a milestone achievement, AITO has become the first enterprise to acquire a stake in Huawei Yinwang, further upgrading the industry-leading 'HI' model to the 'HI Plus' model. The optimal resources of CHN will empower AITO, driving its leapfrog development and forging a new luxury AITO that can compete globally."

Can a 700,000 yuan limited edition solidify its high-end position?

Setting aside strategic cooperation at the brand level, AITO's decision to focus on both high-end and extended-range vehicles demonstrates its significant ambition.

The extended-range vehicle market is experiencing rapid growth. According to the China Passenger Car Association, while pure electric vehicle wholesale sales increased slightly year-on-year in July, plug-in hybrid and extended-range vehicle sales grew by 73% and 115%, respectively. Sales data for the first half of 2024, released on August 1, showed a promising increase of 124.2% in extended-range vehicle sales, reaching 469,000 units, compared to an 11.6% year-on-year growth in domestic pure electric vehicle sales.

This trend has benefited multiple competitors, such as Lixiang, Wenjie, Shenlan, and Leapmotor, which have seen sustained sales growth. Even Xiaomi, a newcomer to the automotive industry, has started recruiting extended-range system development engineers.

AITO's decision to enter the promising extended-range vehicle market to stimulate sales is justified. Notably, this also allows AITO to lower the price threshold for its new vehicles, potentially enhancing their competitiveness. For example, the extended-range version of AITO 12 is expected to be priced between 200,000 and 300,000 yuan.

It is worth mentioning that while lowering the entry barrier with extended-range models, AITO has further enhanced its high-end luxury image through collaborations with luxury designers.

Taking previous products as examples, AITO 11 and 12, both pure electric models, are priced between 250,000 and 400,000 yuan. On August 21, when AITO unveiled its limited-edition joint-branded AITO 12, it also introduced top-of-the-line versions of AITO 11 and 12, the Royal Theater Editions, priced at 450,000 yuan.

In comparison, while the introduction of extended-range models aims to increase sales volume, the launch of limited and top-of-the-line editions may be intended to enhance quality. At the very least, they create a clear boundary for consumer segments based on price points.

Ultimately, the market performance of AITO's extended-range series and luxury models will determine whether it has accurately identified its positioning and breakthrough points in the fiercely competitive market.