The launch of NIO’s new sub-brand model, Ledao L60, marks the completion of NIO’s, Xpeng’s, and Li Auto’s product deployments targeting lower-end markets. As former front-runners among the new-energy vehicle players, today's “Wei Xiaoli” (collectively referring to NIO, Xpeng, and Li Auto) are no longer as dominant in sales volume or reputation as they once were.

The introduction of mid-to-low-end models can be seen as a “roundabout way to save the nation” strategy for Wei Xiaoli. Whether black or white cat, any cat that increases sales is a good cat. However, during the process of brand penetration, Wei Xiaoli must confront practical issues such as maintaining brand tonality and avoiding dilution of brand image.

Low-priced models usher in a strong sales start

For Wei Xiaoli, which are relatively small in scale and in the strategic investment phase, survival is their common goal. Among the three automakers, only Li Auto has achieved profitability. In the second quarter of 2024, NIO's total revenue reached RMB 17.446 billion, representing a significant 98.89% year-on-year increase. However, NIO's net profit attributable to shareholders was -RMB 5.126 billion. Compared to the same period last year, the loss narrowed by 16.26% year-on-year.

In the second quarter of 2024, Xpeng's total revenue reached RMB 8.111 billion, up 60.22% year-on-year and 23.9% quarter-on-quarter. Its net loss was RMB 1.285 billion, a year-on-year narrowing of 54.19% and a quarter-on-quarter narrowing of 6.57% from the previous quarter's RMB 1.37 billion. In the first half of the year, Xpeng's net loss was RMB 2.653 billion, up 48.41% year-on-year.

Although NIO and Xpeng have achieved certain market success, they still face numerous challenges. For instance, competition in the new energy vehicle market is intensifying, with major brands increasing investments and R&D efforts to launch more competitive products. Additionally, uncertainties in the supply chain and fluctuations in raw material prices may also impact NIO's future development.

Unlike NIO and Xpeng, Li Auto's profitability is on track. In the second quarter of 2024, Li Auto's total revenue reached RMB 31.678 billion, up 10.56% year-on-year. Its net profit attributable to shareholders for the quarter was RMB 1.103 billion, though down 51.92% year-on-year. Li Auto's financial report shows steady growth and profitability in the market. However, following the failure of its MEGA model, Li Auto had to introduce the lower-priced Li L6 to seek additional sales growth points.

Wei Xiaoli's product penetration strategy is a crucial adjustment in response to market competition and changing consumer demands. By introducing low-priced models, optimizing channels, and product lines, Wei Xiaoli can better meet market needs and enhance brand competitiveness and market share.

The low-priced models launched by Wei Xiaoli have given these three automakers a strong start in sales growth. Upon launch, they not only sold well among consumers but also received favorable market sentiment, leading to share price increases. NIO Chairman William Li announced during the second-quarter earnings call that the company expects to deliver a total of 20,000 Ledo L60s in the second half of the year. Xpeng's MONA M03 achieved its 10,000th production car rollout in just 22 days after its launch, setting a new record for the fastest 10,000-unit rollout among new-energy vehicle brands. Some sources even reported that Xpeng MONA M03 secured over 30,000 pre-orders within 48 hours of its launch, with daily orders exceeding 2,000. As Li Auto's first model priced below RMB 300,000, the Li L6 has delivered over 20,000 units per month for several consecutive months. As of September 19, 2024, cumulative deliveries of the Li L6 have surpassed 100,000 units, setting a new record for fastest delivery among new-energy vehicle brands.

Product penetration also poses significant challenges

While Wei Xiaoli's low-priced models help expand sales growth potential, they are a double-edged sword. Wei Xiaoli originally had a mid-to-high-end brand image in the minds of consumers. Product penetration may dilute brand tonality, affecting sales and brand positioning in the high-end market. For instance, while NIO's Ledo L60 and Xpeng's MONA M03 are more affordable, they may cause consumers to question their original high-end quality.

To enter the lower-end market, Wei Xiaoli must not only develop models suitable for the market but also adjust their channels. New-energy vehicle brands typically rely on self-operated channels, with only Xpeng adopting a combined self-operated and dealer channel model. When introducing new brands, especially those with significantly different positioning from existing brands, selling them through the same channel may be inappropriate. For instance, NIO's positioning as a high-end luxury brand, akin to the BBA of the new-energy vehicle market, makes it inappropriate to sell Ledo through NIO channels.

In fact, both NIO and Li Auto began exploring dealer channels last year. William Li stated that NIO would select the most suitable model for local markets and brand development needs. In NIO's dealer model, NIO remains responsible for sales, while dealers handle after-sales and delivery.

The theme of NIO and Li Auto's channel strategy is “growing stronger,” while Xpeng's is “slimming down.” He Xiaopeng introduced the “Jupiter Plan,” through which Xpeng brought in over 160 excellent dealers and expanded into 40 lower-tier cities. The Jupiter Plan, led by Xpeng President Wang Fengying, aims to replace the direct sales model with a dealer model.

The dealer model can rapidly expand a brand's sales network, especially in lower-end markets. Dealers, with their deep understanding of local markets and rich sales experience, can help brands better enter and expand into these markets.

Despite the dealer model, Wei Xiaoli still faces considerable pressure in the lower-end market. Traditional automakers like BYD and Geely already occupy significant market shares in the low-price segment. These automakers have advantages in cost control and supply chain management, enabling them to offer more competitive prices and products. When entering the low-price market, Wei Xiaoli must compete fiercely with these traditional automakers.

Apart from traditional automakers, new-energy vehicle brands like Hongmeng Zhixing, Zeekr, and Leapmotor are also actively deploying in the low-price market. These brands typically have more flexible operating models and innovative capabilities, enabling them to quickly adapt to market changes and introduce new products. Wei Xiaoli must compete with these new players to secure market share.

Upon entering the low-price market, Wei Xiaoli must ensure product quality and service levels while effectively controlling costs. However, this is no easy feat. In terms of raw materials, component procurement, manufacturing, and logistics, Wei Xiaoli may face higher cost pressures.

Car Reviews by the Public

Managing relationships between multiple brands, different series within the same brand, and various categories within the same series is a crucial aspect of corporate brand strategy. How NIO, Xpeng, and Li Auto maintain their brand images, balance costs and selling points, and achieve sustainable development amidst price wars are current practical challenges. Especially with the entry of formidable competitors like Xiaomi SU7, it is particularly important to appropriately layout brand strategies and further maintain the relationship between pricing and brand image.