Deep comment: the truth of Tesla's price reduction: how does the opponent win?

[car home? Industry] Tesla's price reduction strategy has become a routine operation. At the same time, the market value is inversely proportional to the price reduction, which exceeds the sum of the market values of many traditional car companies. Only by figuring out the logic behind it and predicting the future direction can the half-awakened contestants find the key to the challenge. Ten years ago, Tesla was regarded as an Internet company in the industry. Now, Tesla is more like a "financial asset company", but instead of selling some financial products, it has opened up a new track that can bring high growth (and high risk).

To achieve high growth, we must reconstruct the gameplay of automobile enterprises.

In the era when automobiles were born, automobiles were like high-tech industries in the global economy. Not only does it have an endless incremental market, but optimistic capital also promotes the continuous progress of the automobile industry. Especially at the beginning of the last century, with the invention of Ford assembly line and the encouragement of employees' working system of $5 a day, productivity has been greatly improved, which is very similar to the Silicon Valley model of high-tech innovation now, when a large number of high-income people were created.

However, the era of high growth is gone forever. After hundreds of years' development, the design, R&D and manufacturing of automobiles have become very mature, forming a set of business models of improving products step by step and making profits in large-scale production and sales. Traditional automobile companies play with gross profit margin. After full competition, the gross profit margin of each link is extremely low. With the advantages of scale and cost, Volkswagen and Toyota have become the leading companies in market value among traditional automobile enterprises. However, the growth brought by this model in the future is too limited, and the advantage will become a disadvantage in another era, and the market value will be overtaken by an unscrupulous car like Tesla.

As an emerging brand, if Tesla continues to start from that traditional runway, it is obviously unable to beat the traditional automobile giants. He chose a high-growth track as the core competitiveness to compete with traditional car companies. This is what Tesla can do, and traditional giants can't do it at present.

When high growth is the core element, the profit rate is not the primary goal pursued by Tesla, but the growth rate of sales volume and the expansion of market share are the core elements higher than the profit rate. This goal is essentially different from the traditional car companies struggling in the stock fuel car market, and it can also explain why Tesla thinks about how to sell cars cheaper every day to get sales growth.

Let's sort out the advantages and disadvantages of Tesla in the new energy incremental market.

There are three main advantages: first, the first-Mover advantage in the electric vehicle market (but Tesla is not the only one); Second, there is no heavy asset profit burden brought by traditional manufacturing industry; The third is the high growth brought about by subversive innovation. Disadvantages include insufficient accumulation of advanced manufacturing technology and low product maturity, which needs continuous improvement.

On the other hand, the advantages of traditional manufacturers lie in three aspects: mature and huge supply chain system, independent mastery of a large number of core technologies and huge global sales channels. The disadvantages are not small, even in the face of the growth of austerity risk, the solidification of product renewal rhythm, the inefficiency and high cost brought by traditional marketing channels and brand building are predictable.

Restore the project development process of traditional manufacturers: market research-product definition-product quantity and price planning-research and development-supply chain procurement-manufacturing-sales, and then use the sales profits to develop the next generation of products, and so on.

The advantage of this method is that it can improve the defects of the previous generation of products through the changes of each generation of products, and with the accumulation of product algebra, the maturity of products is getting higher and higher, the reliability of product quality is getting stronger and stronger, and the cost of quality assurance and parts procurement is decreasing year by year. To sum up in one sentence: the biggest advantage of this is that you can try not to make mistakes. The disadvantage is that it is difficult to do subversive innovation, because any idea of subversive innovation will be pinned down by various cooperative departments or upstream and downstream supply chains.

Tesla's gameplay is: digging people to form a team-product definition-R&D-supply chain procurement-manufacturing-low gross profit-explosive growth of sales figures-story of new energy subverting tradition-high growth-high price-earnings ratio-financing-R&D-production.

It can be seen that Tesla has put aside the shackles of the traditional model, reconstructed the entire automobile ecology, and even reconstructed the development rhythm of the entire industrial chain to achieve subversive innovation. However, the disadvantage is high risk. Once there is a capacity bottleneck, sales decline, or the number of complaints is huge, the market value will fall as high as possible. And in this process, no matter how frugal, the demand for funds is still huge and scary, and its own hematopoietic capacity can't make up for the gap. Once the capital chain breaks or the economic situation is not good, it will cause a fatal blow to enterprises. Why can Tesla play like this and traditional manufacturers can't play like this? The reason is that high risk and high debt ratio are unbearable for traditional heavy asset manufacturers, and it is rare for startups to finally stand out.

Will Tesla continue to play like this?

Tesla reconstructed the entire automobile industry ecology through capital. The first is to eliminate the channel cost and brand cost, which accounts for 20-30% of the manufacturer's guide price. Secondly, Tesla further reduces the cost of parts procurement through the scale advantage established in the field of new energy. The phenomenon that domestic Tesla increases the localization rate step by step and reduces the price again and again fully proves that Tesla is bent on taking the market share route. This is a virtuous circle. By expanding market share, Tesla has become the largest single-brand parts buyer of new energy vehicles, thus gaining the largest bargaining space and further promoting cost reduction, thus reducing the selling price and further expanding market share.

Traditional manufacturers face four challenges when they enter the new energy field: 1. If the market share of new energy vehicles is not the first, it will not be the largest single brand buyer in the three power systems, so the purchase cost is not as good as Tesla; 2. The huge dealer system needs profit sharing, and it is impossible to throw away the existing inefficient sales channels; 3. Traditional brands and continuous public relations investment keep the brand cost high; 4. Inefficient staff redundancy (quoting a teasing from a senior Ford engineer: Ford can be more efficient by reducing one-third of its staff, and then it can operate normally by reducing one-third of its staff).

The risk that Tesla will face in the future: 1, and the market contraction leads to the break of the capital chain; 2. Large-scale public relations risks (including large-scale recalls related to product safety and product reliability); 3. The bottleneck of production capacity restricts the development speed. The whole vehicle consists of tens of thousands of parts, and there are thousands or even thousands of suppliers for these parts and raw materials. Insufficient supply of any core components will lead to insufficient production capacity, which in turn will affect sales growth and eventually form a chain reaction, leading to a decline in stock prices.

Conclusion:

The core difference between Tesla and traditional manufacturers is that traditional manufacturers think about how to sell their products expensive in order to obtain gross profit margin. What Tesla wants is how to sell products cheaply to achieve high growth, which will be transformed into high market value in the capital market. Their DNA determines that traditional manufacturers can't emulate Tesla, but Tesla can gradually improve the factors that have been fully competitive in traditional fields such as products, technology, performance and manufacturing through its strong capital capacity and market share.

Quoting Toyota President Akio Toyoda, 64, publicly commented on Tesla for the first time at an online meeting: "They are not really making things, people are just buying recipes." He compared the two companies through cooking: "Toyota has a kitchen and a chef, and we can make real food."

But Tesla doesn't sell food. Tesla sells the fact that more people will buy food tomorrow, and the value of the latter is much higher than the value of the food itself. Realizing these values through the capital market can further improve food and gain the leading edge of food. It doesn't matter whether they have a kitchen chef or a recipe.

However, what is even more frightening is that through the reconstruction of the whole industrial chain, Tesla has eliminated the channel cost and brand cost. In addition, the largest purchase volume in the new energy field and the low product cost are crushing the nature of traditional automobile brands, and the cost advantage of de-dealer channelization will have a multiplier effect after the sales scale is expanded, and the biggest risk in the future is the relationship between the public. It can be predicted that Tesla's price is not the lowest but lower, and Tesla's share price is not the highest but higher. Next, analyze Tesla's price reduction space in detail, so stay tuned. (Text/car home Industry Commentator? Thomas Dariel)