Of course, for NIO, Xpeng, and Li Auto at this moment, choosing to go downmarket is the only option. In summary, if they want to avoid being forgotten by the market and abandoned by capital, the top priority for NIO, Xpeng, and Li Auto is to generate revenue internally, especially for NIO and Xpeng. As for Li Auto, which has already entered a stable stage, it needs to make a comeback in the pure electric vehicle market.

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This year, NIO, Xpeng, and Li Auto have accelerated their exploration of going downmarket. NIO introduced the Ledo L60 with a pre-sale price of 219,900 yuan. Xpeng targeted the market below 200,000 yuan with the MONA M03. Li Auto, which has been deeply rooted in the 300,000 yuan market segment, introduced the Li Auto L6 priced at around 200,000 yuan.

As the former representatives of the new-energy vehicle startups, NIO, Xpeng, and Li Auto are facing double pressure from traditional automakers and emerging brands. To change the situation of frequent price cuts and thin margins, they have accelerated their paths to go downmarket in search of new growth curves.

Having once relied on differentiated positioning to establish themselves, NIO, Xpeng, and Li Auto have now entered the most mainstream price range in the automotive market. This raises the question: can they carve out a niche in this new territory? It's worth noting that the 100,000 and 200,000 yuan segments are also crowded with formidable players like BYD, Leapmotor, and ARCFOX, especially with the aggressive Xiaomi SU7 priced as low as 215,900 yuan.

Facing numerous strong competitors, how can NIO, Xpeng, and Li Auto maintain their competitiveness? During the process of going downmarket, how can they uphold their brand tone and avoid diluting their brand image? These are all practical issues that need to be addressed.

Forced to Go Downmarket

It can be said that NIO, Xpeng, and Li Auto are widely recognized as the most representative new-energy vehicle startups. Initially, they leveraged their first-mover advantage to achieve relatively good results in the market. However, much has changed since then. In terms of sales volume and brand influence, NIO, Xpeng, and Li Auto are no longer as dominant as before. For them, going downmarket is a necessary step to adapt to the changing market landscape.

The primary reason for this is that the high-end new-energy vehicle market is gradually becoming saturated as more competitors enter the fray. As early entrants in the new-energy vehicle space, NIO, Xpeng, and Li Auto have secured a certain market position. However, they are now facing fierce competition from traditional automakers, emerging brands, and gasoline-powered vehicles in the same price range, which has gradually weakened their competitiveness.

With modest sales volumes, NIO, Xpeng, and Li Auto are still in the strategic investment phase. Enhancing their internal revenue generation capabilities is crucial. Among the three, only Li Auto has achieved profitability, while NIO and Xpeng are still deeply in the red. Let's start with NIO. Following a net loss of over 20 billion yuan in 2023, it incurred a loss of 10.384 billion yuan in the first half of this year, up 4.95% year-on-year.

Xpeng Motors lost billions in 2023 and incurred a loss of 2.65 billion yuan in the first half of this year. Although the loss narrowed, Xpeng delivered just over 50,000 vehicles in the first half of 2024, less than a quarter of its annual target of 280,000 vehicles. Behind these issues lies insufficient sales volume. For NIO and Xpeng, boosting sales and strengthening internal revenue generation are particularly crucial. Creating affordable mid-to-low-end vehicles is undoubtedly more conducive to expanding their market share.

Unlike NIO and Xpeng, Li Auto does not face immediate financial pressure in the short term. It has maintained a gross margin of nearly 20% for seven consecutive quarters. However, following the failure of its MEGA model in the market, Li Auto had to introduce the lower-priced Li Auto L6 to seek additional sales growth.

So far, NIO, Xpeng, and Li Auto have all ventured into the lower-priced market segments. Xpeng's MONA M03 has even dipped below the 100,000 yuan mark, making it the most aggressive among the three in terms of price positioning. The Li Auto L6 is positioned at the high end of the three, priced at 249,800 yuan. The NIO Ledo L60 falls in the middle, starting at 206,900 yuan, with a price as low as 150,000 yuan after adopting the battery swap solution. The entry of these models has intensified competition in the already crowded mid-to-low-end market.

A Strong Start

For years, NIO, Xpeng, and Li Auto have been known for their mid-to-high-end positioning. Now, by lowering their model pricing, they have further reduced the entry barrier, allowing consumers to become their customers with a smaller budget while still enjoying the corresponding services. This is quite attractive to many consumers.

So far, NIO, Xpeng, and Li Auto's downmarket strategies have yielded positive results. Li Bin, CEO of NIO, revealed that orders for the Ledo L60 have skyrocketed fivefold since its launch, and the company aims to deliver over 10,000 units by November this year and 20,000 units by March next year. Additionally, NIO's share price surged by over 3% after the Ledo L60's launch on the U.S. stock market, indicating capital markets' confidence in the prospects of the Ledo L60 and NIO.

Xpeng's MONA M03 has also performed well, receiving over 10,000 orders within just one hour of its launch and exceeding 30,000 firm orders within 48 hours. This has also driven up Xpeng's share price.

Li Auto's L6 has had a similar impact. Before its launch, Li Auto's sales performance lagged behind WEY. However, the introduction of the L6 has significantly boosted Li Auto's sales, propelling it to the top of the new-energy vehicle sales rankings. In just five months since its launch, the L6 has delivered over 100,000 units, setting a new record for the fastest delivery among China's new-energy vehicle startups. This achievement within less than half a year of its market entry is truly remarkable.

Undoubtedly, NIO, Xpeng, and Li Auto's downmarket strategies have achieved initial success. Their lower-priced models have paved the way for them in the mid-to-low-end market, gaining recognition from a large number of consumers and boosting their share prices.

However, whether the sales growth driven by these lower-priced models will be a short-term high or a long-term trend remains uncertain. In Electric Power's view, behind the impressive performance of NIO, Xpeng, and Li Auto's lower-priced models lie several hidden concerns.

Some Hidden Concerns

It is well-known that a carmaker's brand tone is often determined by its best-selling models. As mentioned earlier, NIO, Xpeng, and Li Auto have established a premium image in consumers' minds, largely due to the popularity of their mid-to-high-end models such as the NIO ES8, Li Auto L9, and Xpeng P7. However, as lower-priced models become their volume drivers, there are concerns about whether this will erode their brand power and lower their brand tone, which need to be tested by the market.

Moreover, the entry of lower-priced models may also lead to internal brand competition within NIO, Xpeng, and Li Auto. Li Bin, CEO of NIO, has previously expressed his stance on internal competition between NIO and Ledo, stating that "it's better for us to compete with ourselves than for others to do so. That's the bottom line." This statement is worth pondering.

Based on current data, the market positioning of NIO and Ledo seems well-differentiated. According to Ai Tiecheng, Senior Vice President of NIO and President of Ledo Auto, only 2-3% of Ledo orders come from existing NIO owners, and most of them are repeat customers. So far, the entry of the Ledo L60 has not significantly impacted NIO's other models, indicating that Ledo's sales growth is expansionary, and NIO's multi-brand strategy is currently on a healthy track. However, how long this situation will last remains to be seen.

Xpeng has not been as fortunate. While the MONA M03 has achieved significant sales growth, the market performance of Xpeng's other models has declined. This raises the question of whether the MONA M03's sales growth has cannibalized demand from Xpeng's other models, resulting in internal competition that may undermine its overall performance.

It's worth noting that MONA's positioning within Xpeng differs from that of Ledo. MONA is a new series under Xpeng rather than a separate brand. This could lead to a potential issue: as the MONA M03 becomes more successful in the market, it may undermine Xpeng's premium image built over years through its smart driving technology.

Similarly, while Li Auto's L6, L7, L8, and L9 models are well-differentiated in terms of market positioning, some consumers may find the higher-end configurations of the L7 and L8 excessive and opt for the more affordable L6 with suitable configurations. This has led to a decline in the sales share of the L7 and L8 within Li Auto's brand portfolio.

What Comes Next After Going Downmarket?

In the short term, going downmarket seems to be a viable option for NIO, Xpeng, and Li Auto. However, in the long run, everything is uncertain.

For NIO, sharing the battery swap network and on-site maintenance services between Ledo and NIO may lead consumers to question the need for a more expensive NIO when a more affordable Ledo is available. Furthermore, the fiercely competitive new-energy vehicle market, with an abundance of new models, may make it challenging for Ledo to stand out if it fails to quickly establish a significant sales volume.

Similarly, Xpeng's MONA M03 faces the challenge of rapidly ramping up sales while maintaining its brand positioning. As mentioned earlier, integrating advanced smart driving technology into a tens-of-thousands-yuan vehicle may not fully meet consumer demands and could potentially dilute Xpeng's premium image.

While Li Auto's L6 better caters to family car buyers and offers amenities like refrigerators and large seats, reports suggest that its overall quality falls short of the L7, L8, and L9. Moreover, the L6 competes in a crowded 200,000 yuan segment with offerings from established players like BYD, Leapmotor, and Geely. Even the highly anticipated Xiaomi SU7 poses a significant threat to NIO, Xpeng, and Li Auto in this segment.

Nonetheless, for NIO, Xpeng, and Li Auto at this juncture, going downmarket appears to be their only viable option. In summary, to avoid being forgotten by the market and abandoned by capital, their top priority must be to generate internal revenue, especially for NIO and Xpeng. For Li Auto, which has already established a stable footing, the challenge lies in reclaiming its position in the pure electric vehicle market.