Recently, a data in the automotive industry has flooded the screen: a domestic electric vehicle company lost 5 billion in the first half of this year. As soon as this number came out, many people exploded. 5 billion! Half a year! Although there are many companies that are losing money now, this scale is really terrifyingly large and is almost the "top" of the industry's loss list. What's even more outrageous is that the sales volume of this company is pretty good and the cars are selling well. How come they lose so much?
When many people see this number, their first reaction is: It’s over, this company is probably going to be in a mess. Some people also say that domestic brands are not good, and no matter how much they sell, they will not make money. In the end, they still cannot play with joint ventures and foreign brands. There are even voices saying that it is better to let these companies go bankrupt as soon as possible and not to waste money by taking advantage of resources. But is it that simple? Is losing 5 billion really a "dead end"?
Let's take apart this number first and don't rush to draw conclusions. Losing 5 billion is actually not a complete cash flow loss. Many parts of this are on the books, such as R&D expenses, fixed asset depreciation, and the "paper loss" caused by some strategic investments. To put it bluntly, part of the money is not spent directly, but is invested in the future. Looking at the revenue, the company's revenue in the first half of the year was actually more than 20 billion yuan, and its gross profit margin was about 10%. This shows that its basic position is still there, and cars make money. So what's the problem?
The problem lies in the cost structure. Let’s look through the account book and R&D expenses account for 20% of the giants, advertising and marketing have spent more than one billion yuan. In addition, the supply chain procurement costs have not been completely suppressed,
Recently, a data in the automotive industry has flooded the screen: a domestic electric vehicle company lost 5 billion in the first half of this year. As soon as this number came out, many people exploded. 5 billion! Half a year! Although there are many companies that are losing money now, this scale is really terrifyingly large and is almost the "top" of the industry's loss list. What's even more outrageous is that the sales volume of this company is pretty good and the cars are selling well. How come they lose so much?
When many people see this number, their first reaction is: It’s over, this company is probably going to be in a mess. Some people also say that domestic brands are not good, and no matter how much they sell, they will not make money. In the end, they still cannot play with joint ventures and foreign brands. There are even voices saying that it is better to let these companies go bankrupt as soon as possible and not to waste money by taking advantage of resources. But is it that simple? Is losing 5 billion really a "dead end"?
Let's take apart this number first and don't rush to draw conclusions. Losing 5 billion is actually not a complete cash flow loss. Many parts of this are on the books, such as R&D expenses, fixed asset depreciation, and the "paper loss" caused by some strategic investments. To put it bluntly, part of the money is not spent directly, but is invested in the future. Looking at the revenue, the company's revenue in the first half of the year was actually more than 20 billion yuan, and its gross profit margin was about 10%. This shows that its basic position is still there, and cars make money. So what's the problem?
The problem lies in the cost structure. Let’s look through the account book and R&D expenses account for 20% of the giants, advertising and marketing have spent more than one billion yuan. In addition, the supply chain procurement costs have not been completely suppressed, which makes the books look miserable. What is this a bit like? It's a bit like a startup company, desperately spending money to grab the market, but there is always no profit on the account. To be honest, this is not only the company, but almost all new car companies are like this. Which one of NIO, Ideal, and Xiaopeng has suffered a sharp loss in the past few years? But some people are losing less now, while others are still unable to stop the car.
Let’s take a look at the joint venture car companies. Some people say that joint venture car companies don’t have these problems. Why do they make money stably? But don’t forget that many joint venture brands don’t touch the “money-burning job” at all. For example, new energy research and development rely more on previous technical accumulation and iterating slowly. In order to seize this wave of market, domestic brands basically start from scratch, and R&D investment is naturally much higher. In addition, new energy vehicle companies generally like to use functions such as large screens, smart cockpits, and advanced assisted driving, and each one is not cheap. To put it bluntly, domestic brands are following the "asset-heavy model", while joint venture brands are more like the "light-heavy model". Now, domestic companies are indeed under greater pressure.
Then the question is, is this strategic reinvestment worth it? This depends on two points: first, whether investment can be transformed into competitive advantages; second, whether the company can last until the day of profit. Like Tesla, it was also shockingly lost in the past few years, but it relied on its technological and scale advantages and finally survived. It is still unknown whether these new domestic forces can reach Tesla's level. Especially now that the competition is so fierce and the market is not good, it is possible that anyone who can't stand it first is impossible.
In fact, a loss of 5 billion is not scary. What is really scary is that the company itself has not figured out how to spend money and why it loses. If this money is really invested in the future, such as new battery technology, more efficient manufacturing processes, and smarter driving experience, it will be earned back sooner or later. But if you are advertising randomly, selling cars at low prices, or doing OEM casually, it is really dangerous. Now, the company's losses are more of a strategic loss, and a choice made to expand the market and enhance brand power. Although the data is scary, it is not a particularly outrageous phenomenon in the industry.
I have to say here that don’t use the profit model of joint venture brands to build domestic brands. The genes and methods of playing are completely different. Joint venture brands rely more on stable supply chains and mature technology to make a living, while domestic brands have to compete in the market, supply chains, and technology from scratch. This is a bet without a turnaround. If you win the bet, it may be the next "industry giant"; if you lose the bet, it may disappear in history.
To sum up - a loss of 5 billion is indeed scary, but if you look at it separately, this is actually a microcosm of domestic electric car companies scrambling for the future. It is not abnormal, but a phased phenomenon. The key is whether these companies can find their own moat and survive the cold winter. Instead of staring at the losses in front of you, it is better to pay more attention to their actions in the next quarter. After burning money, whether there are new technologies, new products, and new markets is the key to success or failure.
Therefore, don’t rush to mock domestic brands for “losing money and making publicity”, and don’t kill these loss-making companies with one blow. The real competition in the automotive industry has just begun.
