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Tencent Auto "High Beam"

Author: Guo Yifei Editor: Liu Peng

The good days of making money quietly are fading away. As a leader in power batteries, CATL has chosen to no longer keep a low profile and step out from behind the scenes.

On August 10, CATL's first new energy living plaza officially opened in the most prosperous Tianfu New District in the southwestern city of Chengdu, with an operating area of ​​13,800 square meters, a scale comparable to large supermarkets such as Walmart and Yonghui.

Not only the company's development history and core products are displayed here, including Kirin batteries, Shenxing super-charged batteries, energy storage products, "Feishu" integrated chassis, etc., they also prepare "wedding clothes" for car companies, gathering nearly 50 car brands and nearly 100 models. "It can be regarded as a never-ending new energy super car show."

This is the "most comprehensive offline garage" equipped with CATL batteries. From the perspective of the models, it covers sedans, SUVs, MPVs with different positioning and models with different power forms such as pure electric, hybrid and extended range.Tesla、BMW、Benz、AudiForeign brands such as Weixiaoli, Xiaomi,ZeekrAnd other independent brands.

However, this does not include the best-sellingBYD, the latter has fully self-developed the field of power batteries and competes with CATL.

According to statistics from the China Automotive Power Battery Industry Innovation Alliance, in the first half of 2024, in the ranking of installed capacity of domestic power battery companies, CATL and BYD continued to rank first and second in the industry, with installed capacity of 93.31GWh and 50.51GWh respectively, and market shares of 46.38% and 25.1% respectively, significantly ahead of other manufacturers.

BYD can digest its own batteries through its rising car sales, but CATL cannot do this. They must continue to invest in research and development, use product performance to widen the gap with their peers, and deeply bind external car company customers.

According to official statistics, in 2022, there will be 48 new car models with CATL batteries on sale in China, totaling 271,900 units. By 2023, this number will rise to 57 models with 377,400 units. More than 51% of the newly launched models use its batteries.

Although it occupies half of the market, it has a strong sense of crisis. Starting from 2024, CATL, which was not directly facing end consumers, decided to take a different approach and promote the "comprehensive To C" strategy, launching the slogan "choose electric vehicles and identify CATL batteries", trying to occupy the minds of consumers, thereby influencing B-end customers, reversely driving car companies to purchase their own batteries, and regaining the voice and bargaining power in the industrial chain.

Under this competitive strategy, the company has launched a series of marketing initiatives, including outdoor large-screen advertising, opening social media accounts, and sponsoring sports events. The opening of Chengdu New Energy Life Plaza is the latest implementation move. However, the effectiveness of its C-end strategy remains to be seen.

How can Life Plaza make a profit if it opens stores but doesn’t sell cars?

"Some people may think that CATL is going to sell cars. We once said that we would not make cars. Here I want to solemnly tell everyone that CATL will not sell cars either." At the opening ceremony, CATL Vice Chairman Li Ping publicly stated.

In his opinion, the New Energy Life Plaza needs to solve two major pain points in the industry: the difficulty for car companies to reach consumers and the information asymmetry among consumers. "What we do is to build a platform that connects all parties. Car companies will become the protagonists on the platform. The goal is to help car companies display good cars and help consumers choose good cars."

In addition to hosting auto shows, it has also built a team of about 30 new energy experts who "know both cars and batteries, can answer consumer questions in real time, and recommend the most suitable new energy vehicles based on needs, budgets, and uses, solving the pain points of consumers having scattered car viewing locations, few choices, and difficulty in comparison."

Tencent Auto's "High Beam" learned that CATL plans to continue to build new energy life plazas in Beijing, Shanghai and other places, and commercial vehicle plazas are also under planning.

From a business logic perspective, if you want to replicate this model, you need to carefully calculate the input-output ratio. The costs of a comprehensive auto hypermarket like this include rent, decoration, manpower, etc., but at the moment, how to make a profit does not seem to be the core consideration of the company, but more of a brand promotion behavior.

Several employees of CATL's Chengdu store told Tencent Auto's "High Beam" that the store had been idle and unfinished for a long time, and the local government supported the rent. The car companies were also very active in exhibiting cars, which were basically their own best-selling and highest-end models. The store was equipped with a special investment promotion team to connect with the car companies, and new products will be continuously updated in the future. Most of the current cars are displayed randomly.

An in-store car selection expert told Tencent Auto's "High Beam" that he does not have a KPI for selling cars, otherwise it will affect the objectivity of the recommendation. The store has previously opened up the resources of the car companies' 4S stores. If consumers have test drive and car purchase needs, they will call the dealers, and within half an hour, they will come to communicate about the sales process. "We help car companies sell cars. The more they sell, the more batteries Ningde purchases, forming a cycle."

In a fiercely competitive environment, car companies naturally welcome more brand exposure.

An executive in the marketing line of a new car manufacturer told Tencent Auto's "High Beam" that CATL's opening of a store in Chengdu will be beneficial to the car company in terms of traffic and brand, which is welcome from our perspective. The industry competition is very fierce now, both online and offline traffic are expensive, and it is not easy to get high-quality leads.

It is worth noting that the parameter configuration table of the car displayed in the New Energy Life Plaza highlights information such as the battery type, cruising range and battery capacity of the model, which is different from the practice of regular sales outlets.

Batteries are no longer in short supply, and CATL bids farewell to high growth

During the 2024 Beijing Auto Show, Zeng Yuqun and "car circle internet celebrity" Zhou HongyiNIOWhen speaking on the platform, Zhou Hongyi called Zeng Yuqun to his face, "the big brother behind all the automotive industries, and he is the most low-key."

He also said that all AI companies lose money, only Nvidia makes money, and pure electric companies don’t make money, only batteries make money. He also suggested that they imitate Intel, “Everyone is promoting you, so just write Ningde Inside in the future.”

Li Bin on the side said, "We all have to make money for him. Help us reduce costs a little so that our profits can be higher. Give me a subsidy for each car."

Such conversations highlight the complex relationship of love and hate between car companies and battery manufacturers.

In the first half of the electrification competition, battery factories led by CATL were the industry's protagonists, earning high premiums with batteries that were in short supply. However, as the industry entered the second half of intelligent competition and under the pressure of continued losses, automakers began to fight back. On the one hand, they began to develop their own batteries or decentralized procurement, supporting second- and third-tier battery factories and reducing their dependence on CATL. On the other hand, as a core component, batteries account for 30% to 40% of the cost of a vehicle, and vehicle manufacturers also hope that battery manufacturers will work together to reduce costs and increase efficiency.

Looking at the industry itself, the price of battery-grade lithium carbonate has plummeted from a high of 600,000 yuan/ton to 80,000 yuan/ton. Affected by the decline in battery raw material prices and overcapacity, CATL, as a leader in power batteries and energy storage, has said goodbye to high growth since the fourth quarter of last year.

The financial report shows that in the first half of 2024, the company's net profit attributable to the parent company increased by 10.37% year-on-year, but the total revenue fell by a rare 11.88% year-on-year. Among them, the revenue of power batteries fell by 19.2% year-on-year, and the corresponding average price fell by 30% to 0.79 yuan/Wh. The capacity utilization rate increased by 4.7 percentage points year-on-year to 65.3%, while the data for the whole year of last year was 70.47%.

To this end, the commissioning time of the first phase of its Guangdong Ruiqing lithium-ion battery project was recently announced to be significantly postponed by two and a half years. The project plans to invest a total of 12 billion yuan, with an annual production capacity of 30GWh, and was originally scheduled to be launched in June 2024.

In this context, CATL must deeply bind itself to its car-making customers to maintain its leading position in the market. In addition to B-side actions such as the "lithium mine rebate" plan and the joint venture to build a battery factory, the implementation of the C-side strategy carries the heavy responsibility of seeking new growth points for its performance.

Targeting the aftermarket service market, but denying the "Inside" strategy

On the day when the lifestyle advertisement opened, CATL also launched the "Ningjia Service" brand and established a car owner club, aiming directly at the aftermarket service cake.

According to the data, the business covers the entire life cycle of new energy products, including battery repair, battery maintenance, battery testing, battery extended warranty, second-hand car trading, and battery recycling and reuse, and has expanded multiple after-market service products such as battery insurance, battery replacement, and new energy research. As of July, 112 service providers in 25 provinces and 80 cities across the country have become the first batch of Ningjia Service franchisees.

In the C-end strategy, the market values ​​more the "CATL Inside" strategy mentioned by Zhou Hongyi (CATL is the English abbreviation of Contemporary Amperex Technology Co., Ltd.).

This strategy originated from semiconductor giant Intel. According to its incentive strategy, as long as computer manufacturers embed the "Intel Inside" trademark and reflect it in advertisements, they can get funds from Intel to share advertising costs, at least 6%. This generous move has received support from more than 300 OEM manufacturers.

In the automotive industry, Huawei was the first to follow suit, putting a "HI" logo (meaning Huawei Inside) on the rear of all models using its intelligent driving solutions, but the effect was not good.Hongmeng Intelligent DrivingThe smart car selection model prevails.

In January 2024, Dongfeng Group's brandsWarriorThe company launched the 917 electric off-road vehicle and announced that its subsequent new products will be printed with the "CATL Inside" logo. In February, the mechanical engineering giant Lonking Holdings also announced that its new electric loader for the Year of the Dragon would follow suit.SmartS7andQJM9After the product was launched, CATL also released a promotional video highlighting "CATL Inside". However, judging from public channels, no more car companies have landed the case since then.

At the same time, as the helmsman, Zeng Yuqun also began to frequently support car companies or attend signing ceremonies, including Seres,CheryICAR, Didi, COSCO SHIPPING, etc. On August 6, he also went to Beijing toEnjoy S9Go public and use it to promote their own batteries.

However, at the opening ceremony, CATL CMO Luo Jian made his first public statement on the hotly debated "CATL Inside" issue. He said that CATL does not have a "CATL Inside" strategy, which is a misunderstanding of the outside world. The company will not adopt the market strategy like Intel in its early years, and it is not about putting a CATL label on the car body.

Even so, this strategy faces practical difficulties in its implementation.

Tianfeng Securities believes in a research report that, similar to the development difficulties Intel encountered in the past, the time has come for CATL to build brand influence through the CATL Inside model to push new products, thereby consolidating market share and even obtaining excess profits. Battery differentiation is perceptible to car owners, but it is a slow variable.

"CATL's global power market share reaches 40%, but its position in the industrial chain is weaker than Intel, and the concentration of CATL's downstream vehicle manufacturers is also lower than that of computer manufacturers. The importance of batteries to electric vehicles is weaker than that of CPUs to computers, because electric vehicles not only test battery performance, but also intelligent capabilities in the future," the research report pointed out.

As competition in the automotive market intensifies, consumers often "want both" in their decision-making factors, including price, brand, design, intelligence, etc. Batteries are not the most core consideration, and vehicle manufacturers currently do not have enough motivation to pursue battery performance.

"There should be some gaps between different brands and price points." The above-mentioned executive of the new car-making force said that for our cars, users care most about intelligence, followed by brand and price, and battery and battery life are still behind.

In this regard, an executive of a Chinese domestic car company told Tencent Auto's "High Beam" that he would see what kind of support CATL is willing to give me and what the ROI is, and then he would decide whether he is willing to put the CATL logo on it. It definitely requires tangible support, and we can talk about what form it can take.