Latest statement from “prophet” Musk: Some companies cannot escape bankruptcy. Which companies? The PPT behind old Musk:
These automakers are written so blatantly on the PPT. Is Musk considering them as opponents or are they going bankrupt without explicitly saying so?
But according to Musk’s standards, it’s not hard to guess. Musk has long been ridiculing and belittling his competitors, and this time he’s doing it again. Is the automotive industry really in a “battle royale” moment?
What did Musk say?
The car manufacturers named by Musk are: BYD, NIO, XPENG, and Polestar, all of which are Chinese competitors.
Three American players have made it to the list: Rivian, which specializes in electric pickups, the veteran automaker Ford, and Lucid.
Here is Musk’s original statement:
Tesla is the largest electric car manufacturer in the world and also the most profitable automaker in the world. However, it’s really difficult for electric cars to turn a profit. Look at our competitors who have been struggling to achieve better profits.
It’s easy to come up with an idea, and it’s easy to make a prototype. But it is really difficult to increase production capacity, to achieve mass production, and to maintain positive cash flow during this process. Especially if you want to maintain positive cash flow, it is really, really difficult.
In the recent past, many banks have collapsed. This is the result of changes in the macro environment and the entire financial system. And these changes have a significant impact on the affordability and sustainability of vehicle use. The macro environment in the next 12 months is still full of challenges, and many companies may go bankrupt in the near future.
Musk’s statement provides a criterion for judging whether an automaker can survive.
Firstly, there are objective factors such as poor macroeconomic conditions. In particular, systemic financial risks affecting ordinary users have made them cautious or fearful about large-scale consumption such as cars.
In the face of bleak sales prospects, there are two direct factors that determine whether an auto company can survive: gross profit and cash flow.
One is the ability to sustain survival, the other is the ability to resist risks.
Therefore, whether these car companies named by Musk will go bankrupt or not can be studied from the perspective of data.
Which auto companies are on the verge of collapse?
Based on publicly available financial information, we have made a visual comparison of the auto companies listed by Musk:
Both Ford New Energy and Polestar are quite unique, backed by established and massive automotive giants, so even if they suffer significant losses in the short term, they will not be in danger of going out of business.
Ford sold a total of 77,500 new energy vehicles globally last year, mostly in the North American market, with a year-on-year growth rate exceeding 120%. Polestar had a similar situation, selling 51,000 vehicles globally (mostly in Europe and North America) with a year-on-year growth of 80%.
So bankruptcy is not going to happen to them, as they have a solid financial foundation and are experiencing good growth, making it unlikely for them to be forced to stop or abandon their business.
There’s no need to say that BYD won’t go bankrupt or close down. Also, it’s worth noting that the comparative data provided by Musk is the enterprise operating profit margin, and since BYD’s average car price is much lower than Tesla’s, the value of overall profit/revenue is naturally much smaller.
However, in terms of gross profit per vehicle, BYD is already close to 20%, with significant effectiveness in supply chain vertical integration capabilities, though still far behind Tesla’s 28%, surpassing traditional old carmakers by far.
Regarding sales, BYD’s expected minimum guarantee is 3 million vehicles, with a goal of reaching 3.6 million vehicles. Furthermore, BYD’s electronic, rail, commercial vehicle, semiconductor, and other businesses can support the automotive sector’s price war, allowing BYD to gain market share with very low prices, even if they earn less or don’t earn at all.
NIO lost about 14 billion yuan (approximately 2.17 billion US dollars) last year, but their cash reserves are secure. However, there has been a slowdown in sales growth. The new 866 series is about to be launched, which is expected to drive growth. Therefore, there are no worries for at least 12 months.
XPENG’s situation is quite dangerous, with a loss of 9 billion RMB in 2022. At this rate, the current cash reserves can support the company for about 2 years. Additionally, XPENG is undergoing internal turbulence and adjustment period, with the G9 model not meeting expectations and the new G6 model not yet being released to the market.
The situation of Rivian is even less optimistic, with a lot of cash, but it is also consumed quickly. It will lose 6.9 billion US dollars in 2022. At the same time, the delivery quantity is just over 20,000, and it has just begun to enter the normal production rhythm.Unless there is a significant leap in growth within one year, it will be difficult to avoid the fate predicted by Musk.
As for Lucid, it may be the car company that was earliest predicted by the prophet Musk. It has the most losses, the least cash, and can hardly support itself for more than 12 months. At the same time, the delivery volume cannot increase. In 2022, Lucid delivered about 4,000 vehicles, but produced 8,000 vehicles, and 50% of the output was in inventory.
Car Industry’s Great Escape
The situation is like this: the new energy and intelligent revolution stirred up by the automobile industry has clearly established the “two super” positions – Tesla and BYD.
They have both left the rest behind, with sales bases already reaching millions, and can still grow at a rate of doubling this year. It is difficult for new forces, including brands that have transformed from old car manufacturers, to catch up with these two giants.
However, the moment of decision between Tesla and BYD has not yet arrived. While there may be some competition in China, both companies’ current goals are to disrupt and replace fossil fuel vehicles on a global scale.
The post-superpower “multi-strong” pattern is still unclear. However, some trends are emerging.
Traditional car companies cannot be ignored as they are making efforts to catch up. They have deep pockets and adequate technological reserves, and they can at least catch up with new forces in the short term with decent new energy products.
At the same time, they also have the advantage of brand recognition inertia. Therefore, among the “multi-strong,” successfully transformed old-school car companies will occupy a large place.
Notable players in the market include Volkswagen, Ford, General Motors, Geely, Great Wall, GAC, SAIC, and others.
As for new forces, the biggest test since their inception has arrived: there are two giants blocking the ceiling while a group of traditional car companies are hot on their heels.
The market has limited capacity, and even steady growth over the next 1-2 years may not guarantee survival. Only by creating explosive products is it possible to overcome this challenge.
From the perspective of the company’s structure and mindset, this round of big escape is a test for new forces to return to the original value of “car companies,” emphasizing comprehensive capabilities such as engineering manufacturing, product definition, sales system, management system, and more. It’s not just about new forces’ strengths in technology promotion, value vision, and capital packaging.
Musk is indeed scaring his competitors, but not without reason.
Musk believes that if the Federal Reserve continues to raise interest rates, the global macroeconomic situation will worsen. If this scenario continues to unfold, it is highly likely that new car makers who have not substantially improved their delivery volume will face bankruptcy.
The next 12 months will be the final window of opportunity for these new car makers to turn their fortunes around.
Source：AI4auto
