After reading several financial reports, I found that selling a software is really not easy.
Editor’s note: This article is from the WeChat public account “No. 42 Garage” (ID: i42how), author: Boss Huang who sells cabbage.
After breaking up with Google, in October 2013, Tesla Autopilot hired its first employee, Drew Gray, whose head was Sr. Engineering Manager at the time. After less than a year of development time, Tesla released the first generation of Autopilot in October 2014. After another year, in October 2015, Tesla finally pushed the V7 to the owners. .0 software version, and this is the starting point of Autopilot.
When ordinary users are still immersed in the fresh experience brought about by the rapid development of technology, Autopilot brings a good question to the investment community: what will the future car be like, and what are the sustainable profitability points?
In Tesla’s 2020 Q4 earnings conference call, Musk said that the FSD in China priced at 64,000 yuan has a selection rate of only 1%-2%. In the same period, Weilai’s earnings conference call split the NIO Pilot into a select package of 15,000 yuan and a fully equipped package of 39,000 yuan. Li Bin mentioned that the selection rate of the two is 50%.
It can be easily seen from the data that if a one-time buyout is used to sell assisted driving systems, then the price is the core element that affects the selection rate. What is interesting is that the two companies mentioned in the conference call that some measures will be taken in 2021 to increase the selection rate of their own assisted driving systems.
Then let’s talk today about how car companies “just” about assisted driving software.
01 Should the hardware and software be separated
In August 2020, Xiaopeng Motors mentioned in its prospectus seeking U.S. stock listings that it will explore a software charging model in 2021, so that software revenue will become one of the company’s revenue sources. And in November Xiaopeng released the next generation of autonomous driving hardware, which will use urban road HD Map and lidar. He Xiaopeng also stated that he would “beat the people from the west so that they could not find the east.”
For serious and old-fashioned capital markets, they need wonderful stories to stimulate the leeks’ dream of becoming rich overnight. Last year, many people looked for the next Tesla in the stock market. At that time, Xiaopeng, who was mainly engaged in intelligent driving, “smashed into the gun of capital.” In the following days, the share price of Xiaopeng Motors also reached an all-time high of $74.49.
In the 2021 Q1 Xiaopeng earnings conference call, Xiaopeng Motors, as stated in the prospectus, confirmed XPILOT software revenue for the first time in the vehicle revenue. As of the first quarter of this year, Xiaopeng Motors has made a profit of 80 million yuan from assisted driving software, of which 50 million yuan in 2020, and 30 million yuan in the first quarter of 2021. Software revenue accounted for 2.5% of total revenue.
Of course, Xiaopeng Motors also explained that the components of this 80 million yuan revenue, let us look at them one by one.
First of all, Xiaopeng mentioned that the delivery will begin in June 2020. As of the first quarter of 2021, the total delivery of Xiaopeng P7 has exceeded 23,000. The cumulative payment rate of XPILOT 3.0 exceeded 20%, and in a single month in March, this figure reached 25%. However, the increase in the NGP selection rate is not large. In 2020, the NGP selection rate is 16%, and in 2021, the NGP selection rate is 18.8%.
What needs to be explained here is that Xiaopeng Motors is one of the few car companies that has adopted the “separate purchase of software and hardware.” Users of the P7 models on sale can choose either 2.5 hardware models or 3.0 hardware models, and the price difference between the two is 10,000 yuan.
It is worth noting that Xiaopeng mentioned that the XPILOT 3.0 accumulative payment rate in March was 25%. If combined with the data that Xiaopeng P7 has delivered more than 23,000 vehicles, in fact, Xiaopeng Motors wants to express about 5,750 One user chose the 3.0 hardware model, which means that Xiaopeng’s income is about 57.5 million yuan.
In addition, the number of users who choose NGP has increased to 18.8% this year. The underlying meaning is that among the 5,750 users, about 1,092 users have paid for the NGP option, and the revenue of this Xpeng Motors is about 21.84 million yuan.
The sum of the two before and after the data is the same as the total claimed by Xiaopeng Automobile to get 8,00The income of 100,000 yuan is almost the same, but this also exposes a problem. In other words, there are currently about 1,092 Xiaopeng P7s that can actually use NGP on the road. Combined with the data of the cumulative delivery of 23,000 units, such a penetration rate It is 4.7%.
Furthermore, according to Xiaopeng’s official data, currently nearly 75% of P7 users have chosen the 2.5 hardware model, and cannot pay to upgrade the NGP later. In other words, if such data continue to develop, Xiaopeng’s software revenue increase can only be found from the remaining 20% of users.
Therefore, we need to think about a problem here. It is definitely better for users to keep the same terminal price and embed smart hardware in advance. Will it be a loss for car companies?
02 Do you pay the bill?
Among the car companies where assisted driving hardware is embedded in advance and the software is paid for, the more representative ones are Tesla and Weilai. And in this one I want to tell a “old story” first.
In addition to selling coffee and its own brand derivatives, Starbucks’ only other products sold are Evian mineral water with a price tag of up to 22 yuan. And the location of this bottle of water is usually more eye-catching, but how many “philanthropists” can spend 22 yuan to buy a bottle of Evian mineral water at Starbucks throughout the year?
When I witnessed the 28-yuan American cup I ordered, it was made by Starbucks staff who poured a small cup of coffee into a cup of white water. I understand, this coffee is really cheap and only 6 yuan. Starbucks also told me that the biggest difference between American and white water is whether there is a small cup of coffee that is the best.
Of course, I believe that Li Bin, who has repeatedly declared his love for Starbucks brand culture in public, must also be well versed in it. In order not to make the price of the NP full package look too expensive, they launched a “NIO brand mineral water”, no, it is an NP selected package. But what was different from Starbucks was that Weilai’s “bottle of water” was sold.
There are two key figures here. First, according to the Weilai financial report conference call for Q2 2020, Li Bin mentioned that under normal sales conditions, the proportion of users who pay more than 30,000 yuan for optional NP packages is about 25%. Second, according to the 2021 Q1 earnings conference call, Li Bin mentioned that the NP selection package plus the full package, the selection rate of the two is over 50%, which means that the audience of the NP selection package is about 25%. about.
Of course, Wei Lai also mentioned more important information. The average gross profit of NP is about 8,000 yuan. Here, if we combine the delivery data of Weilai’s 20,000 units in the first quarter to make a reasonable inference, then Weilai’s “software gross profit” in the first quarter of this year is approximately 80 million.This is also an important reason why Weilai’s vehicle gross profit margin increased to 21.2% in Q1.
In contrast, Tesla’s FSD promotion methods are more diversified. In Tesla’s 2020 Q4 quarter earnings call, Musk said that China’s FSD selection rate is only 1%-2%. In fact, before that, the Tesla China team had hoped to change the low FSD selection rate in China through some marketing activities. For example, in September last year, Tesla’s official website briefly went online for 10 days. The enhanced version of EAP auto-assisted driving is available for users to choose from, and it provides a 3-year financial interest-free plan.
Since I was named by the boss in the earnings conference call, it is foreseeable that the Tesla China team is burdened with a more arduous software “revenue-generating” task. Therefore, on the fifth day of the first lunar month and May 1st Labor Day, users were given 10 and 45 days of free EAP experience time respectively. Of course, FSD has a low selection rate in China. In addition to the higher price, all models are equipped with AP as standard. One of the big reasons.
Because Tesla did not announce relevant information on the domestic selection rate of FSD in the 2021 Q1 financial report meeting. Therefore, we can only make an “irresponsible inference” from the phenomenon of Tesla China giving users a longer experience time for the second time. Perhaps when the EAP experience time was given for the first time, Tesla China achieved a certain effect, but it did not meet expectations, so it decided to have another wave of “big”.
From the behavior of Tesla and Weilai, we can foresee that when car companies embed hardware in advance, even if users do not assist driving in the initial stage, car companies can still improve software penetration through some marketing activities in the later stage. rate. Among them, software pricing is critical.
According to the terminal retail data of the China Automobile Center, the average transaction price of Weilai is 430,000 yuan, so the price of the NP selection package accounts for about 3.48% of the total car price, and the full package accounts for about the total car price. 9%. The later upgrade cost is that the NP select package accounts for about 4.1% of the total car price, and the full package has become 10.4%.
According to the terminal retail data of the China Automobile Center, Tesla’s average transaction price is 284,300 yuan, of which EAP accounts for 11% of the total car price, while FSD accounts for 22.5% of the total car price. Maybe this is the case. The root cause of the low selection rate.
ThatLet’s look at the relatively complicated Xiaopeng. According to the Q1 financial report, the total revenue is 2.951 billion yuan and the total delivery volume is 13,340 units. It can be concluded that the average selling price of Xiaopeng is about 221,000 yuan, so the price is 2. The NGP of ten thousand yuan actually occupies about 9% of the total car price.
But if you add 10,000 yuan to buy a 3.0 hardware model because you want to buy an NGP, then the cost of this assisted driving system has actually come to 13.57%. The later upgrade fee for users is even higher. After 6 months, the later upgrade fee for NGP will increase to 36,000 yuan, which will account for 16.2% of the total car price at this time.
Combined with all the data, I think it is relatively reasonable if the price of assisted driving is a one-time buyout and controlled within 10% of the car price.
Then the problem comes again. Car companies are painstakingly promoting their own assisted driving products, and is it just to make that money?
03 Be imaginative
In the eyes of investors in the primary market, there are only two types of companies. One is a profitable company, and the other is a valuable company. Of course, companies that make money may be worthless, and companies that make money may not make money.
Because for capital, a valuable company must first meet three elements. First, the industry in which the company is located is capable of attracting large cash flow. The second is that the company’s products are extremely differentiated and disruptive. The third is that the company’s products can be “first”, even if it is very subdivided, as long as it has room for imagination.
Autonomous driving is undoubtedly an industry full of fantasy for capital. According to a CICC research report, the high-level autonomous driving market has a wide range of scenarios. If calculated according to the potential scale, China’s high-speed intercity logistics market is expected to reach 3.3 trillion yuan, the autonomous driving travel service market is nearly 1.7 trillion yuan, the mining area driverless market is nearly 670 billion yuan, and the unmanned terminal distribution market is 170 billion yuan. The scale of the autonomous valet parking market is about 80 billion yuan.
In an interview with “LatePost”, Tucson Future CEO Chen Mo said that in terms of the driverless truck market segment, the number of truck tractors in the United States is close to 3 million, while the number of heavy trucks in China exceeds 9 million. Vehicles. At present, their L4 driverless virtual truck driver has a net income of about 50,000 U.S. dollars a year. The implication is that even if it only occupies 1% of the US market and operates 30,000 trucks, there are 1.5 billion U.S. dollars in revenue a year.
This charging method is similar to the NIO Day in 2021, when Li Bin announced that Weilai’s next NAD autopilot system will adopt a monthly flexible subscription and fee-based subscription model.
Of course, this method of “transporting” the charging method of video and music software to the automotive industry, from the current point of view, can reduce the cost of use for users. For car companies, it seems to be beneficial to increase user software usage. In this way, the basis for determining the revenue of a car company’s software has become the number of users. From this perspective, in principle, Tesla is the car company that should implement the subscription system.
According to a Forbes report, it is estimated that 60% of the value of self-driving cars in the future will be dependent on software, while the value of software today accounts for only about 10%. And this is exactly the reason why electric vehicles are “attracting gold” at the moment.
After all, commercial society and charity are the opposites of two contradictions. No investor invests a large amount of real money just to obtain a “good guy card.” How to commercialize it is what they pay more attention to.
Write at the end
In fact, among all car companies that sell driver-assisted software, there is also a “minority” ideal car, and their approach is to directly configure all driver-assisted software and hardware as standard.
Don’t get me wrong, I’m not saying that this is a gift, but that when car companies directly make the hardware and software systems standard, if there is enough production and sales to drive the formation of large-scale, the hardware cost and The cost of software development is sufficiently thin. Whether it is for users or investors, whether the subscription system is better or the standard configuration is better in the future is still an unknown question.
Finally, what I want to say is that the Japanese thinker Yukichi Fukuzawa mentioned in his “Introduction to Civilization” that “the progress of all civilizations since ancient times all began with a useless heresy.”
Fortunately, electric vehicles have come out of this period.