From Buffett's perspective: Have new energy vehicle players built up their moats?

He Xiaopeng recently said in an interview with Luo Yonghao, "In the automotive industry, the elimination round in China will probably last for about five more years. No one has secured a ticket yet, including Tesla."

He Xiaopeng's remarks in this conversation were really unexpected, yet somehow reasonable.

This makes me think of an interesting statement made by Lei Jun last year.

When discussing the future global new energy vehicle market last year, Lei Jun said, "New energy vehicles, like Internet companies, will ultimately be dominated by a few winners. There may only be 5 - 8 companies left globally in the end."

The remarks of He Xiaopeng and Lei Jun are not groundless.

The new energy vehicle market is constantly reshuffling. In the past two years, the number of new energy vehicle brands "going out of business" has visibly increased.

If the future is really as Lei Jun said, with only 5 - 8 brands remaining, which automotive manufacturers are most likely to stand out?

Tesla and BYD: Can Established Players Build Moats with Cost Advantages?

Actually, we can step out of the cut - throat competition in the automotive circle and view it from an investment perspective.

For decades, Warren Buffett has always emphasized the concept of "moat". This is not only Buffett's secret to success but also a key that we can directly apply when analyzing corporate operations.

What is a moat?

A company has its unique advantages that can keep competitors out of its territory, forming its own business privileges.

It can be a brand advantage, a technological advantage, etc. As long as the difference is significant enough and sustainable for a long time, it can be considered a moat.

Currently, the reason why the new energy industry is extremely "involutionary" is mainly that the industry moat has become lower.

For example, Xiaomi, originally a mobile phone manufacturer, has successfully crossed over into the automotive industry in just a few years, catching many of its peers off - guard.

The rapid entry of new car - making forces into the market benefits from China's powerful supply chain advantages, which allows new and old forces to stand on a more equal starting line.

In the previous era of fuel vehicles, Xiaomi would never have dared to cross over into the automotive industry.

So, in the final competition of the new energy vehicle market, it mainly depends on the company's own moat.

Among them, Tesla and BYD have long been well - known and are established players in the new energy vehicle industry. They have surely built their moats to have survived until now.

First, let's look at Tesla. As the company with the highest market value in the global new energy vehicle industry and the current leader in the new energy vehicle field.

It has several characteristics: First, it has a technological advantage, with its FSD technology leading its peers. Second, it has a cost advantage. Third, it has a brand effect and Elon Musk, a super - founder.

However, although Tesla's technology is leading, this technological advantage cannot guarantee that Tesla will smoothly pass through the industry's involution period.

Under what circumstances can technology become a company's moat?

Take the most extreme example - the lithography machine.

It's obvious that other companies can't replicate it without ten or twenty years.

And Tesla's FSD clearly hasn't reached this level. Intelligent driving is the future trend, and all automotive manufacturers are competing fiercely. Tesla is leading, but Chinese brands are also catching up rapidly. The actual performance of XPeng's XNGP and Huawei's ADS in complex urban road conditions has been very impressive.

Tesla's leading technological level is more like a large - scale model. There might be a DeepSeek - like technology to disrupt it, and the sustainability of its differentiation is questionable.

Of course, Tesla's technology cannot be regarded as a moat, nor can the various technological advantages that other car manufacturers are proud of. Nowadays, being technologically advanced in the new energy vehicle industry is more like a bonus point, and the so - called "far - ahead" is only temporary.

To say the biggest moat of Tesla currently is actually "cost control + super - founder + brand effect".

Tesla uses its vertical supply chain to directly turn the cost - reduction benefits of technology into a price weapon. For example, in 2023, the production cost of the Model Y was 30% lower than in 2020. It can always offer price - cut space, which is also Tesla's confidence to initiate price wars.

This move is almost a "fatal blow" to NIO and other companies that are still in the red.

Even though Tesla's cost - reduction ability is not as good as BYD's, it still has room for maneuver - the higher the sales volume, the stronger the bargaining power with the supply chain, and the cost will be further diluted. The positive cycle of price - cut - volume increase - further price - cut will expand like a snowball, allowing it to always have the initiative in the involution.

Secondly, Elon Musk's influence in the world goes without saying. Many people regard Lei Jun as an idol, and Lei Jun regards Musk as a role model, once saying bluntly, "We don't even dare to think about what Musk is doing."

Moreover, Lei Jun has proven that in today's new energy vehicle competition, it's not necessarily about the product but also about the founder.

Now we can also see more automotive founders and executives stepping into the spotlight, such as Yu Chengdong and Wei Jianjun of Great Wall Motors.

It can only be said that Musk's influence in the world is greater than Lei Jun's.

Moreover, Tesla, once the world's most valuable company, has a brand effect that domestic new energy vehicles can't match.

So, according to Lei Jun's prediction that there will only be 5 - 8 new energy vehicle brands in the future, Tesla is basically a sure bet.

Next, let's look at BYD. BYD has always been the king of price wars and is even more aggressive than Tesla in this regard.

Why is BYD so strong?

It mainly relies on "supply chain advantages + scale effect".

According to the Tianyancha APP, BYD has a large number of supply - chain subsidiaries, filling up several screens.

BYD has almost "monopolized" the entire industrial chain: from mining lithium ore in the mines for battery raw materials, to making its own batteries, motors, and electronic controls, and then to vehicle assembly. It even develops and produces its own chips. Except for general parts like tires and glass, the "BYD" logo can be seen everywhere on the vehicle.

The benefits are obvious - all links are within its own control, and the cost is minimized.

Coupled with BYD's status as the global new energy sales champion, its bargaining power when purchasing raw materials is extremely strong.

Relying on the advantages of the largest production and sales scales, BYD has brought its cost to the lowest point in the industry.

If there is industry involution, then BYD is truly the "king of involution".

This year, BYD has even popularized intelligent driving in the sinking market of new energy vehicles.

If we talk about why China's new energy vehicle industry has developed so rapidly, BYD is definitely the biggest contributor.

In 2024, BYD's domestic market share of new energy vehicles reached 33.2%, which means that for every three new energy vehicles sold, one is a BYD.

However, BYD's "cost" moat is not without flaws. That is, its assets are too heavy.

Maintaining so many heavy assets requires a huge amount of investment every day to keep them running.

Moreover, the reason why BYD is so strong is mainly because it masters blade battery and DM - i hybrid technology.

Its entire production system is built around these technologies.

What if, one day, solid - state battery technology matures or other technologies emerge? Wouldn't all the money it has spent become obsolete production capacity?

Moreover, as BYD's scale has increased, its brand advantage has declined.

BYD's main market is in the vehicle price range of 70,000 - 200,000 yuan. Above that, within the 500,000 - yuan range, the Denza brand has relatively good sales, while the performance of other products is mediocre.

So, although BYD's moat is strong, there are still some uncertainties at its foundation.

It's not hard to find that established players use scale and cost as moats, which gives them the initiative in the new energy vehicle war. In contrast, new forces have their own tricks.

Newcomers in the New Energy Field: Different Ways to Build Moats?

Among the new forces, we mainly talk about Huawei, Xiaomi, NIO, XPeng, and Li Auto.

Among them, Huawei and Xiaomi are similar in that they have been competing in the mobile phone industry for many years, but now they have taken different paths.

One operates with light assets, and the other participates with heavy assets.

It's worth mentioning that although Huawei claims not to build cars, it's only in the sense of not manufacturing cars directly.

The reason why the AITO M5 sells so well is definitely not because of the Seres brand.

The author believes that Huawei's "as - if - building - cars" model of only providing technological empowerment is an ideal model in the context of over - capacity.

Now, everyone knows that car manufacturers are having a hard time. How long will this difficult period last?

According to He Xiaopeng, it will be at least five more years.

By choosing the light - asset operation model, Huawei doesn't have to go through such a hard time and even seems to be in its element.

It doesn't have to invest huge amounts of money in building factories and manufacturing cars or operate with heavy assets, and it also avoids being an enemy of all car manufacturers.

Many people say that Huawei wants to be the Bosch of the new energy vehicle industry.

Actually, I think Huawei is more like an early - stage e - commerce platform. Just as Taobao and Tmall emerged because there were many small merchants, Huawei has the space for light - asset operation centered on technological empowerment because there are many heavy - asset car manufacturers with huge intelligentization needs.

Although Taobao doesn't sell goods directly, it has more say in the sales process. Similarly, Huawei doesn't build cars directly, but its say in the car - manufacturing process is increasing.

At the same time, Huawei's technological advantage can definitely be transformed into a moat.

Shouldn't it be domestic companies that provide ICT and other technological empowerment to traditional cars?

In this regard, how many domestic companies can catch up with Huawei?

In terms of technological trust, few companies can claim to surpass Huawei.

It seems that Huawei is helping car manufacturers build better cars, but in essence, it is redefining cars with technology.

The drawback is that light - asset operation has the risk of betrayal. Many car manufacturers don't want Huawei to have too much say in their products, and there are bound to be contradictions between Huawei and its partners.

However, I think the problem is not serious.

In 2021, the chairman of SAIC said that SAIC would not accept Huawei's autonomous driving technology and couldn't accept the idea that "Huawei is the soul and SAIC is the body".

But now, SAIC has accepted it. Huawei and SAIC have recently cooperated to launch the Shangjie.

Last year, BYD dethroned SAIC from the sales throne for the first time. Facing survival pressure, SAIC finally had to embrace Huawei - this is exactly the manifestation of Huawei's moat in the new energy vehicle track: when it becomes one of the few choices for traditional giants to "extend their lives", the barrier is so high that competitors can't bypass it.

Next, let's look at Xiaomi. As an old rival of Huawei, Lei Jun's "all - in" strategy is very ingenious.

The Xiaomi SU7 locked 240,000 orders in 18 hours, creating a miracle in China's automotive history.

At first, people thought that Lei Jun's statement that "cars are becoming more and more like smartphones" was just a joke.

But when Lei Jun applied the smartphone business model to the automotive industry, his competitors were completely stunned. Even when selling cabbages, you can't achieve such an effect.

Some people say that Xiaomi's good sales are mainly due to marketing.

But I want to say it's not that simple.

First of all, Lei Jun has made Xiaomi one of the top mobile phone brands globally. This is not only due to marketing but also to the real product strength. Without the latter, no one can sell any product to become a world - champion just by talking.

So Lei Jun is essentially a super product manager who can not only control the product but also do marketing to an astonishing level.

It's just that the amazing sales volume has overshadowed people's understanding of Lei Jun's quality control.

The reason why people rush to buy the Xiaomi SU7 is essentially a transfer of "smartphone trust": people transfer the good impression they have accumulated of Lei Jun and Xiaomi smartphones over the years to Lei Jun and Xiaomi cars.

Business is often a trust - based transaction. Otherwise, where do so many financial derivatives come from?

When Fat Donglai's supermarkets sell well, is it just about the products?

It's also about trust.

Xiaomi's ability to gain such high user trust is actually a manifestation of its brand moat.

So, Xiaomi still has a good chance of making it to the final round, provided that there are no major product failures.

However, I still have great confidence in Lei Jun's ability to achieve a perfect "trust transfer" for Xiaomi cars.

When Lei Jun crossed over into the automotive industry, he didn't start from scratch but used the Xiaomi brand.

This also shows Lei Jun's trust in himself, his products, Xiaomi, and Xiaomi fans.

So, the moat of Xiaomi cars is essentially "super - founder + Xiaomi ecosystem".

Just go to a Xiaomi Home store in the mall during the winter or summer vacation. It has become like a Xiaomi cybercafé. These kids playing games in the Xiaomi Home store are likely to be Xiaomi car owners in the future.

Many car manufacturers can only look on with envy just in terms of brand awareness cultivation.

Finally, let's talk about NIO, XPeng, and Li Auto. As the established players among the new car - making forces, they each have their own characteristics and also some similarities.

At first, NIO wanted to create a closed - loop of energy replenishment and user experience through "battery swapping + high - end services"; XPeng wanted to turn its full - stack self - developed intelligent driving into a technological barrier; Li Auto wanted to use the extended - range route, family - scenario definition, and extremely efficient supply chain to make the "dad's dream car" a popular model logic that others can't copy.

As a result, NIO has now been forced to adopt a price - cut strategy. The price cut of the ES8 has backfired on its old customers, and Li Bin can only helplessly say, "If NIO maintains high prices, it will be difficult to compete."

Mainly, NIO's battery - swapping cost is high, and with the progress of fast - charging technology, the advantage of battery swapping is becoming smaller and smaller.

Moreover, the so - called high - end services have high maintenance costs, and competitors can replicate them. For example, the "HarmonyOS canteen" is also a relatively low - cost high - end service.

The moat that NIO wants to build has not really taken shape and is too easily replaceable.

Li Auto's extended - range route has a window period. Once the pure - electric range and charging facilities cross a critical point, Li Auto will have to switch to pure - electric vehicles. And although the "refrigerator, color TV, and big sofa" concept...