Steve Jobs liked the design philosophy of ‘modern minimalism born to change chaos,’ so Apple products followed an extremely simple route.
In the automotive industry, Tesla and Ideal are also advocates of minimalism. They can dominate with two cars, never with three, and those who can use three cars will never use a bunch of cars.
01
NIO, They Only Made One Car in Eight Years
Some people say that in its eight years of entrepreneurship, NIO only made one car. Essentially, they are all variations of the NIO One. The L8 is a modified version of the NIO One, the L7 is a five-seater version of the L8, and the L9 is an extended version of the L8. The L7, 8, and 9 have almost identical front and rear faces, jokingly referred to as the ‘matryoshka’ design. Li Xiang himself is not opposed to the term ‘matryoshka.’ He even mentioned in an interview with ‘Late Auto’: ‘(Apple’s car) will be a matryoshka. Apple phones look the same, and so do Braun’s razors and Dyson’s vacuum cleaners. The most successful companies in the world are all matryoshka.
From the consumer’s perspective, NIO’s marketing has a familiar taste. Whether it’s the unified appearance, technology platform, and the incremental changes in body size of the L7/8/9, or the naming convention of models as Air, Pro, and Max, it is extremely similar to Apple’s approach in consumer electronics, and also in line with Starbucks’ ‘tall, grande, venti’ lineage. For NIO, this approach saves marketing costs and makes it easier to gain consumer recognition. NIO’s sales performance also confirms this. In September, the delivery volume of NIO L-series cars exceeded 10,000 units, and they also completed the delivery of the 500,000th car.
NIO is dominating the market with 3 car models, while Tesla only uses 2 car models—Model 3 and Model Y.
With 2 models and 3 years, Tesla has surpassed Mercedes-Benz, BMW, and Audi, winning the title of the 2022 annual delivery champion in the luxury brand market in China. Model Y, with a delivery volume of over 450,000 units, became the best-selling single car in the luxury brand market.
Having a small number of SKUs is a strategic choice, and both Tesla and NIO have proven that success can be achieved with very few SKUs. Complex SKU designs increase supply chain costs and marketing expenses. The automotive industry often teases Li Bin for being ‘too busy,’ while Li Xiang only makes one car and still has time to post on social media.
Many of my friends around me can’t figure out how many car models NIO has, including some industry insiders, but most people are clear about NIO’s L7, L8, and L9. Li Xiang said he has a ‘clean SKU’ obsession, with extreme attention to how to meet a wide range of user needs with the fewest number of models. In fact, according to Li Xiang’s original intention, the number of SKUs would be even fewer.
02
Tesla Pursues “Simplicity” to the Extreme
I once asked a friend from a traditional automotive research institute, why does Tesla have so few SKUs? According to the traditional automotive mindset, in the price range of 230,000 to 330,000 yuan, there should be at least 5 to 10 different configurations. Almost all traditional automakers do it this way. This friend from the traditional automotive industry also highly appreciates Tesla’s product strategy. Having fewer SKUs makes research and development work simpler, and suppliers are happy about it, but the sales team disagrees. The product development needs of traditional automakers mainly come from the sales team.
In traditional automotive companies, a single product can have as few as four or five configurations, and as many as a dozen or more, and the sales team always wants them all. Especially when sales are declining, the sales team looks for problems with the product: it’s too expensive, the range is too short, not comfortable enough, and so on. This leads to changes in configurations and the introduction of more models, resulting in an increasing number of variants. If the Tesla Model 3 were in the hands of a traditional automaker, it would never have only two configurations in a price range of hundreds of thousands of yuan; they would insist on starting with at least five configurations.
Excellent car models generally do not have more than three configurations, and their model names are always simple and clear, without strange names.
Having too many models is painful for consumers, torture for suppliers, and a disaster for dealerships. In traditional automotive companies, it’s easy to add to products, but very difficult to subtract from them. No one dares to take responsibility for declining sales. When product sales decline, it’s easy to play meaningless addition games in the name of consumers.
03
BYD Has Many SKUs, Why Are They Successful Too?
Is it really “the more children, the more fights” or “less is more”? This is a philosophical question. In the past twenty years, BYD only had its main brand, “BYD.” However, in recent years, they have expanded to include multiple brands such as Wangchao, Ocean, Tang’s, Dolphin, and Ascend, among others. In terms of SKU quantity, BYD has made efforts to focus.
- Wangchao has five major single-product models: Qin, Tang, Song, Han, and Yuan.
- Ocean has five major single products: Dolphin, Seagull, Seal, Destroyer, and Escort.
- Tengshi currently has D9, N7, and N8.
- Formula Leopard and Ascend currently have Leopard 5 and Ascend U8.
In terms of simplicity, BYD is not as extreme as Tesla or NIO. However, compared to traditional automakers like Great Wall and Chery, BYD has significantly fewer SKUs. Great Wall currently has 19 models on sale, while Chery has 23.
So, whether “more” or “less” is better is indeed a philosophical question, and success can be achieved through different strategies in the automotive industry.
Based on the sales figures from January to August 2023, BYD averages around 106,000 units sold per model, while Great Wall sells around 20,000 units per model, and Chery sells around 14,000 units per model.
In the era of traditional gasoline cars, BYD was once fond of the game of “rebadging and renaming.” For example, an F3 model would change its appearance and become the G3, then change again to become the L3, and a minor grille modification would result in the F3 New Novelty Edition, add a roof rack, and it becomes the F3 Travel Edition. However, in recent years, as BYD shifted its focus away from gasoline cars and towards new energy vehicles, they have become much more focused on their model IPs. When the sales of the Dolphin fell short of expectations, BYD didn’t simply change its name or create a new brand; instead, they increased their investment in the Dolphin. For instance, the recent launch of the Dolphin DM-i was aimed at expanding the Dolphin’s IP.
Many traditional automakers have the mindset that they need to offer a wide range of models, covering various wheelbases from small to large, from sedans to SUVs, in the belief that there’s always a model suitable for everyone. Great Wall, for example, has been indulging in the pleasure of naming their vehicles, to the point where even industry insiders can’t keep track of how many models they have or remember all the names based on animals and coffee.
Chery’s surge in export volumes this year has overshadowed its embarrassing domestic sales figures. Chery’s domestic sales are much lower than BYD’s and even lower than Great Wall’s. Despite having numerous models, apart from the Ruilin 8, which barely exceeds ten thousand units in sales, all the others fall below that mark. The “having more children is better for fighting” strategy has failed.
As Steve Jobs said, “Making things complicated is easy. Making things simple requires serious work.
04
Simplicity is Efficiency, and It is Productivity
Li Xiang particularly admires the book “The Power of Simplicity.” Li Xiang is also a faithful follower of Steve Jobs, requiring the entire company to study “The Power of Simplicity.”
In “The Power of Simplicity,” it is mentioned that people prefer simplicity, but simplicity doesn’t spontaneously arise. It requires someone who can resist complexity, even individuals with clear thinking may sometimes abandon their commitment to simplicity because complexity provides a sense of security. Unfortunate (poor-selling) car models have their differences, but successful car models are often similar.
Many car companies expend considerable effort on color naming to demonstrate their high marketing prowess. Due to inadequate marketing capabilities, insufficient consumer insight, and incorrect product planning, they end up adding unnecessary complexity to their product names, which is a case of misplaced priorities. Car companies often hesitate between more and fewer options, wrangling with the decision, when in reality, it’s due to a lack of capability and overly ambitious desires, leading to a mismatch between capability and desire.
Take Good Cat, for instance, they offer 20 color combinations and put tremendous thought into color naming, resulting in peculiar names like “Forgiveness Green” and “Blue Wave Ten.” With so many color options, they confuse consumers and fail to improve sales.
On the other hand, look at Tesla, which keeps its color naming simple. Ideal follows a similar approach, avoiding strange and convoluted color names.
Li Xiang says, “If second-tier luxury brands could take their basic skills as seriously as BBA (BMW, Mercedes-Benz, Audi), rather than focusing solely on lifestyle, their sales could increase by at least 30%.” I’ll add to that: Any struggling brand that takes the time to study the marketing methods of Ideal and Tesla, instead of wasting time on quirky names, could increase sales by at least 30%. Tesla and Ideal have achieved success with a minimal number of SKUs, which is worth studying and learning for many car companies. In today’s competitive environment, “having more children is better for fighting” is not the optimal solution; focus and simplicity can yield greater efficiency.
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