High-End Games, Tough to Play
Author| Wang Yajun
Cover Source| SheTu Network
"Essentially, it's like spending the price of a car to get a house." On March 1st, Li Xiang described the launch of Ideal's first all-electric model, the Ideal MEGA, in such terms at the press conference.
Luxury cars like the Tesla Model X, Toyota Alphard, BMW 5 Series, and Mercedes-Maybach S-Class were used to "diss" and set a backdrop. "If Jobs were still around, the Apple car would probably be just like this," Li Xiang wrote on his WeChat Moments.
He even claimed that this car "ushers in a new era for electric vehicles."
Ideal MEGA; Image source: Ideal Official
This single-version, pure electric vehicle priced at 559,800 CNY is not only crucial for Ideal to achieve its sales target of 800,000 units in 2024 but also directly impacts its ability to compete with high-end brands like BYD and Tesla.
According to Li Xiang's plan, Ideal Motors aims to complete its product matrix with four extended-range and four pure electric models this year, surpassing BBA in sales, entering the top five in annual revenue domestically, and by 2030, reaching the peak global revenue of the iPhone.
However, the capital market's reaction to this launch event was lukewarm. On March 2, Beijing time, while NIO and XPeng Motors saw gains in the US stock market, Ideal Motors experienced a 5.1% drop to $43.54.
During Li Xiang's one-hour presentation, several mainstream high-end MPVs were mentioned for comparison with the 559,800 CNY Ideal MEGA.
In his view, Japanese high-end MPVs lack luggage space when seating seven passengers; German high-end MPVs, although spacious, suffer from van-level noise insulation and suspension performance, struggle with power for regular overtaking at full load on highways, and almost lack smart cabin and driving capabilities. In terms of charging power, Ideal MEGA nearly triples the performance of Tesla Model X at V3 charging stations.
Li Xiang described MEGA as not only the fastest charging production car in the world, the largest electric passenger vehicle available globally, but also the MPV with the "lowest drag coefficient, lowest energy consumption, and largest trunk volume" worldwide.
In summary, "the product strength of mainstream high-end MPVs is extremely poor," while MEGA is described by Li Xiang as the "flagship among flagships," "surpassing million-level models in space, configuration, performance, and design."
In Li Xiang's view, the ideal has firmly established its foothold in the 0 to 1 stage through the extended-range route, stepping into the 1 to 10 stage. The pure electric model is considered an essential weapon to cross this stage. The day before the launch event, he set the standard for achieving the 1 to 10 stage: reaching 1.6 million units by 2025.
His expectation for MEGA is to become the "top product with sales exceeding 500,000."
Ping An Securities stated in a research report that if the pure electric model can achieve the expected success after its market launch, Ideal's market value is expected to rise again.
In the second half of this year, Ideal plans to launch three more pure electric models, forming a model matrix consisting of 4 extended-range and 4 pure electric models by the end of the year.
Everbright Securities' research report mentioned that the new model cycle initiated by the pure electric series and the extended-range L series is expected to further expand Ideal's scale advantage. Li Xiang also expressed confidence in exceeding the total sales of BBA by 2024 with the delivery of pure electric models and other new extended-range models.
Regarding profitability, Ideal's CFO Li Tie mentioned in a recent Q4 earnings call that the long-term comprehensive gross profit margin for pure electric and extended-range models is expected to be around 25%. He stated, "Since the second half of last year, with the decrease in battery raw material prices and the rationalization of battery prices, it is a good time for the market launch of our pure electric products."
With the significant debut of this pure electric model for Ideal, Li Xiang has sent a new signal: bidding farewell to the era of "small and ideal," entering the high-end arena, and transforming from a leading player in the new car industry to a leader in the entire industry.
Eight days before the launch event, Li Xiang set a new goal on his personal Weibo: strive to enter the top five in domestic market revenue this year.
In 2023, according to Li Xiang, it was the year with the "most pressure and the most controversies." It was also the year when the once close comrades "small and ideal" gradually drifted apart.
In 2019, "small and ideal" almost simultaneously faced financial difficulties due to a lack of funds.
At that time, NIO's cash flow was calculated on a daily basis, and Li Bin exhausted all his contacts but could not find a penny. He Xiaopeng also encountered a situation where almost 90% of the financing negotiations could not proceed, feeling like it was the last struggle. The financing Li Xiang obtained was just enough to deliver the Ideal ONE and establish a direct sales system.
A year later, these three companies successfully secured financing and achieved sales growth, and "small and ideal" became a shorthand for the new three major carmakers.
In April 2020, Li Xiang posted on Weibo that if only three new car companies could survive, he would strive to be one of them, hoping the remaining two comrades would be NIO and Xiaopeng.
Entering the second half of 2022, "Wei Xiaoli" once again faced a life-or-death situation. (For details, refer to the article "The 'Squid Game' in the Electric Vehicle Industry: Wei Xiaoli Successfully Navigates Another Challenge" by Snow Leopard Financial News.)
Ideal emerged as the first to overcome this crisis. In 2023, Ideal's sales growth entered the fast lane, starting from March of last year, releasing sales charts on a weekly basis and consistently dominating the charts. Competitors' sales, as described by Li Xiang, were nothing more than "three melons and two dates."
In the full year of 2023, NIO delivered a total of 376,000 vehicles, marking a remarkable YoY growth of 182.2%. This accounted for 62.3% of Tesla's domestic sales during the same period. Thanks to this surge in sales, NIO became the first new automaker to achieve an annual revenue exceeding 100 billion CNY.
As the latest company established within the "We Small" group, Ideal has achieved profitability ahead of others and joined the ranks of "Bitwise."
According to financial report data, in 2023, Ideal's net profit exceeded 11.8 billion CNY, making it the third global new energy vehicle company to achieve annual profitability after Tesla and BYD (Editor's note: NIO and XPeng Motors have not released their full-year 2023 financial reports; Tesla's net profit in 2023 was nearly 15 billion USD; BYD's performance forecast indicates a net profit attributable to shareholders of 29 billion to 31 billion CNY).
In terms of gross profit margin, Ideal even led BYD and Tesla after Q4 of 2022. For the full year of 2023, Ideal's gross profit margin reached 22.2%, surpassing Tesla by 4 percentage points.
In terms of market share in 2023, "BitRide" emerged as a prominent brand in the respective price segments, establishing itself as a representative player in the new energy vehicle sector.
The gap between "Weilai, Xiaopeng, and Li Auto" seems to be widening, also adding a bit of a rift among them.
In July 2023, Li Auto and Xiaopeng momentarily engaged in a public spat over weekly sales rankings. Following the verbal skirmish, a photo featuring the heads of the "Weilai, Xiaopeng, and Li Auto" companies circulated on social media once again. Li Xiang retweeted it with a comment saying "This is great," while Li Bin and He Xiaopeng both remained silent.
In 2024, Li Auto set an ambitious target: to sell 800,000 vehicles a year. This figure is 1.33 times the sales of Tesla in China last year.
Zou Liangjun, the Vice President of Sales and Service at Li Auto, broke down this target in an interview at the beginning of the year: The L series models 7, 8, and 9 aim for annual sales of 400,000 units, with the upcoming Li Auto L6 expected to hit monthly sales of 30,000 units in April, and Li Auto MEGA targeting 8,000 units per month. "The basic foundation of this year's sales will be the extended-range series and MEGA."
To support this challenging goal and sell more cars, Li Auto plans to open more stores this year at an unprecedented pace.
On the day before the Ideal MEGA launch event, Li Xiang expressed on Weibo that the number of small deposits of 5,000 CNY for this car has far exceeded the performance of Ideal L9 during the same period. "Suppliers and partners, please make sure you keep up with the production capacity supply. Don't be misled by the assumption that high-end electric vehicles don't sell."
A supply chain source supplying to Ideal told Leopard Finance that after entering 2024, the pace of parts supply requested by Ideal has accelerated, "at least by a third."
But the challenges are also growing.
In an all-staff letter, He Xiaopeng described 2024 as the first year of "bloody" competition for Chinese car brands. Guan Jiaxuan, CEO of Geely Automobile Group, also stated in a start-of-work letter that 2024 will be the "most competitive" year.
In such a competitive environment, it's difficult for MEGA to replicate the competitive advantage of misplaced competition that Ideal ONE had back in the day. In the pure electric MPV segment, competitors like Xpeng X9, Denza D9, and Jikrypton 009 have already established a presence.
Huatai Securities recently adjusted its sales forecast for Ideal MEGA this year from the previous 60,000 units to 50,000 units.
A sales department manager from a car company told Leopard Finance that MEGA is Ideal's flagship pure electric product. If this car doesn't make a splash, the sales of other electric models might be affected.
Pu Yin International expects Ideal's sales to reach 661,000 units this year, while the forecast from Bankcomm International Securities is 569,000 units.
Li Xiang's role models and sources of learning are all giants: Apple for product, Tesla for business, Toyota for manufacturing, and Microsoft for transformation. Their achievements are also Li Xiang's new targets.
A week before the launch event, Li Xiang mentioned twice that he hopes Ideal can surpass the global peak revenue of the iPhone by 2030. According to data from Counterpoint Research, the iPhone achieved a record revenue of $203 billion in 2023, equivalent to 2.1 times the revenue of Tesla in 2023.
But before that, he needs to first prove that he has the ability to remain at the table with the strong contenders.
