Reporter: Zuo Maoxuan, 21st Century Business Herald
Ideal Car has decided to postpone the launch of its pure electric SUV.
On the evening of May 20th, Beijing time, Ideal Car's founder, chairman, and CEO Li Xiang announced this news during the first quarter financial report conference call for Ideal Car in 2024.
"This year, we will not release a pure electric SUV product; it will be postponed to the first half of next year," Li Xiang stated.
He explained that this decision was primarily based on two reasons.
Firstly, having a sufficient number of self-operated supercharging stations is a necessary condition for selling high-end pure electric SUVs.
Ideal Car believes that when the number of self-operated supercharging stations reaches the same level as Tesla, it will be the right time to bring the product to the market.
Secondly, Ideal Car needs to upgrade and increase the number of showrooms and stores.
Li Xiang mentioned that the quantity of showroom spaces is crucial for sales across multiple vehicle models and price ranges. To support a new model reaching sales of over ten thousand units, approximately 500-600 new showrooms need to be added nationwide; otherwise, there may be an issue of increasing the number of products without a corresponding increase in sales. "This has been a challenge Ideal L8 has faced in the past few months, with a 40% decrease in showroom numbers. We are currently working on restoring the number of L8 showrooms," Li Xiang stated.
According to Ideal Car's original plan, 2024 was supposed to be a big year for Ideal Car's products. Apart from the already launched Ideal Mega and Ideal L6 in the first half of the year, Ideal also planned to introduce three new pure electric vehicle models in the second half of 2024. These would form a product matrix consisting of four extended-range electric vehicles and four pure electric models.
However, intensified market competition and a series of challenges faced by Ideal Car in the first quarter have led the company to reconsider its strategic pace. Instead of blindly pursuing sales volume, Ideal Car is now confronting the challenges of reality, making adequate preparations before entering the more mainstream pure electric market to avoid repeating past mistakes.
Deviation from Initial Expectations
"I must admit that we have faced multiple challenges in internal operations and external environments since the beginning of this year, and our performance in the first quarter has deviated from our initial expectations," Li Xiang acknowledged during the financial report conference call.
Nevertheless, he emphasized that in response to these challenges, Ideal Car has been actively and swiftly adjusting, comprehensively initiating and implementing organizational and process optimizations to enhance internal operational efficiency and decision-making quality.
In terms of sales, Ideal Car delivered a total of 80,400 vehicles in the first quarter, a 52.9% year-on-year increase. It remains in the top tier of new energy vehicle manufacturers, with a growth rate higher than most traditional automakers.
However, misjudgments in the market for Ideal Mega and the product transitions of L7, L8, and L9 have had a certain impact on Ideal Car's sales in the first quarter. Ideal Car's sales in the first quarter were temporarily surpassed by direct competitors.
Ideal Car's first-quarter report indicates that the total revenue for the first quarter of 2024 was 25.6 billion yuan, with automotive sales revenue accounting for 24.3 billion yuan, a 32.3% year-on-year increase. Net profit for the first quarter was 591.1 million yuan, a 36.7% year-on-year decrease, with a gross profit margin of 20.6%, a 0.2% year-on-year increase.
Overall, while Ideal Car's revenue in the first quarter continued to grow, there was a certain degree of decline in net profit. This indirectly reflects the increasingly challenging market competition environment faced by Ideal Car.
However, it is worth noting that since the fourth quarter of 2022, Ideal Car has been profitable for six consecutive quarters. Even in the tough market situation of the first quarter, Ideal Car maintained a gross profit margin of over 20% and a cash reserve of up to 98.9 billion yuan.
Ideal Car still maintains good profitability and stable cash flow, which enhances its risk resistance.
Looking at Ideal Car's decision to temporarily postpone the launch of new electric vehicles, the focus for Ideal Car this year remains on several extended-range electric vehicles in the L series.
Regarding the L series, Ideal Car is very optimistic about the expected monthly sales performance in the coming months.
According to Li Xiang, Ideal L6 has been widely recognized, and after adjusting the pricing strategy, orders for L7, L8, and L9 have continued to increase, with no plans for price reductions in the future.
Official data shows that since its launch on April 18th, Ideal L6 has already received 34,000 orders, and production capacity is expected to exceed 20,000 units in June.
This is Ideal's first product with a starting price below 250,000 yuan and is a key volume product for Ideal Car this year.
With the introduction of L6 into a new price range, Ideal Car announced a new pricing system on April 22nd, with various products experiencing different levels of price reductions.
The impact of these price reductions on sales was immediately evident.
In April, Ideal delivered a total of 25,787 new vehicles, a 0.4% year-on-year increase, surpassing direct competitors in sales.
Looking ahead to the second quarter, Ideal expects to deliver between 105,000 and 110,000 vehicles, a year-on-year increase of 21.3% to 27.1%, with total revenue ranging from 29.9 billion to 31.4 billion yuan, a year-on-year increase of 4.2% to 9.4%.
Enhancing Execution Efficiency
As the new energy vehicle industry evolves, Chinese new energy vehicle manufacturers, including Ideal Car, must face various challenges that arise during their growth. The key lies in how they confront reality and strengthen their organizational capabilities through reflection and review.
Undoubtedly, Ideal Car, which has been advancing rapidly, experienced a setback in March this year. However, Ideal has always been adept at adjusting and swiftly driving strategic execution.
On March 11th, Ideal Car's founder, chairman, and CEO Li Xiang responded to negative public opinion on social media. "Although in the darkness, I still choose the light," Li Xiang stated, mentioning that Ideal Car has taken legal measures to address organized illegal activities in response to recent events. In an internal memo released on March 21st, Li Xiang also admitted to misjudging the pace of the pure electric vehicle market. "We mistakenly treated MEGA's 0 to 1 phase (business validation period) as if it were the 1 to 10 phase (period of rapid growth)."
At the same time, excessive focus on sales volume and competition, desires surpassing values, led to a significant decline in Ideal's core strengths of user value and operational efficiency.
Through retrospective reflection, Li Xiang believes Ideal Auto needs to focus on users and efficiency, returning to enhancing user value and operational efficiency.
Clearly, for Ideal Auto at its current stage, it needs to continue focusing on extended-range electric vehicles to maintain a good scale and profitability this year, supporting the company's long-term development.
Simultaneously, facing the challenges in the pure electric vehicle market, Ideal Auto also needs better preparation to ensure confidence in re-entering the pure electric market.
On the afternoon of April 3rd, Ideal Auto internally announced to all employees the initiation of Matrix Organization 2.0 upgrade, along with multiple departmental organizational structure adjustments. This is the largest internal adjustment since the launch of the Matrix Organization upgrade at the end of 2022.
Li Xiang did not directly address recent layoff plans. During the first-quarter earnings call, he emphasized that the most significant change in this organizational adjustment is the establishment of a dedicated quality operations team, enabling the business to focus on high-quality decision-making and improving execution efficiency, rather than spending time on repetitive operational tasks.
"Organizational upgrades and adjustments typically take 12 to 24 months to see tangible results. The results of this organizational upgrade will be clearer by 2025," Li Xiang stated.
