Riding the wave with Musk's strategy, Li Xiang found himself tripping over an unexpected public relations hiccup with MEGA. Both, known for their unique designs, managed to secure an impressive number of pre-orders before delivery. However, while Cybertruck's popularity persisted post-delivery, MEGA encountered a cold reception as it began its deliveries.
Unwilling to sit back, Li Xiang chose March 11th, the day MEGA officially started its deliveries, to launch a counter-offensive against the negative public sentiment. He announced, "Regarding the organized illegal activities involved in this incident, we are already addressing them through legal means."
Due to its avant-garde design, the Ideal MEGA has been dubbed both a "high-speed train on the road" and, by some, a "hearse." Coupled with its steep price tag of 559,800 CNY, the car's sales have not met the company's expectations.
Associating it with a hearse hardly seems a direct reason for the MEGA's less-than-anticipated sales. After all, before MEGA, the MPV market leader Buick GL8 nearly became the go-to vehicle for funeral homes nationwide. None of the top executives at SAIC-GM ever felt the need to post on social media about "fighting darkness with light."
At the end of the day, as long as a vehicle sells well, car manufacturers aren't concerned whether it's used as a hearse or a wedding car. In 2023, the Buick GL8 continued to dominate China's MPV market with close to 120,000 units sold.
At the outset, Li Xiang set a lofty goal for MEGA, aiming to make it the top seller in the over 500,000 CNY price range across all passenger vehicles, regardless of energy type or body style. To achieve this, MEGA's monthly sales would need to surpass that of the reigning champion in this price bracket, the BMW X5, which sells about 8,000 units a month.
However, the reality since its launch on March 1 has seen a significant trend of potential customers canceling their pre-orders. According to Sun Shaojun, founder of Che fans, less than 5,000 pre-orders were made for the Ideal MEGA within 72 hours of its launch.
The high price and a design that challenges mainstream tastes are realities that have led to consumers shying away from Ideal's models, perhaps due to a 180-degree shift in Li Xiang's car-making philosophy on the MEGA.
Among the new forces in car manufacturing over the past nine years, Li Xiang has always seemed more of a realist. When co-founders like Li Bin and He Xiaopeng were committed to the pure electric route, Li Xiang chose to focus on extended-range vehicles to appease investors and alleviate consumers' range anxiety.
Thanks to Li Xiang's pragmatic choices, Ideal was the first among its peers to turn a profit in 2023, making over ten billion CNY while others were still incurring losses of tens to hundreds of billions annually.
However, when Li Xiang shifted from pleasing to educating consumers, the sales points of color TVs, large refrigerators, and sofas that Ideal's previous models boasted became less convincing.
In contrast, Huawei's AITO M9, also featuring similar amenities and focusing on spaciousness with a comparable price, continues with mainstream design and offers an extended-range version, having already surpassed 30,000 in pre-orders.
Despite its attempt to differentiate with the MEGA, it reminds people more of Tesla's Cybertruck, both requiring a significant educational effort for consumers.
LatePost reports that during the sole period of selling the Ideal ONE, Li Xiang meticulously attended to every detail to ensure its success, not allowing any flaws or surprises. After transitioning to the L series and seeing initial success in organizational reform, Li Xiang became more confident.
Whereas Li Xiang previously focused on ensuring his products had no weaknesses, he now prioritizes distinctiveness, urging his team to be "aggressive, visionary, cutting-edge, and different from others."
Steve Jobs' famous quote, "People don't know what they want until you show it to them," is a mantra for many product managers to justify the need to educate consumers.
But Jobs' statement was predicated on Apple's accurate anticipation of future trends, pioneering the smartphone era.
Elon Musk's boldness with the Cybertruck, similarly, can't be separated from his almost single-handedly setting the stage for the global shift to electric vehicles.
The contrasting fortunes of the MEGA and Cybertruck underscore a harsh reality facing Li Xiang and other Chinese automakers: educating consumers might require not just unique product design but also technological innovation.
Ideal MEGA not only challenges the conventional aesthetics of MPVs but also overturns the established norms of product development.
On the Ideal ONE and L series, range anxiety was a primary consideration, replaced by spaciousness and a low drag coefficient as the key elements driving the design of the Ideal MEGA.
In 2019, when Li Xiang first entertained the idea of creating an MPV, the initial plan was for an extended-range MPV. However, aiming for greater space, Li Xiang chose the electric route over the easier-to-package three-electric system and the range extender. To achieve longer range under the electric scheme, Li Xiang opted for a "high-speed train" design to reduce energy consumption through lower air resistance.
According to official data, the Ideal MEGA's drag coefficient is 0.215, in contrast, the Porsche Taycan, an electric sports car, has a drag coefficient of 0.22.
Whether it's the abandonment of extended-range routes or the pursuit of a "highway high-speed rail" aesthetic, the ideal MEGA's public opinion "derailment" highlights the neglect of social acceptance.
Similarly positioned as a high-end MPV, the Tengshi D9 continues some of the classic design language of the Toyota Alphard and offers two versions: pure electric and hybrid, with the hybrid contributing over 90% of sales.
Before MEGA, if anyone were to choose the most realistic CEO among the new car forces, it would undoubtedly be Li Xiang.
Founded in 2015 as Chehejia (later renamed "Li Xiang Automobile"), Li Xiang was trapped by challenges such as high battery costs and imperfect charging infrastructure at that time. He planned two more down-to-earth products, one aimed at the time-sharing rental market, the SEV with removable batteries. Three years later, due to regulatory policies and other factors, the SEV project was terminated.
Li Xiang began to fully invest in another product aimed at nurturing paternal users, the Ideal ONE. Initially, there were plans for both extended-range and pure electric versions internally, but after comprehensive evaluation, Li Xiang decisively bet on the extended-range route.
Following a pragmatic approach, Li Xiang made Ideal the most profitable and best-living car company among the new car forces.
But with the achievement of Ideal's turnaround target, Li Xiang faces the next new challenge, namely how to break away from the label of being a "Chinese version of Tesla" and move towards the ideal of steering a hundred-billion-dollar company.
Continuing to lie in the comfort zone guided by realism and constantly pleasing users obviously makes it difficult for Li Xiang and Ideal to reach the dream of a hundred billion. Gradually educating users and enhancing brand influence has become a move that Li Xiang must try.
B
Musk, through his own practical experience, repeatedly proves the power of successfully educating users to global car companies.
If we apply Musk's often-mentioned "first principles," Musk's connection with Tesla is all about achieving clean energy. Such idealistic pursuits led Musk to discover Tesla and, in a situation where no one believed, invest $7 million in 2004, becoming an angel investor and controlling shareholder of Tesla, laying the foundation for educating users.
Guided further by the unique concept of electric cars, Musk proved to the world with the Roadster supercar released in 2008 that electric cars can also have performance comparable to fuel cars.
The Model S released in 2012 redefined new energy vehicles: a large central control screen and concealed door handles became more and more common features of electric cars; OTA upgrades opened up imagination space for the intelligentization of electric cars; the direct sales model began to challenge the traditional dealership model of 4S stores.
Musk, who has always been committed to making more and more ordinary people drive electric cars, has even changed the traditional car production method directly by introducing for the first time the integrated die-casting technology on the Model Y, which has been evaluated by industry insiders as the biggest manufacturing revolution in the automotive industry since Ford's assembly line and Toyota's lean production.
Leveraging single-piece casting technology, the Model Y's rear underbody, which originally comprised over 70 parts and took 1-2 hours to manufacture, can now be cast in less than 2 minutes, saving about 20% in manufacturing costs. This groundbreaking technology has since been eagerly adopted by domestic car manufacturers.
These idealistic entrepreneurial motivations and pursuits in product manufacturing have not only bolstered Elon Musk's immense personal appeal but also successfully crafted Tesla's brand as the leading global electric vehicle company. This has achieved global brand education for potential Tesla owners at virtually no cost.
Owners' endorsements, in turn, have provided Musk with the confidence to avoid commercial advertising for a long time, helping new Tesla models to instantly become hits upon release.
The uniquely designed Cybertruck, Tesla's sixth consumer model, has amassed over 1 million orders since its debut five years ago. According to Musk, with an annual production capacity of 200,000 units, it would take at least 5 years to fulfill the original million orders for the Cybertruck.
C
Choosing to break the mold in design, both MEGA and Cybertruck have faced different public receptions, reflecting the gap in personal charisma, brand impact, and societal acceptance between Li Xiang, dubbed the "Weibo King," and Elon Musk.
Despite selling nearly 400,000 vehicles last year with the L7/8/9 series and being the first to emerge from financial losses, Li Xiang's Ideal still lacks the "reality distortion field" required to redefine a category.
In the era of smartphones, Steve Jobs became the ultimate spokesperson for the "reality distortion field." Whether it was the iPod in 2001, the iPhone in 2007, or the iPad in 2010, Apple wasn't the pioneer in any of these categories. Yet, under Jobs' leadership, Apple consistently managed to redefine products, integrating the latest technologies into exceptional user experiences, thereby dominating the market and becoming the leader in each segment.
Entering the era of smart cars, this ability to create a "reality distortion field" has transitioned from Jobs to Musk.
Losing the brand influence to redefine a category could also directly impact the business, posing a risk to Li Xiang's goal of maintaining a profit margin of over 20%.
In 2015, during a conversation with Matrix Partners, Li Xiang spoke about branding, noting that many companies mistakenly equate visibility with branding, "but they're actually two different things because visibility is a matter of traffic, and having a large territory doesn't necessarily mean having a good brand."
After some contemplation, Li Xiang concluded that a brand does not necessarily dictate sales volume, but it does determine profit margins. Using Volkswagen as an example, he pointed out, "If you remove Porsche and Audi, its profit margin is basically only one-third of Toyota's."
MPVs are not high-volume models in China. More and more car manufacturers are eyeing the lucrative MPV category, akin to foldable screens for domestic smartphone makers. They don't expect to contribute much to sales volume but bear the responsibility of enhancing the brand image.
In an article titled "How Will Li Xiang Save MEGA" by He Fan Finance (ID: daxiongfan), it is explicitly stated that behind the aggressive pricing strategy lies the psychological effect of creating a price anchor for the upcoming electric vehicle models: when the technology and configuration matched by the 559,800 CNY MEGA are applied to cheaper electric models, it is expected to stimulate customers' buying desire.
During the fourth-quarter earnings conference call, Li Xiang mentioned that in 2024, Ideal will launch five new models, including an extended-range SUV L6, and four pure electric cars M6/7/8/9. Combined with the existing L-series models, these will constitute the main lineup for Ideal's sprint towards its 800,000-unit annual sales target in 2024.
Currently, Ideal MEGA, which has been listed for less than half a month, still awaits further market validation. Li Xiang, who is calling for a "counterattack," has once again revealed his choice.
When faced with some doubts about terminating the SEV project, which had been under preparation for two years, in 2018, Li Xiang responded in an article, "The challenges we face are actually choices, not right or wrong. People accustomed to pondering right and wrong can harvest: 1. Lots of negative energy; 2. A narrowing perspective; 3. Virtually no courage. It's like killing three birds with one stone."
References:
"How Does Ideal MEGA Solve the Contradiction between Space and Performance" by Later Auto
"Lei Jun and Yu Chengdong, No Longer Following Musk" by Alphabet List
"New Car Manufacturers Crossing the Life and Death Line" by Tencent Technology
"Li Xiang: Either Die or Achieve a Billion Dollar Valuation" by Chinese Entrepreneur
"Li Xiang: 'Do the Right Thing, Not the Easy Thing'" by Li Xiang
