On March 21st, just 20 days after the official launch of the Ideal's pure electric MPV model MEGA, Ideal Auto's Chairman and CEO Li Xiang issued an internal memo admitting misjudgments in both pace and objectives.
MEGA is Ideal's first mass-produced pure electric vehicle since its inception, and also the highest-priced model in a short period of time. There is only one configuration for the entire lineup, with an official price of 559,800 CNY. Prior to the launch, Li Xiang stated that the goal of MEGA was to become the top-selling model among all passenger vehicles priced above 500,000 CNY, "regardless of energy form or body type."
According to media reports, within the first 72 hours of its launch, MEGA received over 10,000 cancellations of pre-orders. After half a month of release, the cumulative orders were approximately 4,000 vehicles. Ideal Auto has never publicly disclosed official orders, indirectly indicating that MEGA's performance is below internal expectations.
The overall pace of Ideal Auto has also been affected. As the leader of new car-making forces, Ideal achieved revenue exceeding 100 billion CNY last year and turned losses into profits. This year, it set a target of 800,000 units in annual sales and plans to launch four pure electric models—a power form they had not previously ventured into. In Li Xiang's public letter, he mentioned the chaotic pace of MEGA, which affected the sales of existing "L-series" models, and this was also a major reason for the rapid internal adjustments.
It is widely believed in the industry that 2024 will mark the beginning of a smart electric vehicle elimination match. With the long cycles and complex supply chains of the automotive industry, every decision is crucial, as they say, "a big ship is hard to turn around." Each player still faces the challenge of survival to some extent.
Title: The Inside Story of Li Xiang's Internal Memo | Sourced from the Internet
01 The First New Force with Revenue Exceeding 100 Billion: Why is Li Xiang Leading the Pack?
To grasp the current situation of Li Xiang's MEGA, we first need to address a more fundamental question: Why, in the year 2023 when many new forces were generally facing losses, even halting operations, could Li Xiang achieve growth against the tide - selling over 370,000 new vehicles and turning losses into profits?
This is a complex proposition, involving various aspects of business operations. If we narrow our focus solely to the product dimension, the answer becomes relatively simple: because Li Xiang's cars are sufficiently spacious.
Yes, you read that right. It's not about the so-called "refrigerator-sized sofas and large TVs," nor is it about the endless debates on Weibo over the extended-range and pure electric technology routes, which are just marketing gimmicks. The core differentiation lies in the "size of the house" being ample enough.
"The concept of 'Mobile Home' is at the core of the Ideal's promotional strategy." | Official Weibo Account of Ideal Automobiles
Let's first take a look at how the concept of a 'home' was introduced. Before venturing into car manufacturing, Li Xiang's previous entrepreneurial project was the vertical community of Autohome. Unlike competitors in the market at that time, Autohome's core differentiation lay in serving only those with a genuine need to purchase a car, rather than catering to a broad spectrum of car enthusiasts.
This approach influenced the product logic of Autohome and provided Li Xiang with sufficient experience and data for his later car manufacturing endeavors, underpinning his profound insights into the automotive consumer market. Li Xiang observed that traditional automotive companies positioned their products based on price or vehicle type but had never defined a vehicle from the perspective of the user.
Thus, when founding the 'Car and Home' entrepreneurial project, Li Xiang proposed a new product definition logic based on 'user life stages' as the reference system. He believed that family users were the genuine car-purchasing demographic in the foreseeable future and, from a product standpoint, first introduced the concept of a 'three-row six-seat' interior layout, introducing the concept of ample space to the automotive consumer market.
Today, when we see various car manufacturers at new product launch events using real estate developer rhetoric to introduce a car's 'livability rate' and interior configuration, this product logic is actually greatly influenced by Ideal Automobile's early years.
Of course, the above retrospective analysis may seem more like self-reflection of an individual and an organization after success. So, let's now look at Li Xiang's design logic from a business perspective.
Firstly, it's about the form of extended-range power. Extended-range was not Li Xiang's aim, nor was it the only choice; it was merely a means to address the range anxiety of new energy vehicle users (who were among the first batch of such users in China at that time). There were many approaches to solving this issue, including battery swapping and extensive pre-deployment of ultra-fast charging stations. However, Ideal Automobiles had limited resources at that time, so extended-range was actually a necessary choice.
The first product of "CJ EV" | Ideal Auto
Let's rewind back to 2017-2018. Back then, due to policy reasons, Li Xiang abandoned the first product, SEV (low-speed pure electric vehicle), and instead entered the "home market". However, at that time, the total financing scale of Ideal Auto was only about 2 billion RMB, while NIO, which followed the battery swapping route, had raised over 2 billion USD, and their first mass-produced model, the ES8, had already been launched. In terms of both financial strength and product differentiation, Ideal lost the first-mover advantage.
Next is the cost strategy. The benefit of making extended-range vehicles is that a considerable portion of the battery cost can be saved per vehicle (the battery cells were much more expensive back then), and this saved cost can be used to give this big "house" a "deluxe renovation". This is how the three-row, six-seat family car came into being.
So, the innovation of Ideal ONE happened like this. Li Xiang used limited resources and deep insight into user needs to create Ideal's first product, and it was consolidated in the subsequent L series products.
Li Xiang steps into the frontal "battlefield"
As a super product manager, Li Xiang is very good at discovering user needs. Whether it's releasing real-life photos of products during his time at Autohome, or leaving space for a passage in the second row of past three-row SUVs, he is very good at improving mature products and finding points of differentiation.
We can first think about a question: Why has Li Xiang been so wary of Huawei until 2024?
The Ideal L series proves that extended-range large SUVs can sell over 370,000 units in a year. However, whether it's new forces like NIO and Xiaopeng, or traditional automakers like BYD and Geely, no one has yet launched a direct competitor in the same price range.
So, besides Li Xiang's emphasis on Huawei's organizational capabilities, brand momentum, and product intelligence capabilities, there's another crucial point: Huawei's M5, M7, and M9, whether in terms of powertrain or product positioning, are direct competitors to Ideal's L series.
However, ultimately, when the new energy vehicle industry enters a fierce competition in 2024, facing head-on confrontation is an unavoidable question.
And on this frontal "battlefield", Ideal not only has to face other manufacturers but also Ideal Auto itself.
Li Xiang reviewed and stated that inquiring about the boundaries is "never encountered such a strong opponent before" | Li Xiang Weibo screenshot
Firstly, let's talk about the external competitive environment. According to data from the China Passenger Car Association, the penetration rate of domestic new energy passenger vehicles reached 35.7% in 2023, compared to just 3.73% in 2018. Whether it's the MPV segment where MEGA operates or the pure electric power form where the upcoming M model from Ideals will be positioned, both face fierce market competition.
The increase in players not only brings about competition in "numbers" but also in "quality" (technology).
For example, the original key technological direction of Ideals MEGA during winter testing was the "charge for 10 minutes, drive for 500 kilometers" 5C charging technology. However, just two days before the launch event, the 2024 edition of JiKe 001 preemptively released the 5C charging technology, seizing the minds of users ahead of time.
If JiKe 001, in terms of both vehicle model and price, is not in the same industry dimension as MEGA, then the Xiaopeng X9 released on New Year's Day this year serves as another benchmark for comparison. This product, which comes standard with rear-wheel steering in its class, once put immense pressure on MEGA in the public opinion arena.
The Ideal MEGA, dubbed as the "Highway Bullet Train," boasts an impressive exterior design. But let's delve into its interior environment. Unlike the Ideal ONE, which started from scratch, the MEGA, along with the three other M-platform electric models slated for release this year, faces competition head-on.
According to Fan Haoyu, Senior Vice President of Ideal Automotive, the first principle of Ideal's product design is "space." So, it's safe to say that the radical exterior design of the MEGA serves more than just reducing aerodynamic drag. In fact, differentiating between pure electric and extended-range series with two distinct design languages is a core objective of the design.
In the current market, many top-selling models have released both extended-range and pure electric versions. For instance, the Wanjie M9, or last year's domestic MPV market leader, the Tengshi D9. However, without exception, the sales of extended-range versions have overwhelmingly overshadowed their "pure electric siblings."
Apart from range anxiety, pricing is another significant emotional trigger. Taking the Wanjie M9 as an example, the pure electric model with the same configuration is 40,000 RMB more expensive than the extended-range version. Even with the significant aesthetic differences between the MEGA and the L series, once it hit the market, consumers immediately compared it to the Ideal L9. The blunt conclusion drawn was: minimal differences in interior design, but this pure electric car is priced 100,000 RMB higher than the top-tier L9.
Thus, facing a different market competitive landscape, accumulating increasingly homogenized product features, and rapidly evolving technology, the Ideal MEGA finds itself in a harsh predicament right from its inception.
Why Ideal is "Starting from Zero" Again
Having analyzed how Ideal succeeded previously, why Ideal chose to produce the MEGA, and why it adopted such a product and pricing strategy, let's finally discuss why Ideal's MEGA stumbled and decipher the deeper meaning behind Li Xiang's internal memo.
Ideal ONE's dual armrest seats before launch | Ideal Community
In fact, there have been many recent analyses of Ideal MEGA. Some say it's because the price is too high, some say it's because the brand power is insufficient, and some say it's because of public relations mishandling... We won't delve into that here. Combining the previous analysis, let's briefly summarize:
Ideal's past success was built on the cost advantage of hybridization and the choice of "space" as a differentiating factor that resonated with users. For the same amount of money, users are willing to buy Ideal with hybrid and space features, rather than just an electric vehicle from other brands. However, MEGA's "pure electric + space" comes at a higher price compared to ordinary electric cars of the same positioning, which makes users unwilling to buy it alone.
Of course, Li Xiang didn't arbitrarily decide on this strategy. Essentially, it's still based on past success, which leads him to believe that users are willing to pay a premium for the concept of space brought by the Ideal brand. In fact, many users do have high expectations for Ideal. Although MEGA's sales volume did not meet expectations, it still sold over 4,000 units of a 500,000+ RMB car. Furthermore, after encountering setbacks, sales of some other mid-to-high-end MPVs from other brands surged, indicating that those users were previously observing MEGA, indirectly proving that Ideal's past brand accumulation had some effect.
However, it is obvious that Ideal overestimated its brand's appeal to users with MEGA. Ideal believed that its past accumulation had already taken them from 0 to 1 or even from 1 to 10, and the launch of MEGA was just taking them from 10 to 100. But in reality, it's not that simple. For Ideal, MEGA is not just a pure electric MPV, but the first challenge to support a product's premium with its own brand momentum and design philosophy.
So the first reflection in Li Xiang's internal memo emphasizes the need for the Ideal team to return to the rhythm of "from 0 to 1" in managing MEGA, and to lower sales expectations or desires.
In a sense, encountering setbacks in the first pure electric product and the first attempt at a premium strategy might not be a bad thing for Ideal. Ideal is also launching three new pure electric models this year, and this kind of timely adjustment is necessary. There are many examples in history where a team that has always had smooth sailing collapses completely after encountering headwinds. Zhong Xuegao is a cautionary tale, and the impact mentioned in the internal memo on the main model L8 also indirectly reflects that the impact of this headwind on Ideal is more than just local.
The only thing worth celebrating is that it's only been a little over two months since 2024 began, and a new round of competition for electric vehicles is just beginning. It's better to discover problems early than to be fatally hit during a period of intense competition.
