On April 28, Li Xiang, founder, chairman and CEO of Ideal Car, thanked Lei Jun on Weibo. He said that when our Ideal MEGA encountered a public opinion crisis, Lei's team also took the initiative to help us solve the problem. For Lei and friends of Xiaomi, our team has two keywords: gratitude + learning. I remember that in 2022, I talked to Lei about car-related matters. At the end, he asked me a question: Li Xiang, do you have any good suggestions for Xiaomi's car-making? I replied: I have only one suggestion, you personally must be Allin car-making, no one can replace you.
It seems that Ideal has gradually emerged from the recent public opinion turmoil and returned to the right track.
At this year's Beijing Auto Show, Ideal Car also exhibited all its models. However, since the Ideal L6 had already been launched before the auto show, Ideal Car did not bring new products to this auto show. Therefore, the heat of Ideal Car at this Beijing Auto Show does not seem to be as high.
Nevertheless, Ideal MEGA and Ideal L6 still attracted a lot of attention at the auto show.
Just two days before the Beijing Auto Show opened, Ideal Car announced that except for the Ideal L6, all models under its brand would be discounted. Among them, the Ideal MEGA had the largest price reduction, directly lower by 30,000 yuan. The price reductions for the 2024 models Ideal L7, Ideal L8 and Ideal L9 ranged from 18,000 to 20,000 yuan. For Ideal Car, which had repeatedly stated that it would not reduce prices, this price reduction of all models caused a sensation in the domestic car market.
In response to Ideal Car's price drop following Tesla's price reduction, some analysts in the auto industry believe that Ideal Car hopes to strike a balance between cash flow and sales volume. Although among new energy car manufacturers, Ideal Car had the best operating situation and was the first to achieve profitability, faced with the increasingly fierce competition in the new energy vehicle market, Ideal Car also had to respond promptly.
Just a month ago, faced with fluctuations in new car orders, Li Xiang, founder and chairman of Ideal Car, pointed out in an internal memo to all employees: Lower your expectations and desire for sales volume, return to healthy growth, and focus on improving user value and operational efficiency. In response to this, some industry experts believe that sales volume is still very important for Ideal Car. Faced with the rise of Huawei and Saicelis vehicles, Ideal Car must not only improve efficiency but also to some extent make concessions by trading volume for price.
At the beginning of 2024, Li Xiang stated on social media that Ideal Car's annual sales target was 800,000 vehicles. However, Ideal Car only delivered 28,900 vehicles in March, below the previous plan. Ideal Car also adjusted its delivery guidelines for the first quarter of 2024 from 100,000 to 103,000 vehicles to 76,000 to 78,000 vehicles. According to statistics, Ideal Car delivered a total of 80,400 vehicles in the first quarter of 2024. There are reports that Ideal Car has adjusted its annual sales target to 560,000 to 640,000 vehicles.
In 2024, the fierce battle among models priced below 100,000 yuan in the Chinese auto market, and between 100,000 and 200,000 yuan, the market has slowed down significantly, and the spillover effect has also affected higher-level models.
The new energy vehicle market with prices above 200,000 yuan had a scale of about 2.6 million vehicles last year, with a new energy penetration rate of around 40%. Internally, Ideal Car believed that the market size in 2024 is expected to reach 3.6 million vehicles with a new energy penetration rate of over 50%.
In March of this year, Ideal Car's product line president, Liu Jie, said: comparing 3.6 million vehicles with last year's 2.6 million vehicles, it is a nearly 1 million vehicle increase. The demand from users and the market incr ease are there, it all depends on who has the ability to meet and exceed the user's demand.
However, in less than a month, it was found that the market for new energy vehicles priced above 200,000 yuan did not grow as expected, with sales volumes of around 200,000 units in April 2024. In addition, the market for passenger cars priced above 300,000 yuan, including traditional luxury car brands such as Audi, Mercedes-Benz, and BMW, have also lowered their prices by 20,000 to 30,000 yuan in recent months.
Currently, Tesla's main models include Model Y and Model 3, priced between 200,000 and 300,000 yuan. In December 2023, Tesla sold as many as 15,750 Model 3 vehicles, but by January 2024, sales had dropped to 9,969 units, and by February, there were only 7,604 units left. On April 21, Tesla China announced a price reduction, affecting not only these two models but also the high-end models Model S and Model X. Tesla this time reduced the prices of these four models by 14,000 yuan each.
Given these factors, in order to maintain its market share and ensure the order numbers promised to suppliers at the beginning of the year, Ideal Car must achieve its planned sales volume through price reductions.
On March 21, 2024, Li Xiang issued an internal memo that reflected on the pace and sales volume issues of Ideal's new car MEGA. At the same time, adjustments were made to product operations, dealers, charging network layout, and sales expectations. The internal memo shows that Li Xiang conducted a retrospective on the issues that emerged in Ideal Car in March, such as the MEGA pace problem and overly focusing on sales desires, and pointed out that the root cause of these problems is overly focusing on sales and competition from top to bottom, letting desires surpass value and significantly reducing our original strengths in improving user value and operational efficiency.
In the internal memo, Li Xiang also admitted that there was a misjudgment in grasping the market pace, and said: We mistakenly treated MEGA's from 0 to 1 phase (business validation period) as a 1 to 10 phase (high-speed growth period) for operation. Therefore, Li Xiang proposed to reduce excessive emphasis on sales volume, return to healthy growth, and focus on improving user value and operational efficiency.
The reflection cannot be said to be superficial.
Some analysts believe that Ideal Car has recently repeatedly emphasized lowering expectations internally, which, on the one hand, is indeed an internal adjustment to the previously overly confident mindset, and on the other hand, is a pre-judgment of the external market environment.
After the adjustment in mindset, many of Ideal Car's actions became more decisive, such as the price adjustment this time, where the internal has fully abandoned fantasy, i.e., giving out the value that should be given to users.
In addition to the mindset issues, Ideal Car internally actually had an important review, which involved adjusting the organization to address issues in the existing decision-making mechanism.
Ideal Car has been learning to manage processes, which brought many benefits and enhanced combat capabilities; but for the sake of the processes, some business leaders who could actually fight were trapped by the processes, leading Ideal Car to become a traditional car company where 'the boss gives orders and the subordinates only execute'.
However, from top to bottom, Ideal Car has realized this problem and made adjustments.
According to insiders, the mechanism of Ideal Car now allows people inside to play games with Li Xiang's personal decisions. This is very important—so the variable in this change in prices also reflects Ideal Car's sensitivity to internal organizational adjustments.
It should be made clear that despite the significant price system adjustment and user benefits, from the overall perspective of the company, Ideal Car has not lost its composure.
< p>It is said that in this adjustment of the price system, Li Xiang's own thinking is also very clear. On the one hand, he agrees to take proactive measures through price reductions, and on the other hand, he emphasizes stabilizing sales while continuing to maintain healthy profits and stable cash flow for the company.In addition, at internal meetings, Li Xiang repeatedly emphasized the need to invest in next-generation technologies, especially in technologies core to intelligent driving, such as end-to-end, large-scale models, etc. From a long-term perspective, as intelligent development advances in software and hardware, electric vehicles and humanoid robots will become different carriers of the same thing. This is also an area where Ideal Car must vigorously invest and lay out.
From this perspective, although striving to extricate itself from the current predicament, in the eyes of Ideal Car, long-termism is still paramount.
A very clear trend is that the auto market in 2024 is heating up. Cui Dongshu, secretary-general of the China Passenger Car Association, has previously stated that 2024 is a crucial year for new energy car companies to establish themselves, and competition is bound to be very intense.
Currently, the new M5 from Wanjie was just released in Beijing, with a starting price of 249,800 yuan, exactly the same as the L6 from Wanjie, and the new M5 from Wanjie comes standard with laser radar and Huawei ADS 2.0 advanced intelligent driving assistance, which the Ideal L6 does not have.
Under the impact of the new M7 and M9 from Wanjie on the Ideal L series, the new M5 from Wanjie is certain to pose a significant challenge to the Ideal L6. Taking a broader view of the current domestic auto market, besides the Huawei HarmonyOS intelligent driving models, the greatest attention comes from the Xiaomi SU7. Since the technical briefing of the Xiaomi SU7 at the end of last year, the heat around Xiaomi's cars has only increased, relying on the accumulation of over a decade in the consumer electronics market with strong user stickiness and market breadth. The Xiaomi SU7 is indeed the most popular 'chicken' in new energy vehicles development in recent years.
With one having a strong brand effect and technical development strength and the other having a broad audience, market, and huge traffic volume, in 2024 Ideal will face a year of strategy deployment and product outbreak following tech giants entering the car-making field.
Not only that, new energy brands incubated by traditional car companies, with deep technical reserves and solid sales channels, are also disrupting the market structure, such as Jikey, Zhiji, and Tengshi, etc.
The achievements Ideal made last year have prompted other car companies to learn and emulate in terms of products and operations. Firstly, extended-range form is no longer unique to Ideal; secondly, refrigerators, color TV, and large sofas have become standard configurations for SUVs, even C-class cars are following suit; in addition to simplifying product SKUs to make targeting of niche audiences more precise, this aspect has also gradually been used by more car companies; finally, internet marketing, car company bosses are becoming increasingly active on social media platforms, communicating with more users through live streaming and sharing, not only getting closer to users but also allowing their personal IP to shine and reflect on products and brands.
Although idealistic was once a 'unique secret recipe', after experiencing a series of 'black swan events' in March, while internally adjusting and reflecting, Ideal has also given other car companies time to catch up. When all car companies possess such abilities and advantages, the space left for Ideal also becomes more crowded. As the first new force carmaker to achieve profitability and a billion-dollar cash reserve, after the launch of L6 and the product price reduction, Ideal may need to consider more res ponse measures in the face of fierce competition.
Looking back at Ideal Car's development from its inception to now, the Ideal ONE helped Ideal Car complete the process from 0 to 1, the three L series models (L9, L8, and L7) helped Ideal Car build its product system and achieve commercial success, and Ideal MEGA allowed Ideal to enter a new phase of simultaneous development of extended-range and pure electric products.
Currently, the start of this new phase of development is not smooth. Perhaps, on the road to becoming a giant, Ideal still has a long way to go. Perhaps this year's fall can make it more solid moving forward. But fortunately, Ideal Car still has enough opportunities, space, and capabilities to make self-adjustments.
This article comes from the WeChat public account: Car Wisdom Library (ID: EV100_Plus), author: Han Xu