The rhythm of product releases for electric vehicles at Ideal Automobile has undergone significant changes. The market failure of their first electric model, MEGA, triggered a series of follow-up effects. After organizational restructuring, the implementation of price reduction strategies, and staff cuts, Ideal Automobile decided to adjust its product release schedule. On the evening of May 20th, Ideal Automobile's CEO Li Xiang revealed during the first quarter financial report conference call that the company will not launch a pure electric SUV this year but will instead postpone the release to the first half of next year.

According to Ideal Automobile's original plans, the company expected to launch three pure electric SUV models in the second half of 2024 and hoped to have 4 range-extended models and 4 pure electric models on sale concurrently by the end of 2024. Now, these plans have had to be adjusted.

Facing market challenges, Ideal Automobile has begun exploring new growth points, including setting sights on overseas markets. In the financial report conference, Li Xiang mentioned that Ideal plans to establish a post-sale service network in Central Asia and the Middle East this year and seeks to appoint agents in countries and regions beyond Western Europe and North America to expand their market share.

The first quarter financial report from Ideal Automobile reveals pressure. While the company achieved a revenue of 24.3 billion yuan with a sales volume of 80,200 units, a 32.3% increase from last year's same period revenue of 18.3 billion yuan, it faced an operating loss with a total loss amounting to 585 million yuan, breaking Ideal's record of profit for four consecutive quarters. Nevertheless, due to the 1.069 billion yuan interest income and investment gains, Ideal ultimately recorded a net profit of 591 million yuan, although there was a 36.7% decrease compared to the same period last year.

Indeed, Ideal Automobile's quarterly delivery volume of over 80,000 units is commendable among new automobile manufacturers, but the poor market performance of their first pure electric model, MEGA, led to a series of financial shocks. In the first quarter of this year, Ideal Automobile's inventory amount increased by about 5.3 billion yuan from the end of last year, reaching 12.1 billion yuan. This suggests the possibility of completed vehicle stock and raw material inventory, with MEGA's current monthly sales not reaching a thousand units, and inventory quantity also exceeding a thousand. Additionally, Ideal's accounts payable to suppliers increased by 2.7 billion yuan since the end of last year, likely due to the company extending suppliers' payment terms, with some suppliers pointing out that Ideal has stretched the payment cycle from the previous 60 days to 90 days. This change helped Ideal maintain a cash position of 9.89 billion yuan during the first quarter.

In the face of numerous economic challenges, Ideal reduced the prices of its range-extended models in April, with MEGA dropping by 30,000 yuan, and reductions of up to 20,000 yuan for the L series models. The overall price reduction for the models caused a financial impact on Ideal's finances. As Ideal's most economical model, the L6 commenced deliveries in April, the company's guidance for second-quarter sales volume was 105,000 to 110,000 units, with expected revenues ranging between 29.9 billion to 31.4 billion yuan, representing a year-on-year increase of about 4.2% to 9.4%.

For companies experiencing pressure in the range-extended vehicle market, adjusting their pure electric product line and re-entering the market is essential. It not only covers the sales strategy of the products but is also directly related to the long-term financial health of the company. For some brands, range-extended models might be easier to sell, but delaying the pure electric models means reserving the necessary time for the construction of their replenishment system.

According to statements made by a related CEO during a financial report meeting, the successful market sales of pure electric SUVs depend on owning a large number of proprietary supercharging stations. He pointed out that it is only appropriate to bring pure electric models to the market when the number of proprietary supercharging stations can match the number of charging stations of the market leader in China. As a reference, the leading brand has deployed over 1,900 supercharging stations and 11,000 charging piles in mainland China. The company aims to complete the construction of more than 2,000 supercharging stations by the end of the year and to exceed 10,000 charging piles. As of May 19th, the company has successfully operated 404 supercharging stations with 1,770 charging piles.

The CEO also emphasized that in order to support the goal of a monthly sales volume of over 10,000 for new vehicle models, about 500-600 fixed display slots need to be added nationwide. This is because simply increasing the number of products without significantly increasing sales can lead to issues, as has been faced by the company in recent months. Therefore, he pointed out that having a sufficient number of supercharging stations and enough new store display slots are the prerequisites for their sale of pure electric SUVs, a timeline expected to arrive in the first half of next year, which also means a complete shift in the rhythm of the brand's launch of electric vehicle models.

In addition to building a charging network, the brand may make even greater adjustments to the pure electric product line itself. The market has rumors that the front design of their pure electric SUV is somewhat similar to other competitors, which if this similarity persists, could negatively impact the brand. The industry also speculates that the company might make significant adjustments to the electric vehicle models or even re-design and redefine the products.

In the coming year, the company will face the challenge of making adjustments, but this is also an immense task with significant pressure. It is understood that delaying the launch of pure electric models puts great pressure on the supply chain. If economic cost is considered, the whole situation may seem quite unfavorable. Fierce market competition also requires the brand to reassess the market demand for pure electric products and offer higher configurations to meet various internal and external challenges.

In terms of sales and service, the company is improving sales efficiency by adjusting the number and quality of sales stores. In newly opened stores, more than half are able to showcase more than nine display cars. At the same time, the company has closed some smaller stores and slowed down its expansion pace in third- and fourth-tier cities. Unlike the rapid expansion at the beginning of the year, the company has set a goal of about 550 sales stores by the end of the year, which is reduced from the original plan of more than 800. As of May 19th, the total number of the company's retail stores stands at 488.

Li Auto is vigorously developing its autonomous driving technology, striving to catch up with top companies such as Huawei in the highly competitive intelligent driving field. The company plans to offer an update service to its AD Max model customers in the third quarter of this year—a function that enables smart driving nationwide without the need for map data. This technology has begun internal testing with thousands of users since May.

Having experienced a swift shift from an optimistic sales target of 800,000 units to reassessing the reality, Li Auto made rapid adjustments to its organizational structure, pricing strategy, and product lineup in just over two months. For a large corporation with over 30,000 employees, this level of execution efficiency can be said to be quite swift. However, it is likely that a full-scale strategic adjustment of the company may experience some delayed effects.

Some of the outcomes of these adjustments have begun to manifest, for example, Li Auto mentioned that after a price reduction across its range, the order volume for its L7/L8/L9 models has grown weekly in April. However, other measures will require more time to verify, including the long-term effects of organizational restructuring. Li Xiang noted that such transformations usually need 12 to 24 months to show effectiveness, and he expects that "by 2025, there will be clearer results."