Since the beginning of this year, Ideal Automobile has developed rapidly, not only reaching its peak among new power enterprises, but also showing advantages in sales and financial performance. In the third quarter, the net profit exceeded that of established traditional car companies such as Changan Automobile and GAC Group, and the profitability climbed to the first tier level.
Recently, Ideal Automobile disclosed its financial report for the third quarter of 2023, with delivery volume and multiple core financial data reaching new historical highs. At the same time, there are media reports that domestic new car manufacturing companies have transmitted their sales forecast for 2024 to the supply side. Among them, Ideal Automobile is expected to sell over 800000 vehicles in 2024, which also means that Ideal Automobile needs to sell approximately 67000 vehicles per month to achieve this goal.
Ideal Automobile CEO Li Xiang once made a bold statement that in 2024, he will challenge BBA's sales in China in advance and strive to become the top selling luxury brand in the Chinese market. Against the backdrop of bold words and strong gains this year, the most concerning issue in the industry is whether the growth base of Ideal Automobile has been completely stable, and whether such a large growth is a flash in the pan.
Earnings for four consecutive quarters, with revenue expected to exceed 100 billion levels
According to the 2023 third quarter financial report of Ideal Automobile, its revenue in the third quarter was 34.68 billion yuan, a year-on-year increase of 271.2%. Becoming the first car company in the new forces to have a quarterly revenue of over 30 billion yuan. The operating profit and net profit for the same period were 2.34 billion yuan and 2.81 billion yuan respectively, achieving four consecutive quarters of profit. In the first three quarters of this year, Ideal Automobile's operating revenue reached 82.12 billion yuan, a year-on-year increase of 197.14%, and achieved a net profit of 6.057 billion yuan.
At the same time, the operational efficiency of the enterprise has been continuously optimized, and the company's gross profit margin in the third quarter was 22.0%, maintaining a healthy level. It is worth noting that Ideal Automobile is a new force enterprise in the automotive industry that first converts its gross profit margin to normal after mass production. In this context, the current 22.0% gross profit margin has surpassed many strong traditional automotive companies.
Automotive industry analyst Lin Shucheng told reporters from China Times: The gross profit margin represents the efficiency of a car company's utilization of funds, and the data of 20% is crucial. A gross profit margin of 20% is the minimum gross profit margin for a company to develop healthily in the long term. If a car manufacturing company's gross profit margin can be maintained at this level, it indicates that it has a certain level of profitability and operational efficiency, which can ensure the sustainable development of the company and further reflect the profitability of the car company
Lin Shucheng further pointed out that car manufacturers are necessary for research and development and investment to maintain technological leadership and market competitiveness. If the gross profit margin remains above 20%, there will be more funds for research and development and investment, thus maintaining a leading position in the market. From the core standard of 20%, Ideal Automobile currently has the strength to expand market share and further ensure its competitiveness.
From the perspective of free cash flow, excellent operational capabilities also provide good support for cash flow growth. Data shows that Ideal Automobile increased from 6.7 billion yuan in the first quarter of this year to 9.62 billion yuan in the second quarter. Now, it has increased to 13.22 billion yuan in the third quarter. As of the end of the third quarter, Ideal Automobile has a cash reserve of 88.52 billion yuan. This also indicates that the ideal car has broken free from the shackles of "selling one car at a loss," and its hematopoietic capacity has steadily improved.
From the perspective of Ideal Automobile, we told reporters from China Times: Since the end of 2022, Ideal Automobile has launched a matrix organization upgrade, adding new business departments, supply departments, process departments, organization departments, and finance departments to the strategic and product departments, comprehensively upgrading the processes and organizations. In the next three years, it will be comprehensively located and continuously optimized to form a matrix organization's operational loop. With the organizational upgrade, the enterprise's operational efficiency will be comprehensively improved. Nowadays, the enterprise's risk resistance ability will be comprehensively improved Continuously enhancing, sufficient funds on hand to ensure the long-term and firm investment of enterprises in research and development and new product layout
In the fourth quarter, Ideal Automobile's revenue is expected to reach 38.46 billion yuan to 39.38 billion yuan, a year-on-year increase of 117.9% to 123.1%.
With sufficient funds on hand to ensure the continuous enhancement of the company's risk resistance ability, according to the current growth trend of Ideal Automobile, if the fourth quarter revenue meets expectations, Ideal Automobile is expected to become the first new Chinese car manufacturing force with annual revenue exceeding 100 billion levels.
The product matrix is gradually becoming fuller and officially entering the pure electric race track
Objectively speaking, an important factor contributing to the significant year-on-year increase in multiple business indicators of Ideal Automobile is that its performance in 2022 was not as outstanding as it is now, especially due to the insufficient momentum of "relying solely on one model to conquer the world", coupled with the impact of product upgrades, resulting in a low sales base of Ideal Automobile in the second quarter of 2022, only 28700 units.
Automotive industry analyst Gu Yantao told reporters from China Times: When there is only one model, the ideal car can fully achieve economies of scale. However, as competition intensifies and traditional car companies gradually launch new energy counterattacks, it is no longer realistic to rely solely on one model to seize market share. Moreover, a single model cannot meet the requirements of profit scale, and investment in ideal car research and development costs, production costs, and marketing costs will inevitably gradually expand, If a product matrix offensive is not formed, it will inevitably further increase financial pressure
As Gu Yantao said, according to the 2022 financial report of Ideal Automobile, its net loss in 2022 was 2.03 billion yuan, an increase of more than five times compared to the 322 million yuan in 2021; In 2022, the operating loss reached 3.65 billion yuan, an increase of nearly 2.6 times year-on-year.
Ideal Automobile also realized that in order to achieve long-term development, it must solidify its product foundation, so it began the layout of its product line. With the launch and delivery of L7 and Air versions, Ideal has completely broken away from the label of "relying solely on one model to dominate the world". Currently, the product matrix is gradually enriched, reaching 8 configurations in 3 models (L7/L8/L9).
Sales, as the lifeline of car manufacturing enterprises, the growth of financial performance is bound to be inseparable from the improvement of delivery volume. After expanding the product matrix, Ideal Automobile completely broke free from the shackles and embarked on a comprehensive sprint.
According to the financial report, Ideal Automobile delivered a total of 105100 new cars in the third quarter, a year-on-year increase of 296.3%; As of October 31, 2023, Ideal Automobile has delivered a total of 284600 vehicles throughout the year.
Nowadays, the three models under Ideal Automobile are all in leading positions in their respective market segments. According to data from China Automotive Corporation, in the third quarter, the Ideal L9 won the championship in full-size SUV sales, with the Ideal L7 and L8 models firmly ranking among the top two in sales of mid to large SUVs. In the new energy vehicle market of over 200000 yuan, the sales of Ideal Cars remain in the top three, with a market share increasing from 10.9% in the first quarter and 13.7% in the second quarter to 15.4% in the third quarter.
At the same time, Ideal Automobile has also started to "walk on two legs", no longer just putting "eggs" into the "basket" of the increased programming technology route. According to the plan of Ideal Automobile, the first pure electric model, Ideal MEGA, will be officially released in December this year and will be delivered in February next year. One step into the luxury car camp of over 500000 yuan, becoming one of Li Xianggang's courage in the BBA.
With the continuous expansion of market share, Ideal Automobile is expected to deliver over 40000 vehicles per month, and the quarterly delivery volume is expected to reach 125000-128000 vehicles, a year-on-year increase of 169.9% to 176.3%.
Gu Yantao pointed out that the performance of Ideal Automobile this year is obvious and worthy of recognition, but this is only the first step, and there are even more daunting challenges ahead for Ideal Automobile. After entering the pure electric race track, it will take time for further verification to ensure the improvement of market share, maintenance of high gross profit, and steady upgrading of research and development level while expanding at a high speed, in order to truly achieve the goal of challenging BBA.