The ideal car, which is making great progress, was forced to press the pause button this year.
MEGA has encountered unprecedented challenges in its ninth year of establishment due to its cold reception, lower than expected overall delivery volume, ongoing layoffs, and delayed launch of pure electric new cars. The Financial Investment News reporter noticed that last year, Ideal Automobile successfully entered the "100 billion revenue" club with a revenue of over 100 billion yuan and a profit of over 10 billion yuan. However, in less than half a year, Ideal Automobile has fallen from a high level and suffered a heavy setback.
Business faces multiple challenges
On May 20th, Ideal Automobile released its first quarter financial report for 2024. The financial report shows that in the first quarter of this year, Ideal Automobile's revenue was 25.634 billion yuan, a year-on-year increase of 36.4% and a month on month decrease of 38.6%; The net profit was 591 million yuan, a year-on-year decrease of 36.7% and a month on month decrease of 89.7%.
Public information shows that the main component of Ideal Automobile's revenue is vehicle sales revenue. The financial report shows that in the first quarter of this year, the sales revenue of Ideal Automobile vehicles was 24.3 billion yuan, a year-on-year increase of 32.3% and a month on month decrease of 39.9%. In terms of gross profit margin, the comprehensive gross profit margin of Ideal Automobile has decreased from 23.5% in the fourth quarter of last year to 20.6%, a decrease of nearly 3 percentage points compared to the previous period.
At the financial report conference call, Li Xiang, Chairman and CEO of Ideal Automobile, said, "Since the beginning of this year, we have faced multiple challenges in internal operations and external environmental changes. The performance of the first quarter has fallen short of our expectations at the beginning of the year. In the face of problems, we have actively and quickly adjusted, fully launched and implemented organizational upgrades and process optimization, improved internal operational efficiency and decision-making quality, and strived to better focus on creating and delivering user value."
Looking ahead to the next quarter, Ideal Automobile is expected to have a revenue of 29.9 billion to 31.4 billion yuan and an estimated delivery volume of 105000 to 110000 vehicles. It is worth mentioning that the market previously estimated its delivery volume for the second quarter to be approximately 130700 vehicles. Obviously, this delivery guideline is far below market expectations. According to public information, the delivery volume of Ideal cars in April this year was 25800 units. Based on this calculation, the total delivery volume in May and June will reach 79200 to 84200 units.
Regarding this, Li Tie, CFO of Ideal Automobile, stated that the current top priority for Ideal Automobile is to restore order volume, which is a top priority goal. As is well known, automobiles are an industry with significant economies of scale. It is believed that as the pace of production and sales advances, the economies of scale in gross profit margins will gradually be released. In addition, the launch of Ideal L6 has further optimized the product portfolio, coupled with good cost control capabilities and continuous organizational efficiency improvement, the gross profit margin will also be further improved.
Monthly sales continue to decline
2023 is the shining year of Ideal Automobile, and with outstanding financial data, it has established its unshakable dominant position in the extended range new energy vehicle market.
According to the 2023 financial report, Ideal Automobile achieved a revenue of 123.85 billion yuan throughout the year, a year-on-year increase of 173.5%; Realized a net profit of 11.81 billion yuan, turning losses into profits. This means that in an environment where many car companies are facing losses, Ideal Automobile not only achieved annual profits for the first time last year, but also became the first "new car making force" in China with annual revenue exceeding 100 billion yuan. Among them, the hot sales of products are the key to supporting the significant increase in the performance of Ideal Automobile. The financial report shows that in 2023, the delivery volume of Ideal Automobile reached 376030 units, a year-on-year increase of 182.2%, far exceeding the annual delivery target of 300000 units.
The ideal car standing on the mountaintop undoubtedly fills investors and consumers with expectations for its future performance. But who would have expected that it would face a difficult start to 2024, with the first major blow being a sustained decline in monthly sales.
Public information shows that since January this year, Ideal Automobile has been missing out on the championship of new forces for three consecutive months and has been overtaken by Wenjie Automobile. Specifically, in January of this year, Wenjie Automobile's delivery volume was 1808 units ahead of Ideal Automobile; In February this year, Wenjie Automobile delivered 891 units ahead of Ideal Automobile; In March of this year, the delivery gap between Wenjie Automobile and Ideal Automobile once again widened to 2743 units.
At that time, the ideal car may have deeply felt the changes in the external environment, and innovation became the top priority. However, to our surprise, since March 1, MEGA, the first pure electric MPV model, has not become the "Rocket" of ideal car sales, but has been caught in the whirlpool of public opinion.
At this point, the dream of becoming a popular model of Ideal Automobile has been declared a failure. In an internal letter from all staff, Li Xiang stated, "We mistakenly mistakenly treated the 0-1 stage (commercial validation period) of Ideal MEGA as the 1-10 stage (high-speed development period) for operation. Ideal MEGA and high-voltage pure electric must go through a similar 0-1 stage as Ideal ONE and Extended Range Electric, and cannot have the potential to operate from 1 to 10 as soon as the Ideal L series is launched. This is our misjudgment of the pace of pure electric strategy."
Of course, this new car making force that focuses on range extenders has not caused a stir in the pure electric new energy vehicle market. How to turn the tide of decline? Ideal cars are forced to lower their body shape and choose to lower prices across the entire range. On April 22nd, under heavy pressure, Ideal Automobile announced for the first time a major price reduction across the entire range. In the new pricing system, Ideal Automobile has made comprehensive adjustments to the prices of L7, L8, and L9 models, with a price reduction range of 18000 to 20000 yuan.
Suspend entry into the pure electricity market
The Financial Investment News reporter noticed that after the May Day holiday this year, Ideal Automobile has been in the midst of a layoff controversy. Previously, it was reported that in the new round of employee optimization actions by Ideal Automobile, the proportion of layoffs exceeded 18%. Based on its scale of 31600 employees last year, this layoff may involve 5000 employees.
Is layoffs a last resort or a cost reduction and efficiency increase? It is not difficult to see that today's ideal cars are actively seeking self rescue, and the more important step is to slow down the pace of development and temporarily delay entering the pure electric market.
On the evening of May 20th, Li Xiang suddenly announced during the 2024 Q1 financial report conference call that Ideal Automobile had decided to postpone the launch plan of a pure electric SUV. On the one hand, Ideal Automobile has not yet laid out enough self operated supercharging piles, which is a necessary condition for selling mid to high end pure electric SUVs; On the other hand, Ideal Automobile needs to upgrade and increase the number of booths and shopping malls.
According to previous plans, 2024 was already a year of vibrant products for Ideal Automobile. In addition to the MEGA and L6 launched in the first half of the year, three pure electric models are also planned to be launched in the second half of this year, gradually forming a product matrix of four extended range electric models and four pure electric models.
The Financial Investment News reporter noticed that Ideal Automobile is currently facing a dilemma of being attacked from both sides. On the one hand, it is the initial failure of the pure electric vehicle market, and on the other hand, the increasing number of competing models in the extended range vehicle market has led to the influx of car companies such as Wenjie, Geely, and Chery, forming a strong competitive relationship with them.
The reaction of the capital market vividly confirms the polarization of investor attitudes towards ideal cars. Affected by the news of declining performance, on May 21st, the closing price of the Hong Kong stock of Ideal Automobile was HKD 80.65, a decrease of 19.27%. Since the high point of HKD 182.90 in February this year fell, the largest decline of Ideal Automobile has reached 56%. On the US stock market, the closing price of Ideal Automobile on May 20th was $21.71, a decrease of 12.78%, almost halving compared to $43.54 when MEGA went public on March 1st.
