Soaring 50 billion overnight, the ideal car went crazy
01. Sell a car to earn 80,000 yuan
At a time when the new car-making forces in China and the United States have successively suspended production and laid off employees, the most controversial player of the new domestic car-making forces, Li Auto, has handed over a report card that can be called "explosive".
On February 26, Li Auto released its financial report for the fourth quarter and full year of 2023, which was officially said to be the company's best financial performance since its establishment in 2015.
According to the financial report, in 2023, Li Auto's revenue will be 123.851 billion yuan, a year-on-year increase of 173.48%, and its net profit will be 11.809 billion yuan, a year-on-year increase of 681.06%. In the fourth quarter, the company's revenue was 41.73 billion yuan, a year-on-year increase of 136.4%, and the net profit was 5.75 billion yuan. It can be said that the financial performance in the fourth quarter largely contributed to the results of Li Auto for the whole year.
What is the concept of 100 billion revenue and 10 billion profit?
Taking the 2022 financial report data as an example, in China's auto manufacturing industry, there are only six listed OEMs with annual revenues of more than 100 billion yuan, namely SAIC, BYD, Geely Automobile, Great Wall Motor, Changan Automobile and GAC Group. Among them, only SAIC and BYD have a net profit of more than 10 billion.
Looking at the financial reports of Li Auto in the past five years, in 2018~2022, the net loss has accumulated more than 6.45 billion yuan. Two years after landing on the U.S. stock market, Li Auto's revenue in 2022 will be less than 50 billion yuan, with a net loss of more than 2 billion yuan.
And now, the ideal has finally turned over and turned into a serf to sing, earning back all the money of the past five years at once.
Automobiles are a typical industry with economies of scale. Ideal also attributes this list of achievements to the continuous increase in deliveries.
In December 2023, Li Auto's monthly deliveries reached 50,000 units for the first time, and the annual delivery volume reached 376,000 units, a year-on-year surge of 182.2%, and the annual sales target completion rate reached 125.3%.
At the same time, Li Auto's careful control of the overall cost has also saved the company a lot of expenses. In the past three quarters, Li Auto's sales and administrative expense ratio has remained at about 8%, and the expense ratio did not exceed 9% in the first quarter of last year and 7.9% for the whole year. In comparison, its sales and administrative expense ratio was 12.5% in 2022.
Similarly, in 2022, Li Auto's R&D expense ratio was 15.0%, and in 2023, that figure became 8.5%.
Under the open source and cost reduction, Li Auto's cash reserves have increased significantly. From 58.45 billion yuan at the end of 2022 to 103.67 billion yuan at the end of 2023. The company's gross profit margin also increased from 19.4% at the end of 2022 to 22.2% at the end of 2023, and the gross profit margin of vehicles also increased from 19.1% to 21.5% during the same period.
Looking at the entire new energy vehicle industry, such profitability is not inferior to Tesla and BYD, which are known for their cost control capabilities. In 2023, Tesla's gross profit margin will be 18.2%, and BYD's gross profit margin in the third quarter of the same year will be 22.12%. And these two companies, the sales volume in 2023 will be 4.8 times and 8 times that of Li Auto, respectively.
If it is estimated according to the average transaction price of 370,000 yuan of Li Auto, it is equivalent to a gross profit of 80,000 yuan and a net profit of about 30,000 yuan.
At the earnings call that night, Li Xiang, chairman and CEO of Li Auto, said that by 2030, in the household user market of more than 200,000 yuan, "we only need to eat one-third of the market share in the Chinese market, and we can have more than one trillion yuan in revenue." He believes that if the company can still perform well overseas, "by 2030, we can approach the global operating income of iPhones in a market of more than 200,000 home users alone." ”
After the conference call, as of the close of the U.S. stock market on February 26, Li Auto closed at $41.34 per share, up 18.79%, and its total market value rose by about US$6.939 billion (about 49.9 billion yuan) to US$43.862 billion overnight. On February 27, the Hong Kong stock of Li Auto also rose sharply at the opening, and its market value rose by about 60 billion Hong Kong dollars in the morning.
02. Tens of billions of profits depend on three cars
The most direct reason why Li Auto can make a lot of money in 2023 is that it has achieved great success in both overall sales and single vehicle profits. However, in the past year, the ideal sales volume was almost entirely contributed by L7, L8, and L9. Why can Li Xiang go crazy with just these three SUVs?
I'm afraid everything has to start with the first model released by Ideal - Ideal ONE.
Since the launch of the Ideal ONE in 2019, the price positioning has fallen on the high-end car market of more than 300,000 yuan. This not only considers the market competition environment and opportunities, but also integrates the feasibility of long-term healthy development, including profit and other factors.
The higher the end of the product, the higher the profit, and the automotive industry is no exception. How to make consumers pay for "high-priced" new energy vehicles, Li Xiang very boldly chose the extended-range power route of "no endurance anxiety", plus "refrigerators, color TVs, large sofas" and other configurations, which was almost unprecedented at that time.
Although this was controversial at the time, Ideal ONE "unexpectedly" succeeded.
In 2021, with the Li ONE model, Li Auto achieved sales of more than 90,000 units. Li Auto's 2021 financial report shows that its annual gross profit margin for a single vehicle is 20.6%, which is equivalent to a profit of about 70,000 yuan from the sale of an ideal ONE of about 340,000 yuan.
However, in 2022, Huawei's Hongmeng Zhixing turned out to be born in the M7 almost crippled the ideal ONE, forcing Li Xiang to sacrifice the "L series" in advance - L9 and L8 to fight, and the three cars joined forces to achieve sales of 133,000 units, but they did not stop the loss gap.
In 2023, Li Auto's sales of 376,000 units will exceed four times that of 2021 and almost triple that of 2022.
It can be said that the rapid growth of Li Auto's sales market has changed from the previous ideal ONE "big item" to the current L7, L8, and L9 "big single item x3".
There may be some luck in this. For example, the L7 series, which had the highest sales volume last year, Li Xiang revealed that he wanted to cut it, but the executives resolutely opposed it.
Whether it is the ideal ONE, or the L7, L8, and L9, they are all extended-range models. Although many people say that the extended-range model "burns oil to generate electricity", it is "taking off his pants and farting", and lacks core technology; "refrigerator, sofa, large color TV", there are no technical barriers, but the extended-range model reduces the mileage anxiety of car owners, and "refrigerator, sofa, and large color TV" meet the needs of consumers, so that Li Xiang can make money before his peers.
"A great product manager who understands people. An angel investor of Li Auto once commented on Li Xiang.
Of course, taking the extended-range route is one thing, Li Auto can become the first company to make money among the new car-making forces, and Li Xiang's "picking" has also helped a lot.
In the industry, Li Auto is a well-known "picker", and Li Xiang himself has laughed at himself. In a word, his hope is: use the least number of people, spend the least money, and sell the most cars. This is evident in the product strategy of the L series.
Although the L7, L8, and L9 are three different models, the internal and external design and mechanical foundation of "carved out of one mold" are actually almost the same car in essence.
From the perspective of positioning, the L8 is a direct replacement model of the Ideal ONE, the L9 is the PLUS version with higher size and specifications, and the L7 is a 5-seater version with a slightly smaller size. To put it simply, you can use "medium cup, large cup, and super large cup" to distinguish the three cars of L7, L8, and L9.
The benefit of this "matryoshka doll" tactic is that it reduces the development cost and time to market of the three models, while the scale effect of the increased sales volume can further reduce costs. The L6, which will be released in the second quarter of 2024, also follows the same strategy - it belongs to the "small cup".
▲ (Source/Understand Chedi)
In addition to the technical route and cost advantages at the product level, Li Auto's good sales also depend on marketing and channels.
On the one hand, Li Xiang likes to speak on social platforms and cheer for the company, and he also has high requirements for the service level of sales. For example, last year, many flight attendants changed careers to do ideal car sales.
In addition, in terms of channel expansion, in the fourth quarter of 2023 alone, the company opened more than one new store a day, adding a net of 106 retail centers, building China's largest direct sales system for automobiles. As of January 31, 2024, Li Auto has 474 retail centers across the country, covering 142 cities.
On the earnings call, Li Xiang said that this year, it is necessary to "increase the layout of first- and second-tier cities, and deepen the coverage of third- and fourth-tier cities".
03, can Gao Ge advance aggressively?
In July 2023, Li Xiang once said in the circle of friends that whether a new brand and its products are really valuable can be verified through three aspects: first, sales are willing to sell, second, users are willing to buy, and third, opponents are particularly hateful. Now it seems that he did.
On the call, Li Xiang said that "the target sales volume in 2024 is 800,000 units, and the goal of achieving the first sales volume of luxury brands in the Chinese market will be achieved."
What is the concept of 800,000 annual sales, which is higher than Mercedes-Benz's 2023 data of 765,000 new cars delivered in China. And compared with the 376,000 units sold in 2023, the increase is as high as 113%, will the expectations be too high?
"2024 will be an unprecedented year for Li Auto's products, and by the end of the year, Li Auto's new car product line will include 4 range extender and 4 pure electric models, a total of 8 models, forming a highly competitive product portfolio to meet the diversified needs of family users in an all-round way. Li Xiang said.
This means that in addition to the MPV pure electric model Li MEGA, which will be released and delivered on March 1, the 2024 facelifted L7/L8/L9 (extended range), and the extended range model L6 released in the second quarter, Li Auto has also "hidden" three new pure electric vehicles (M7, M8, and M9).
Li Xiang said that these three cars are all SUVs, "standard 5C charging, four-wheel drive, and strong product power."
Zou Liangjun, vice president of sales and service of Li Auto, predicts that the delivery volume of Li Auto will exceed 50,000 units in March 2024, 70,000 units in June, and monthly sales of more than 100,000 units by the end of the year.
Li Xiang also revealed by the way that models below 200,000 will not be launched in the next 5 years. In his view, by the fourth quarter of 2024, the new energy vehicle market of more than 200,000 will show the result that the top three brands will eat up 70% of the market share. "It's not the CR5 (the market share of the top five companies in terms of business size), but the head concentration of the CR3, which is more concentrated than the fuel car, and it is no different from a smartphone. You'll have to wait and see."
In this regard, some industry insiders analyzed that Li Xiang's judgment is more radical. In 2023, the sales volume of new energy vehicles with more than 200,000 yuan will be 2.54 million units, and the market share (CR3) of the top three companies will be 53.28%. Among them, Tesla 24.02%, Ideal 14.84%, BYD 14.42%. If BYD and Denza are counted together, it is 19.1%. "Judging from the trend, CR3 will not converge quickly, because the new energy vehicle market of more than 200,000 yuan is growing rapidly. ”
Netizens speculated about who the "Big Three" Li Xiang was talking about.
If you count by brand alone, Tesla, Ideal and BYD do have the largest sales base. Some netizens also said that the new energy market is changing too fast, no one will be the eternal winner, and the "potential" of ZEEKR and Huawei cannot be ignored.
While Ideal is doing well in 2023, it's far from a safe moment. The first is whether the pure electric models launched this year can also be recognized by consumers like range extenders.
You must know that the ideal for so many years of promotion of range extenders, aimed at the pain points of pure electric models "range anxiety" and "energy supplement anxiety", many consumers have even directly equated "range extender" with "ideal" in Li Xiang's shouting. It may take time to switch from range extension to pure electric track, so that consumers can accept it.
Some netizens said that "oil and electricity" will definitely consider ideals, but its pure electric models "still have too many unknowns". This is also like the ideal 5C super charging station currently being laid out, although the energy replenishment speed is very fast, but the number and density of outlets and other aspects related to infrastructure construction, we must think about how to dispel users' doubts as soon as possible.
In addition, another magic weapon of Li Auto to occupy the minds of consumers, "refrigerators, color TVs, and large sofas" is not impossible to copy. Intelligent cockpit and intelligent driving are not outstanding at present, but they are easy to "overturn" too early.
Ma Donghui, president and chief engineer of Li Auto, said on the conference call that "the city pilot NOA will be opened across the country, and the scope of use will no longer be limited by the number of cities." But at the beginning of February 2024, Sohu Auto reported that Li Auto's so-called urban NOA "opened the city" in Tianjin, but in fact, it only covered two roads.
Although it is a bit of a word game, Li Auto is also investing heavily in waiting for the moment when the quantitative change of intelligent driving causes qualitative change. From this point of view, with the report card of "pulling hatred", Li Auto does have more room for adjustment.
At present, there are still voices in the industry questioning the lack of a technical moat of Li Auto, or the moat is not deep enough, and the substitution is strong. But in fact, new energy vehicles will inevitably become more and more homogeneous, and the real moat of Li Auto may lie in the grasp of "user value".
Author | Huang Shuo, Liu Dongxue
Edit | Tian Yanlin
Operations | Liu Shan