I have two questions. Firstly, the company’s delivery volume for the first quarter is expected to decline compared to the previous quarter. Could the management explain the reasons behind the decline – is it due to supply or demand factors? Secondly, regarding Shanghai’s recent policies, the city will no longer provide free green license plates for specific vehicle types starting from 2023. How will this policy affect IDEAL’s cars?
Shen Yanan: Regarding the first question, we believe that a small monthly decline in sales does not mean that the product sales have encountered a bottleneck. The monthly sales of a single model over 5,000 units still demonstrates that IDEAL’s products are highly competitive. In January 2021, our sales volume was 5,379 units, and in December 2020, it was 6,126 units. The average monthly sales volume over these two months was 5,753 units, which is in line with the company’s growth expectations. As February included the Chinese New Year and sales were bound to be affected by seasonal factors, we made a relatively conservative estimate for the sales in the first quarter of 2021, considering the recent outbreak of COVID-19 in the northern regions of China. However, with the expansion of our stores and the effective control of the epidemic, we have confidence that sales will gradually improve.
Regarding the second question, Shanghai’s policies are within our expectations, and the implementation time is even later than what we predicted. We believe that the details of the policy may still change in the next two years. We are also maintaining communication with the Shanghai municipal government. The policy’s implementation in 2023 will encourage users to purchase PHEV and EREV models in advance. We expect the AF license plate sales to peak in 2022, which will be helpful to our sales in 2021 and 2022. Shanghai’s sales accounted for only about 9\% of our total sales in 2020, so the impact of Shanghai’s policies on the company overall is relatively small. As of the end of 2020, sales in cities without license plate restrictions accounted for more than 55\% of our cumulative sales. Our layout is healthy and reasonable. We are also accelerating the development of pure electric platforms and introducing pure electric models in 2023.
Good evening, management. Firstly, thank you for your time, and congratulations on achieving excellent results in the fourth quarter. I have two questions. The first is about this year’s channel development guidance and whether the company still maintains the business efficiency of one store selling over a hundred units. The second question is about how the management views Baidu, Apple, and Xiaomi entering the auto-making industry. Will this cause a structural disruption to the domestic electric vehicle/autonomous driving market?
Lee Xiang: Regarding the first question, IDEAL’s channel strategy remains focused and efficient, and the guidance for channel development for this year is not yet available. As for the single-store sales volume, this indicator is just one of the measures of operational efficiency. Instead, we pay more attention to the overall sales volume of the company, the speed of sales growth, and the level of customer satisfaction.
Regarding the second question, the entry of Baidu, Apple, and Xiaomi into the automotive industry will undoubtedly bring challenges to existing established car manufacturers. But the impact on IDEAL will mainly depend on the competition between different market players and how the competition unfolds. What we can do is to focus on our own strengths, continue to innovate, and create more value for customers in terms of product quality and user experience. Together with our partners, we will work hard to provide consumers with leading and personalized smart new energy vehicles.Shen Yanan: I will answer the first question regarding sales efficiency. The company has entered the second strategic cycle, during which more models will be released in the next few years. Therefore, the company will not set a single-month store efficiency of 100 as a single goal. In order to maintain store efficiency at a relatively healthy level, we will vigorously promote store layout this year and in the coming years, and prepare for the launch of multiple products from 2022. Li Xiang will answer the second question.
Li Xiang: In China (we won’t mention Apple here because its secrecy is too strict and we can’t get effective information), any new technology companies that want to enter the field of intelligent cars need about 3 years from team building to market research, project approval, formal development, experimentation, production, factory manufacturing, and market delivery to make a relatively good product when making the first product or the first generation of products. Most of the dozens of new car makers that quickly launched their vehicles have failed. These vehicles made quickly have no competitiveness. Those who survived were very patient in making cars and launched good products. If it is the latter case, after such a research and development period plus the need for one year of market verification, basically four years have passed.
You can imagine what Ideal Cars will develop into four years later. Firstly, in terms of sales volume and user scale, by the end of 2024, we will have a sales volume of several hundred thousand units in a single year, and there may already be a very large user scale and brand accumulation. Second, in terms of tangible infrastructure construction, by 2024, we will have thousands of service network points to provide comprehensive services to users. At the same time, our own factories and supply chains can also provide very good basic support capabilities for us to break through the million-car mark in the future. Third, by 2024, in the second strategic cycle, we will have very rich products, with a complete coverage of price ranges from 150,000 to 500,000 yuan, to provide comprehensive services for users, and both the products and technology will become very mature.
We admire and welcome these technology companies to enter this industry. Time is more favorable for us and several new forces. When new technology companies are concentrating on the 0 to 1 stage, Ideal Cars has already entered the high-speed growth stage from 1 to 10. This is our basic viewpoint.
Question 3The first question is about the technology route of pure electric vehicles. We have seen the acceleration of research and development of pure electric vehicles since the launch of the IDEAL model, with a focus on high voltage and fast charging. Now there are two brands, WHALE and SHARK, could you share more details about their relevant technologies? Does WHALE mean spacious and SHARK mean fast acceleration? How should we understand the meanings of these two brands? And what about the timetable?
The second question is about the target of gross profit margin and net profit margin for 2021. The current profit margin is relatively high. Will you strategically choose a slightly lower profit margin in 2021 to gain a higher market share? In the process of balancing supply and demand, how does the management view the profit margin target?
Li Xiang: I will answer the first question. The core purpose of using a high-voltage pure electric platform is to greatly improve the entire charging experience, speed and efficiency. Since it is necessary to replace fuel vehicles on a large scale, the most important thing is to make the entire energy replenishment experience and efficiency of electric vehicles close to fuel vehicles. Therefore, we have been researching ultra-fast charging. Whether it is the current national regulations or technology, it has actually reached a relatively mature stage. So we will accelerate the speed of research and development of pure electric vehicles.
On the high-voltage pure electric platform, the four fundamental levels of technology are the most important:
First is the charging rate of the battery, which needs to reach 4C and above, to ensure the life, stability, and safety of the battery. In this regard, although we will use products from suppliers, we will also invest a large amount of research and development with suppliers because this is different from the previous 1C or 2C battery requirements and safety.
Second is the electric drive system, which must use silicon carbide (SiC). At the same time, the efficiency of the entire electrical equipment and motor will also be different.
Third is the thermal management system, because a 400kW fast charger cannot be just for a moment. We must try our best to keep the entire charging speed at a high power level. At this time, the heat dissipation of the vehicle constitutes the biggest challenge. Therefore, thermal management is very important. When facing ultra-low temperatures of minus 20 degrees, 25 degrees, a thermal management system that adopts a leading carbon dioxide (CO2) refrigerant medium scheme can meet the heating requirements. It can also meet the cooling requirements under the condition of 400 kW high-power charging. These are the foundation of our technology research and development. Therefore, this is the third part of thermal management.
Finally, the high-power charging network needs to achieve a charging network of 500A and 400KW, which includes the entire charging equipment that we independently develop. Ultimately, we will achieve an 80% charging experience for users in 10-15 minutes. Due to the high commercial utility value, in addition to the official public charging facilities of the government, we will also invest in the construction of a large number of charging facilities.The following is the technical information. From 2022, Ideanomics will deliver at least 2 new products to the market every year, and in 2023, they will deliver a pure electric series. The product range will also become more extensive. Today, we only covered the price range of 300,000-350,000 yuan, but in the future, we will effectively cover the price range of 150,000-500,000 yuan.
Looking towards the future, we are committed to effectively replacing conventional fuel vehicles. The EREV technology and high-voltage pure electric technology product platforms will both become richer. Through the most effective user experience, we will accelerate the conversion of more users from fuel vehicles to electric vehicles.
When making BEV, the form will not adopt the traditional shape of a car. Whale aims to give users more space while Shark aims to provide better performance.
Li Tie: The gross profit for the whole of 2020 was approximately 16%. We expect that the gross profit for 2021 will be 19-20%, mainly due to the increase in production, reduction of BOM costs, and lower manufacturing costs. Regarding net profit, we are increasing our research and development investment, and, as mentioned earlier, we will expand our network layout, so we do not provide guidance on net profit. The positive net profit in the fourth quarter is mainly due to the returns from short-term financial products.
Hello, leaders, thanks for giving me this opportunity. My first question is about smart vehicles. May I ask if there are any milestones for us in smart technology this year? Also, how can we demonstrate that Ideanomics can catch up with and exceed Xpeng and Tesla in terms of intelligence? My second question is about opening offline stores. It wasn’t mentioned just now. There seems to be a guideline this year, which is about 120 stores, is there any change? If it is 120 stores, it will double compared to the end of last year. Can we assume that the sales this year will also double?
Wang Kai: As far as the plan for 2021 is concerned, we will invest more funds in R&D. In 2021, we will prepare for building a new, scalable, and upgradeable system architecture. This system architecture includes a new generation of advanced driving assistance systems, computer systems, and our own vehicle operating system. We will release this system architecture in 2022.
At the same time, our products will provide customers with some new features in addition to having similar functions to our competitors. In terms of engineers, we plan to double the total number of R&D personnel, so the construction of the Shanghai R&D Center is also part of this expansion plan. In the face of competition, we are confident that we can prove our capabilities in terms of efficiency. Last year, our performance in financial reports has already fully demonstrated our strength. Therefore, we believe that with the rapid expansion of our research and development scale, we will hear more good news in the field of autonomous driving technology. Thank you.沈亚楠： 很高兴回答您的问题。目前，公司在磨合期内，我们会全力以赴、不断努力，从不同维度来提升产品品质和用户体验，为客户提供更好的购车、用车服务和产品体验，争取在市场中赢得更多的认可和支持。同时，我们也会积极争取和加强渠道建设，多元化扩展销售网络，不断拓宽市场覆盖面和增加产品销售渠道，提升售后服务体系，努力满足客户需求。再次感谢您的关注。Thank you, management. I have two small questions. The first one is about the Shanghai R&D center mentioned earlier, which is expected to have 2,000 employees in the future. What is the ideal time frame for this? Additionally, how will these 2,000 employees be distributed across different areas, or what is the approximate percentage of distribution? The second question is about R&D expenses. Last year, we observed that Ideal’s R&D expenses were increasing from quarter to quarter in absolute scale, but because the growth rate of sales was faster, the quarterly R&D expense rate was actually diluted and diluted. In light of this, what is Ideal’s expected total scale of R&D expenses and R&D expense rate in the next one to two or five years? Thank you.
Wang Kai: Thank you for your question. Let me answer your questions about R&D activities. In the future, the Shanghai R&D Center will model the configuration of the Beijing R&D Center and develop more models and undertake more advanced research and development activities. Regarding the ADAS team, we now have more than 300 engineers in total. By the end of this year, we will expand this team to more than 600.
Li Tie: R&D expenses in 2020 are mainly used as early R&D investment for new models in 2022. This year, our R&D expenses will increase further to reach at least RMB 3 billion. With increasing investment in autonomous driving and new models, we expect our future R&D expenses to reach RMB 6 billion per year (USD 1 billion) within the next three years. Of which, over half of the expenses are expected to be used for autonomous driving-related research and development. Thank you.
Source: Ideal Automotive
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email email@example.com.