Article | Karakush
It’s the end of the year, and Li Xiang seems quite idle.
He’s been watching the new anime series “King Ranking” on Bilibili; he exercises every day, which is actually playing the VR game “Beat Saber” on Oculus Quest 2; he also reviewed an old book “Crazy Concise” published in 2013.
Last night, he wrote another small essay “A Few Words to Myself at 40 and Li Xiang, My 14-Year-Old Classmate”, revealing that he has gained more than 20 kilograms in weight in 26 years.
This is not to imply that his workload is not sufficient.
For entrepreneurs, especially those with personalities like Li Xiang, showing their lives is a good signal, indicating that the company’s operations and management systems are on the right track.
On the other hand, if coping with operations and management has become overwhelming, it means that the company still has many problems, lacks a mechanism to solve them, and the top management has to make decisions on every detail. Therefore, bosses who cannot take breaks cannot possibly lead a good company.
Idle time is, in fact, a kind of solid foundation.
The Most Comfortable Person in 2021
Li Xiang should be quite idle.
After all, He XPeng said on CCTV’s “Dialogue Challenger” program that among the three people, including himself, Wei Jianjun, and Li Xiang, Li Xiang had the most comfortable year. They have a small group where they discuss industry policies every day.
From a performance perspective, he lives up to expectations.
Last month, Ideal Auto’s deliveries exceeded 10,000, reaching 13,485. According to the third quarter financial report guidance, Ideal expects to deliver 30,000-32,000 vehicles in the fourth quarter, which means that no matter the order backlog, market demand, or production/supply chain capacity, Ideal is likely to maintain over 10,000 deliveries in December, and even exceed expectations. Whether or not they will, the results will be known in another two days.
# Ideal is Not Just “Ideal” Anymore
Last year at this time, the target delivery scale was just over 6,000, which was the best result achieved with great effort. Within a year, the sales volume doubled, and the suggested retail price also increased by 10,000 yuan. It was an enviable achievement.
Brilliance doesn’t stop at just the surface. As of the third quarter, the gross profit margin of Ideal’s single bike exceeded 20%, reaching 21.1%. With a healthy and even robust profitability, coupled with restrained cost spending, Ideal has achieved both positive non-GAAP operating and net profits, with a relatively abundant cash reserve of 48.83 billion on the books.
Ideal is already a mature Ideal, able to rely on itself to support itself.
Just three years ago, Ideal was left with only 900 million yuan on the books and had to rely on personal connections for financial assistance. Li Xiang once joked that because of insufficient funds, he had to have a “perverted” demand for cost and efficiency. Everything had to be explained with mathematical models to ensure that selling cars would generate positive cash flow.
Behind the “stingy” reputation in the industry is a tightly strained nerve that doesn’t allow a step to go wrong, as failure would not even qualify for ICU rescue. Today, Ideal’s survival ability not only includes running a closed-loop system but also having a certain degree of robustness to tolerate risks and setbacks.
In fact, in 2021, Ideal has not been comfortable either, as the chip shortage issue that troubled XPeng and Nio also affected Ideal. Just two months ago, due to the shortage of millimeter-wave radar chip supply, they had to decide to deliver three of the five radars first and pay for two later, which caused quite a bit of ridicule. Until today, the supply chain colleagues are still not at home, stationed everywhere, asking for parts here and there, piecing together deliveries. Currently, the average waiting time after placing an order is still 6-8 weeks, which is not easy.
However, both external perspectives and internal confidence tend to stabilize: for Ideal, if a problem can be solved, then it is not a problem. Common small-scale issues will no longer shake Ideal.
Annual Bestseller
The solid foundation of Ideal’s rise is based on a product, the Ideal ONE.
Actually, this is alarming, as the risk is too concentrated, so if there is loss, everything will be lost.
The other small brothers who have sold over 10,000, XPeng and Nio, have three models each on sale. However, Ideal only has the Ideal ONE and only one configuration. Nevertheless, this model has demonstrated incredibly high efficiency, beating hundreds with one and showing two noteworthy features:Firstly, the Ideal One has not benefited much from the policy dividends. There is no subsidy for cars priced over 300,000 yuan. As for license plate discounts, according to the Ideal’s insurance data, the purchase ratio in cities with license plate restrictions, such as Shanghai, Guangzhou, Shenzhen, Hangzhou, and Tianjin, is only 23\%, while the ratio in non-restricted cities reaches 76\%, including Beijing, which restricts the purchase and driving of extended-range vehicles without license plates.
In the Beijing region’s large SUV market, the Ideal One ranked first in the November insurance purchase volume, surpassing Volkswagen Touareg, Range Rover, BMW X5, and Mercedes-Benz GLE, among others. The Ideal One is in direct competition with gasoline-powered cars.
Its sales reflect the true market demand, with few cases of forced buying motivated by incentives. As a product relying less on subsidies and policies, it will not be significantly impacted by subsidy withdrawals in the future. It has been verified by the market and is an excellent product worth looking forward to.
Secondly, many of its swapping users come from luxury car owners. The top three brands for swapping transactions are BMW (7.7\%), Mercedes-Benz (7.6\%), and Audi (6.7\%), with a total population of 22\% in the BBA (BMW, Benz, Audi) group. Among them, the preferred replacement models are BMW 3 Series and Mercedes-Benz C-Class, which are in the same price range.
These users are not short of money, and they have a clear reference framework and know what constitutes excellent automotive quality and experience. They are still willing to choose the Ideal One, indicating that the Ideal One’s product strength indeed possesses high-end attributes and brand sustainability.
The 2021 new energy vehicle market is fascinating, with a higher average income level. However, due to the unavailability of intelligent driving capabilities, mass-produced models are mainly limited to suspensions, car computing power, audio, and cruising range, and traditional parameters have been overemphasized, leading to much higher prices, without necessarily providing high-end features.
Fundamentally, the difference may lie in the level of the core product manager. For Ideal, it is Li Xiang, whose product intuition is largely derived from his direct experience of buying and driving luxury cars. For example, at a product development meeting, Li Xiang made it clear that they should learn from Bentley, and the team then went on to explore how to learn from Bentley. The Ideal One has some unexplainable mystique worth 5 million yuan, probably derived from excluding Bentley’s costs.
According to a survey by the consulting firm JLL, which looked at 18 new energy brands’ long-term tracking research and reputation, Ideal ranked first with a net recommendation score of 90.2\%.Exclusive Closed Loop
From a product perspective, only bad products need to explain “hard to satisfy everyone”; and good products will always find common ground.
From the outside, this year’s iteration is the key to victory, while increasing configurations and prices, consumers perceive it as a high value proposition, and come in droves. These are all common topics.
Before June, no one was optimistic. When the 2021 model went on sale in May, the ideal number was 4,000 units, and it was announced that within four months, the ideal would sell over 10,000 units per month. Even Ideal’s own employees did not believe it at that time.
This is not entirely a voluntary situation. The fact that a single product is a legacy problem of lack of money in the early years, and there is no energy to develop multiple products; the target is not based on reality, but based on the backwardness of expansion strategy-because by 2025, the market turning point, the market share must reach 20%, which is 1.6 million vehicles annually. Ideal would have a chance to survive in the competition.
However, a company with a scale of 1.6 million is impossible to achieve that level with only 3-5 thousand cars. In the future, Ideal will launch multiple products on the second-generation extended-range platform and two pure electric platforms. Before that, Ideal ONE must stand up, support a relatively healthy gross profit margin, continue to invest more than 10% in research and development, and layout future development.
According to Li Xiang’s plan, such a good product could have sold more than 10,000 units per month last year. The success of this year is not only due to the product itself, but to a large extent, it benefits from channel construction, with a sales expense ratio of over 10%, which is effective and sales and service network rapidly expanding, covering 100 cities and nearly 200 stores by the end of the year.
This speed is also the result of Ideal’s strategic adjustment at the beginning of the year. Originally, efficiency was the top priority, but Ideal judged that the knockout was accelerating, so in the face of scale, efficiency had to give way.
In terms of the trend, it is difficult to make decisions when it comes to specific decisions. It was not until Ideal put in so much effort that focusing on a single explosion model proved to be a feasible closed loop. This model cannot be replicated. It can only be achieved on the Ideal ONE product and in companies like Ideal.
You have to insist on making many choices that are not understood. For example, extended-range power, which is a prerequisite for national deployment.
Ideal’s sales have exceeded NIO’s, the price is higher than XPeng’s, the profit and cash flow are stable, but in the capital market, its market value is still the lowest because it focuses on creating high-value products in segmented markets. This simple strategy does not inspire much imagination in capital, which is more excited about investment in pure electric and intelligent technology.In fact, in the early stage of entrepreneurship, some investors suggested that Li Xiang should focus on pure electric vehicles, which are easier to tell stories about and can be marketed as the Chinese Tesla. The investors could understand and liked it.
Li Xiang’s response at the time was: “I didn’t create this car for the investors.”
The Courage to be Disliked
It’s not just investors who are skeptical. In September 2020, Volkswagen’s Feng Sihan bluntly stated that extended-range was the worst solution.
Li Xiang remembered this statement for a year. In December, he posted a Weibo comparing sales figures, recording the 24-month journey from selling 1,011 units per month to becoming the champion of mid-to-large-sized SUVs:
Only three nodes were marked: the beginning of the delivery of the Ideal One, Feng Sihan’s statement last year, and the Ideal One surpassing Volkswagen this year.
To many people, Li Xiang seems like a madman. His WeChat signature reads: “I don’t attend any public meetings. My thoughts and practice are reflected in my products and organization.”
It doesn’t seem like a very diplomatic way of speaking. If you’ve read the book “Crazy Simplify”, you might call it “simplicity”. Li Xiang treats it as a “key book” and it’s a record of Jobs’ story before he was the creative director of Apple.
For example, concise communication means providing very clear and direct feedback on whether something is good or bad, and specifically where it needs improvement. Concise meetings mean holding small meetings instead of big ones, without the need for “spectators.” Concise organization means having a small elite team, with a maximum of 100 people. If there are too many people, you eliminate the weaker ones. This is because Jobs could only remember 100 people.
You will find that this is almost the successful business approach of emerging business figures in the last ten years.
For example, Elon Musk. This year he wrote an email to Tesla’s staff, “If I send an email with specific instructions, managers will have only three options. 1. Reply to my email and explain why I am wrong, even if I am completely wrong. 2. If I am unclear, ask for clarification. 3. Carry out my instructions. If none of these are done, relevant managers will immediately resign.”
At Ideal, it is called “network synergy” organizational structure. With transparency of information, decentralization of power, and focus on growth, everyone aligns their awareness, makes decisions within their purview, and cooperates effectively with their peers to mobilize the power of the workers.One notable thing is the fast iteration. Idealland shared a story about sales champion sharing. The company holds regular communication meetings for front-line staff, which Shen Yanan also attends. The opinions and suggestions she raised at the morning communication meeting in Beijing can be implemented in the improvement plan of the store in Shanghai in the evening.
Simplicity is the result of deliberate design through proper organization, and its core is a streamlined decision-making mechanism. In the end, it is reflected in efficiency, small investment and large yield; in product, unique and excellent; and also in communication, easy to understand and clear.
Li Xiang also knows the other side of simplicity clearly. In his short essay, he reflected that at the age of 40, he still speaks without reservation, causes trouble, and is annoying. He has not become mature, stable, broad-minded, rational, and objective as others want him to be. He is almost the same as when he was 14 and headstrong.
“I am most proud to have not made myself more complicated because of the environment in these 26 years.”