If new energy is compared to a gamble, some people lose everything, while others embrace the vision of the next “gambling god”.

Recently, a new force in car group buying has entered the field of car making, claiming that “most new forces in car making have racked their brains to find a handy weapon, but we have picked one from the arsenal”.

On January 5th, Tuanche.com announced on Weibo that it would make cars and singled out the top three companies among new players in car making.

Judging from the number of likes, comments, and reposts, it did not cause as much waves as other companies announcing the making of cars before, and even few media reports. All three companies, including XPeng Motors, chose to ignore it.

Apparently, the effect is not as expected, on January 14th, Tuanche.com’s CEO Wen Wei accepted a small-scale media interview at the headquarters in Beijing, intending to release some “information” to stimulate the market.

This release, however, contained a lot of counter-intuitive information: “With a team of over 100 outsiders, we can make cars that cost over 20 million RMB or less than 50,000 RMB.” “Differentiation, brand positioning, and brand philosophy are yet to be determined.” “It’s okay if the first car fails because we can make another one in three months.” “NIO raised 500 million USD, we may only be one-tenth of that.”

In the face of this statement, Li Xiang, the founder of Ideal Motors, couldn’t resist his “veteran” occupational disease and gave his opinion on Weibo.

Two hours later, Tuanche.com CEO Wen Wei rebutted himself like Cai Huan-Gong, “I didn’t expect the first shot of the Long March to come from Mr. Li Xiang. Besides rhythm and patience, did you forget about vision and judgement? Didn’t Feng Sihan get fired because he sprayed too early? So don’t take yourself as a prophet, and don’t become the people that you hate the most.”

Wen Wei used the story of Li Xiang and Feng Sihan to refute Li Xiang’s words, as if reminding the other that a dragon slayer should not become a dragon.

In fact, Li Xiang himself used to like to express various views during the Snowball period, which attracted a large number of fans. Some seemingly unconventional views were not without reason. In 2016, when Tesla’s annual sales were only a few tens of thousands, Li Xiang predicted that it would reach 500,000 to 600,000 in 2020, which was almost the same as the actual sales of 499,500 cars that year.

However, at the same time, his self-willed character has also made Ideal Motors take many detours.

They are all veterans, don’t brag.

According to public information, both Wen Wei and Li Xiang are serial entrepreneurs, but Wen Wei, who graduated from the Industrial Foreign Trade major at North China University of Technology, seems to have had a less successful record except for Tuanche.com, as there are few records of his previous entrepreneurial experiences online, and Tuanche.com has not achieved profitability since it went public in 2018. In contrast, Li Xiang, a “young head” who dropped out of school halfway, has left a deep impression on the entrepreneurial road time and time again.

Both are “veterans” on the entrepreneurial road, so every word Wen Wei said about Li Xiang was probably crystal clear.

Li Xiang, who has entered his forties, has been very active recently. On the day he expressed his views, he used a 3,000-word essay to further expound on the “importance of controlling the rhythm in entrepreneurship” and divided it into two stages, 0-1 and 1-10.

Li Xiang believes that Li Xirui completed the verification from 0 to 1 in 2021 and is now in the 1 to 10 stage. This may also be the reason why Li Xiang did not set out his “prescription” for the 10 to 100 stage. As one of the top three new car makers, it is not easy for Li Auto to complete the 0-1 stage.

The first priority in doing something is to have a clear understanding of the industry and make accurate predictions.

In August 2016, a global new energy vehicle conference and exhibition was held in Shanghai, with several new forces such as Yundu, Rower, and Qidian joining the traditional automakers.

Zhang Yong, then Vice President of BAIC New Energy, said at the conference, “Although there are more and more social capital and internet companies entering the car-making industry, we must have the most basic respect for car making.” This was met with approval from many in attendance.

However, from the results, many new forces that once had “respect” for car-making have fallen before dawn. Sailin spent tens of billions of yuan to build a “scooter for the elderly” that cost only a few hundred thousand. Baoneng invited industry experts and ended up spending millions on snacks. While hundreds of new forces were fighting each other, only Li Xiang had made preparations early for the “cold winter.”

In fact, Ideal Auto’s early financing capabilities were far inferior to most new car-making forces. According to the company’s disclosed data, when Ideal Auto completed its B round of financing in 2018, it only received just over 4 billion yuan.

Due to Li Xiang’s stubborn development of extended-range technology in the “transition phase,” investors were initially skeptical, and his straightforward nature somewhat increased the difficulty. In his most recent essay, Li Xiang even used “too poor” three times to describe his own financing level. As a result, many investment firms, such as Zhang Ying from China’s Innovation Works and Huang Mingming from Mingshi Capital, helped to intermediate between parties, and the latter even played the role of half CFO for Ideal Auto in its early stages.Although faced with financing difficulties, Huang Mingming later concluded that “Li Xiang was an investor with a background in running a business for a long time.” In other words, entrepreneurs understand the way other entrepreneurs think, while most institutional investors do not. The overall environment in 2019 was not good, and the ideal Series C financing did not progress smoothly. Fortunately, the prototype was completed, and ByteDance and Meituan joined the project besides investment institutions. Wang Xing even used his own money to invest.

Since Tesla used pure electric technology at that time and there was no successful case of extended-range technology as an “outdated” technology in the world, many investors without an industrial background did not understand or were unwilling to invest in it. However, Li Xiang combined this with the domestic situation and made a judgment on the energy supplement system. The Chinese market is different from foreign markets, and most users do not have conditions for fixed parking spaces and privately-installed charging piles. Over the past few years, no technology company has achieved success by completely copying the American model.

In fact, as of September last year, China’s charging pile layout still showed uneven distribution, with a car-to-pile ratio of about 3:1 and a utilization rate of less than 10%. Li Xiang’s prediction allowed Ideal Auto to sail smoothly last year, not only achieving the highest sales volume in the segmented market but also leading the trend of extended-range technology.

Ideal Auto’s insight into the market was actually reflected in its previous “failed” product. Looking at the top few on the C-end sales ranking, one is a medium-to-high-end new energy vehicle like the Model3/Y, and the other is a mini EV like the MINI EV, which is around 300,000 yuan.

Li Xiang once analyzed to us: “It’s just two poles, very simple, and the industry will always be like this.” When the middle part begins to popularize may be answered by the improvement of the next-generation charging technology.

In the 0-1 stage of Ideal Auto, the professional expertise of the managers is the most important, and it is necessary to achieve growth and verification by targeting the acquisition of 3% of the segmented market. Li Xiang’s expertise not only includes renowned product development but also cash flow and organizational management.

On the one hand, due to the scarcity of grain in the early days of Ideal, and on the other hand, due to Li Xiang’s rigorous cost management, such as changing the car logo, standardizing equipment, and cutting off pure electric technology, a series of unprecedented moves in the industry, made Ideal Auto look much better in the winter of 2019 than NIO, who was living in ICU, and XPeng, who was waiting outside.

Before going public, Ideal’s sales costs were only a little more than 7 points, while traditional automakers at the same time were mostly around 30 points, and NIO and XPeng did not lower it. According to last year’s third-quarter financial report, Ideal Auto’s comprehensive gross profit margin reached 23.3%, the highest among domestic new energy automakers.In terms of organizational management, Li Xiang and his teammate and opponent Li Bin formed two opposite sides. In the early days, NIO recruited a large number of industry experts to lay the foundation for its high-end development, while Li Xiang only hired people he believed in and did not question the origins of heroes.

Li Xiang once described himself at 40 as “still unfiltered, causing trouble, and annoying others, without the maturity, openness, rationality, and objectivity that others expected.” In contrast, Li Bin always presents himself as gentle and relaxed.

Perhaps in peacetime, problems always lie dormant, but once external stimuli are received, they will erupt together. In 2018-2019, NIO continually experienced internal friction, and high-level managers such as the North American CEO, Li Zhang, and the Vice President of Software, Zhuang Li, successively resigned, which had a profound impact on Li Bin.

Relatively speaking, Li Xiang described his management as “feeling suspicious of you in the morning and rushing to leave in the afternoon.” From entrepreneurship to listing, apart from those fired, few senior directors and above voluntarily quit.

Rome Wasn’t Built in a Day

Even if Li Xiang has fully considered everything, from 0 to 1, everything is not always smooth sailing. He has also experienced challenges such as being questioned for being technologically backward, insufficient funding leading to slow development progress, and difficulty in coordinating emotions between new and old car owners, and so on. But perhaps it was experiencing the difficulties of starting from scratch that allowed him to distinguish between who is “talking nonsense” and who is “speaking with evidence” in the new force of car makers.

Accurately predicting the industry is no different from becoming a veteran. In addition to some natural talent, continuous learning is still important, finding problems in misjudgments, reviewing, and correcting, pulling out the facts from experience and complex information to find the root cause. Sometimes, personality may also be the crowbar that opens the door to success when experience and natural talent do not work.

“Although we manage our expectations very well in business, sometimes I talk too much, which can damage everyone’s expectations management, because business operations require stability.”

Li Xiang realized very early on that some things should be left unsaid. The leaders of companies leading the way in the industry often remain relatively silent, to prevent being taken out of context and bringing unnecessary trouble to the company. (For example, in the smartphone industry, four of the top five domestic companies do not speak, only the fifth with the highest market share speaks the most, and he is also the most misunderstood.)

Regardless of the reason why Li Xiang cannot control his emotions, at least among the current new car makers, he not only has practical experience in personally making cars, but also observes, thinks, and summarizes the theoretical experience of other car companies. This unique experience allows him to both feel his way across the river and watch and learn from others who feel their way across, and then cross the river on his own.# The Year of Electric Vehicle Consumer Rights Protection

2019 has been an extraordinary year for electric vehicle consumers’ rights protection in China. In March, Tesla announced a significant price cut for all of its models, with some reductions exceeding RMB 300,000, which resulted in a flood of consumers claiming refunds. In response, Tesla could only offer two free upgrades for its autopilot system.

In July, Xpeng launched its G3 2020 model. However, the complaints from owners of the 2019 high-tier versions about the large improvement in G3’s range while being cheaper have induced protests, leaving Xpeng no choice but to send out an apology letter and pledge a subsidy of RMB 10,000 for owners who upgraded to the new version within three years.

Taking lessons from the two mentioned models, despite the launch price of RMB 328,000, the coveted IDEAL One launched in 2020 took care of the emotional side of owners who had purchased the 2019 version by announcing an upgrade to the 2020 version at no additional cost. This move averted any major negative publicity during a tough year.

Unfortunately, IDEAL One still encountered an old issue with the launch of its 2021 upgrade. Some owners who ordered the 2020 version because they were informed that there would not be a new model until a year later were upset when the 2021 model was launched the following year. With overall improvements in the adaptive driving, radar, cameras, motor, and fuel tank capacity, several owners criticized IDEAL One, with some even attacking the CEO Li Xiang on his Weibo account.

The core issue was with the chip supplier. The IDEAL One 2020 was not flexible and had to rely on the Israeli company Mobileye’s chip, which could not incorporate the IDEAL AD autopilot system. Failure to follow other manufacturers’ technology could have had a negative impact on the company’s competitiveness and R&D progress.

Car-making is an exceptionally precise process with a mistake in any phase leading to a severe setback for the company, and Li Xiang’s strategy was as meticulous as any. Still, unexpected things happen. The micro-vehicle project supported by Wuling proved this point. They chose the right track, but the timing was still immature, which resulted in a missed opportunity.

Another reason Li Xiang is under fire is he is well aware that there are countless unpredictable elements that can make things even more complicated and challenging in the car-making process. He once said that he was confident about delivering 10,000 vehicles to consumers as he predicted with high accuracy how the supply chain would behave within the six “easies”: smooth component management, well-oiled supply chain, easy production management, simple employee training, effortless research and development, and problem-free over-the-air software updates.Who would have thought that the chip supply shortage caused by the epidemic last year would affect the delivery process of the Ideal ONE. In order to minimize the impact, Ideal had to introduce a solution of delivering the cars first and installing the radar later. Vehicles scheduled for delivery in October and November will only be equipped with 1 front millimeter-wave radar and 2 rear millimeter-wave radars. Ideal plans to install the remaining 2 millimeter-wave radars for users who have taken delivery from December to before the Chinese New Year.

Therefore, only by understanding the context can one truly perceive the meaning behind Li Xiang’s Weibo post on the “veteran.” It reflects the ups and downs behind it.

Conclusion

Li Xiang’s Weibo repost of Wen Wei’s Weibo mentioned two key phrases: “life-saving straw” and “brand.”

Since its listing, Tuanche has been in a state of continuous losses due to poor revenues, which were compounded by the impact of the epidemic on its offline transactions. In January last year, Wen Wei proposed to complete privatization at a price of $4.25 per share. Based on this price, the valuation of Tuanche at that time was $85.45 million, a decrease of nearly 90% compared to the market value of $626 million on its first day of listing two years ago.

Interestingly, the privatization proposal was eventually abandoned 10 months later, and Tuanche’s reason for this was “to give the company more opportunities.” It is unknown whether these opportunities have arisen, but at least the valve of market capitalization has not yet been closed. As of the close of trading on January 14, Tuanche’s market value was only $55.6 million.

As leading companies such as Renrenche and Uxin lose favor from investors and their offline businesses continue to contract, it is difficult for small and medium-sized players like Tuanche to survive on their own. Historical experience has shown that many bigwigs in the industry have regarded making cars as a “life-saving straw,” from Jia Yueting to property developers in China who have ventured into the car-making industry, but the process has been very bumpy.

From making cars to venture capital, every method has been tried.

However, producing cars imposes extremely strict financial requirements. As of December 31, 2020, Tuanche had a cash and cash equivalents balance of only RMB139.7 million, which is far from the recognized threshold of RMB10 billion.

As for “brand,” Li Xiang believes that entrepreneurship needs to find something certain as its foundation, and talking about “brand” is “completely like blind people touching an elephant.”He believes that the main function of a brand is to identify the identity of a car company. “The previous generation of Mercedes-Benz E sold 2,000 cars in a month, with a discount of 200,000 yuan. This generation of Mercedes-Benz E sells 15,000 cars in a month, with a discount of three to four thousand yuan. Can you tell me if there has been any change in the Mercedes-Benz brand?”

When it comes to shaping a brand, he uses three practical and concise metaphors: one arrow to the head for recognition (such as the product library of Autohome), one arrow to the heart for connecting with users (the concept of mobile as a car and home as a stop), and one arrow to the soul for pursuing and believing in products.

In summary, when it comes to car-making issues, Li Xiang is an experienced person who has tasted crabs and experienced bitter lessons. It is better for Wen Wei to think about whether it is practical to make cars or to make wheels with the little leftover resources he has, instead of just arguing with words. Of course, he can also talk to experienced people, just like Li Xiang once did, watching others feel their way across the river.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.