Results

Author: Leng Zelin

Editor: Wang Pan

On this Friday, IDEAL announced its Q4 and full year financial report data for 2021. Most importantly, IDEAL’s net profit in Q4 was CNY 295.5 million, an increase of 174.9% YoY. Yes, IDEAL has achieved profitability again.

Let’s take a look at the major financial data. Thanks to the significant increase in IDEAL ONE deliveries in Q4, IDEAL’s Q4 revenue was CNY 10.62 billion, up 156.1% YoY and 36.6% QoQ. The full-year revenue also reached CNY 27.01 billion.

The vehicle gross margin in Q4 again reached 22.3%, mainly due to the increase in average selling price brought by the rising number of new IDEAL ONE deliveries. The overall gross margin went down from 23.3% in the last quarter to 22.4% due to the lack of new energy vehicle credit sales in Q4.

Regarding offline channels, as of the end of 2021, IDEAL had 206 retail stores in 102 cities, with 278 service and sheet metal painting centers in another 204 cities.

Overall, IDEAL has submitted an impressive financial report, putting a period to the end of 2021.

With the brilliant financial report and popular car models, IDEAL is arguably one of the biggest winners among Chinese new energy vehicle startups last year. However, that doesn’t necessarily mean that the new energy vehicle sector has truly entered a growth period. The pitfalls for new carmakers might be lurking beneath the shiny surface in 2022.

Once bitten by a snake, a person dreads a rope for ten years.

As one of the top three new energy vehicle startups, IDEAL stood out last year with its skyrocketing sales. However, the internet always brings attention to the self-made celebrities and whoever wants to shine in the spotlight has to withstand public opinion. It’s like being under the public eye is the price to pay for glory.

Recently, IDEAL ONE caused a lot of controversy among the public.

During the Chinese New Year holiday, an IDEAL ONE owner drove his car to a famous place called Chengfo Slope in Shimen County, Changde City, Hunan Province, after visiting Tibet, and decided to challenge the hill climb at the suggestion of a friend.

Chengfo Slope, famous among off-road enthusiasts, has steep gradients, sharp turns, and high roads crossing each other. Videos of Tesla Model 3/Y, NIO ES8, BYD Tang, Siles SF5, and other models successfully ascended Chengfo Slope had been circulating online. Therefore, the IDEAL ONE challenge attracted a lot of attention.# The English Markdown Text Result

The Voyah FREE, which challenged the Ideal ONE together, successfully climbed up the hill after multiple attempts, while the Ideal ONE, after several attempts, seemed to have insufficient grip due to one side of the tires not touching the ground, causing rapid spinning and ultimately damaging the reducer of the rear-drive motor, leaking some fluid.

Videos circulating on Douyin have edited many car models’ challenges with the Ideal ONE. Naturally, the Ideal ONE has been questioned. It has become another brand that has caused public opinion among users after the NIO owner.

In fact, whether a city car can climb such a professional slope does not mean anything. However, the Ideal official later went to Chengfo Slope in Hunan to organize a challenge, and all four tests were successful in climbing up the hill. However, because the ground, weather, and previous conditions were not consistent, many netizens did not buy it, and believed this was unnecessary.

As the poster of the Voyah become more intense, it is seen as a challenge to the Ideal ONE by some. Because the two cars except for the different seat configurations, have extremely high similarity in power mode, interior, and pricing, they are usually regarded as competitive products.

Like NIO benchmarking BMW, Ideal is benchmarking Highlander, while WM Motor often “criticizes” Tesla. Through the association with well-known models and brands of the same level, it helps to quickly expand awareness in the brand’s preliminary stage. Most brands have adopted this strategy, which is acceptable.

However, whether it is Ideal or Voyah, it seems that they are eager to “prove” themselves in this matter.

People unconsciously compare a group of new energy cars like “Te Wei, Xiao Li” etc. If it was last year or the year before, it wouldn’t be a big deal. But now, as various OEM models begin to coincide, the competitive relationship will become particularly intense.

Simply put, in the past, there were enough mountain tops, and everyone occupied the mountains as kings. Now, as their respective “territories” continue to expand, the boundaries are beginning to blur, and frictions and conflicts arise, eventually evolving into local wars.

After this incident became popular on the Internet, many car owners drove various vehicle models to challenge Chengfo slope, and there was even Fukang. In addition to their love of off-roading, this is also an invisible sense of achievement. After all, being able to climb up the hill successfully means their car crushed last year’s sales champion of single new energy car models above 300,000 units.

Currently, the Ideal has only one model for sale. Compared with other new energy vehicle companies, Ideal ONE has had greater sales pressure.

After finally proving themselves through sales, how to wear this crown for a longer time, and more steadily, is perhaps the research topic Ideal wants to delve into.

## “Enlightenment Hill” in front of the new forces of car making

Blocking the way of ideal, “Enlightenment Hill” is actually a slope blocking the progress of new forces in the car making industry.

Looking on social media platforms such as Douyin and Bilibili, we find that new energy vehicles are not welcome to most people. A Douyin influencer told us a “unwritten rule” he summed up over the past few years: pouring out criticism on Li Auto equals more online traffic.

Not long ago, Li Auto terminated its subsidiary, “Li Auto Technology Co., Ltd.,” and reached the top of the Douyin search list. News of bankruptcy and liquidation surged and even surpassed the wildfire popularity of Guilinggao, a type of Chinese jelly. The change in business registration, which happened in one of dozens of subsidiaries, was interpreted into countless editorial versions, and the key is that many people who do not know the truth believe them. There were even comments from some viewers saying “I already knew that Li Auto was going bankrupt” in the comment section.

Over two months ago, Li Bin’s statement, “I don’t understand why people still buy gasoline cars” also brought himself and Li Auto into the trend on various social media platforms, and even created controversy among the people.

The mentality, where people like a good show, hasn’t changed among humans, and this is even more so on the Internet. However, behind these public opinions, there may be public relations staffs gradually losing their hair, and also the helplessness of the founders of new forces in car making.

Therefore, when Li Bin was interviewed by Guangzi Planet at the beginning of this year, he said, “So, as you can see, I am very nervous when I am interviewed now, and I try not to let out any leaks.”

Similarly, Li Xiang, with his straightforward personality, stopped updating his Snowball app after going public. In the past year, he also reduced the frequency of his postings on Weibo, and stopped updating it for several months at one point.

Previously, both Li Xiang’s vulgar statement at the Chengdu Auto Fans Meet and Brother Xiaogang’s remarks on the resale value of used Ideal Auto cars brought negative influences to Ideal.

From the perspective of stock, China’s car ownership is close to 300 million, and the proportion of electric vehicles is still very low at 2%-3%, so expanding the number of users who are willing to consider electric vehicles is a common goal of new energy vehicle companies.

Echoing the public’s opinion without independent thinking is the norm for new energy right now, however, any “over-the-top” statements and unexpected events promulgated by car companies that eagerly carry the banner of new energy propaganda are easy to magnify and create a backlash.

People find it difficult to accept the unknown. The popularization of new energy knowledge has not reached its endpoint even after the reduction of subsidy policies. On the contrary, this is just the beginning of the new energy era. The tolerance for domestic brands is also the same.

Just as one wave subsides, another rises – price increases.The work of promoting new energy knowledge and changing concepts is not yet complete, and automotive companies will face another problem.

Recently, Euler dealers received a notice from the manufacturer to stop ordering their two models, Black Cat and White Cat. Although these two micro-cars are not as well-known as the MINI EV, their combined sales last year exceeded 80,000 units. The sudden refusal to accept orders has triggered a series of doubts.

On February 23, Euler CEO Dong Yudong poured out his “bitterness” in a post in the late night. “Take Black Cat as an example, the per-car loss exceeded 10,000 yuan after the raw material price surged sharply in 2022.”

It is reported that if new orders continue to be accepted, delivery of the new orders will not take place until the second half of 2022. In other words, it is not that production has stopped, but that production is “difficult”.

Behind the suspension of orders for Black Cat and White Cat is the crisis facing the entire industry. The shortage of chips and the rise in upstream raw material prices have become reins holding back the continued rapid development of new energies.

According to Automotive Business Review, the price of chips has risen sharply, and the normal factory delivery price has increased by an average of 17%. Some high-end chips have increased by more than 20 or 30 times, and some individual products have even increased by more than 200 times. The impact on micro-cars that live on cost control is enormous.

Relatively speaking, high-end cars have a stronger ability to command a premium price, but this does not mean that they are not affected. Li Bin once told iPhonexplanet that he would also attend some wine parties to seek the support of partners.

“There are more than 1,000 chips in our car. If one chip cannot be supplied, my car cannot be delivered.”

In addition, XPeng and Ideal have adopted a strategy of delivering the cars first and issuing the tickets later by the end of last year due to shortages in their supply chains.

According to an insider who spoke to iPhonexplanet, some automakers have already decided to raise prices in the middle of this year, but the specific increase is currently unknown. In fact, at the beginning of this year, due to the rollback of subsidy policy, most new energy automakers had already raised prices by 1,000-20,000 yuan.

If upstream raw material prices rise again, consumers’ purchasing enthusiasm will further decline.

With the rise in raw material prices and the shortage of supply chains, combined with the slow improvement of public awareness, the new energy vehicle industry in 2022 is faced with one “Becoming Buddha Slope” after another.

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.