Yesterday evening around 8:00 PM, Ideal Automotive quietly released a message confirming that the X01 model, referred to by its codename, has officially been named the “Ideal L9.”
The message was extremely concise and did not even include an image, yet it was filled with keywords:
- During the Beijing Auto Show
- Designed for families
- Global
- Intelligent flagship SUV
- L9
This amount of information is enough to trigger the imagination of those who are following the X01 model.
The 2022 Beijing Auto Show will take place from April 21st to 30th, which is about 50 days from now. It is normal marketing rhythm to release official preheating messages at this time. The positioning of “designed for families” is also within everyone’s expectations since this is the cornerstone of the success of Ideal One. As for the new information such as “global,” “intelligent flagship,” “L9,” and the price that everyone is most concerned about, let’s explore them together.
What’s the suitable price?
In February of last year, Li Xiang released an internal letter, which mentioned:
Adhere to the brand positioning of luxury intelligent electric vehicles, and cover a wide price range of 150,000 to 500,000 yuan.
Later, in the prospectus of the Hong Kong stock market released in July, this price positioning interval was adjusted to:
Strategically focus on new energy vehicles priced between RMB 200,000 and 500,000 yuan.
Therefore, as the flagship model of L9, the price range occupied must be the highest. It is generally expected to be between 400,000 and 500,000 yuan. What will it specifically be?
The current price range of Ideal One is 338,000 to 348,000 yuan, and all configurations other than the price difference for the body color are standard. Considering the differentiation from ONE, a difference of 50,000 to 60,000 yuan, or a total of about 15%, is necessary. The minimum price of L9’s pricing will not be lower than 400,000 yuan.
Considering Ideal’s sales target of wanting to sell 2 million units by 2025, regardless of whether it can be achieved, every car it produces must be a hit. Even if production capacity is unlimited, wealthy people who can afford luxury cars priced above 400,000 yuan are limited. Every 10,000 yuan increase in price will deter a group of potential customers.
There needs to be a certain bottom line, but the upper limit cannot be too high, which puts Ideal in a dilemma. Let’s first imagine how other manufacturers would do it:
Most likely, a starting price of about 400,000 yuan will be given, and the price of the most popular configuration model will likely be between 440,000 to 450,000 yuan, with a gap of about 100,000 yuan with ONE.
Considering that it has already been clarified that “all models beginning with the L9 in 2022 will have necessary hardware compatible with level 4 autonomous driving as standard,” software subscription services will also be a must-have option.The entry-level price only offers Level 2 advanced driver assistance systems, without enabling advanced autonomous driving functions, while making trade-offs in intelligent cockpit features. The mid-range price offers a complete intelligent cockpit system with a subscription for advanced autonomous driving functions. The high-end price offers a one-time purchase of autonomous driving functions for life. Adding some paint and exterior accessories is the most reasonable option I can think of.
However, in accordance with Li Xiang’s product philosophy, intelligent driving must not be charged and should not offer too many differentiated configurations. Under this strategy, when the hardware costs for autonomous driving and intelligent cockpit significantly rise, it is truly curious how to balance the selling price and profit and have a strong cost-effectiveness.
But I dare to guess that the basic pricing under the standard configuration strategy will not exceed 450,000 RMB.
Focusing on China, but not giving up the world
Ideally has mentioned the global market more than once.
As early as the Q4 2020 earnings conference call, Shen Yanan said that Ideal Automotive’s ultimate goal is to become a world-leading intelligent electric vehicle leader, so there is no doubt that Ideal will participate in global market competition. In the media communication meeting in May 2021, he once again stated that Ideal Automotive is very seriously studying overseas market product and channel models, and the team has been established.
At the 2021Q4 earnings conference call which just ended last week, Shen Yanan stated that Ideal Automotive will participate in international competition, but will be more focused on China. At the same time, he also stated that a professional globalization strategy team has been established, and the main tasks of this team are:
- Find potential markets for products
- Determine suitable product lineups
- Determine the business model when entering new markets to achieve meaningful market share
Now, announcing that L9 is a global model means that it will inevitably go overseas during the L9 product lifecycle, and L9 is one of the suitable product lineups that Shen Yanan mentioned.
So, let’s speculate on the other two questions – where to sell and how to sell.
It is not a new thing for new forces to go overseas. Many new energy vehicle brands such as NIO, XPeng, Aiways, and Dongfeng’s Voyah, have successively entered the European market. NIO still uses a direct sales model overseas, starting from infrastructure. In September 2021, it began to deliver ES8s to the Norwegian market, with only more than 200 units registered so far. XPeng relies on dealer cooperation, and in 2021, XPeng delivered 438 new cars to the local market, of which 406 were G3 models and 32 were P7 models.
From the sales volume point of view, it seems to be investing a lot to go overseas but not getting much in return. However, NIO and XPeng’s main goal for going overseas is to build brand influence and pave the way for the future.
If Ideal’s goal is to achieve “meaningful market share” from the beginning, then it must find a market with sufficient depth to support sufficient sales.## What Abilities Make a Flagship?
As the dominant force in the field of new energy SUVs, the ideal ONE has almost reached its full potential. However, the L9 cannot be called a flagship without any added value.
During the Q4 2021 earnings call last week, Li Xiang said:
“X01 can fulfill the needs that Ideal ONE cannot, and will also satisfy some of the users’ new requirements, which no other new energy vehicles on the market today can provide. We believe many users may not be able to articulate their needs, but will say that it is exactly what they want after experiencing it. This is the core concept of our product development. The user-oriented philosophy will be embodied in X01.”
These new requirements and user-oriented philosophy should be the added value of the L9.
Combining this with the recruitment prospectus of HKEX, stating that “from 2022, Ideal Auto will develop its own hardware for L4-compatible autonomous driving as standard equipment”, higher-grade autonomous driving capability should certainly be one of the previously unmet needs. Moreover, enhancing other hardware components will definitely be a striking highlight of this flagship.
Moreover, the Intelligent Cabin System of Ideal ONE is still modest and traditional. Li Xiang described the cabin space as:
“The space has the atmosphere and design we like, abundant electrical energy, a powerful calculation capacity, the best VR and AR environment. It is a space for entertainment, socializing, work, family, and an intelligent electric vehicle that will provide more value than a residence.”
Therefore, it is reasonable to believe that the cabin system of L9 will provide a groundbreaking flagship experience.
Finally, what new demands and features are there? Considering the price of L9 and the 500,000 RMB consumer spending power of certain groups in the family car market, what do they need in this scenario? If we look at this from a global perspective, what common needs do customers in this consumer group around the world have?
The answer is likely to be family travel. Therefore, L9 may have many innovative features that cater to this specific scenario, such as transplanting some recreational vehicle functions into an SUV and offering unparalleled outdoor experiences that regular SUVs cannot provide.
From ONE to L9, the Name Change is Quite Dramatic.From ONE to L9, this naming approach is quite surprising. The specific brand naming approach is currently only known by Ideal’s marketing department, but let’s speculate.
First, we searched Ideal’s recent trademark registration records and found that they first applied for “Ideal L9” on December 9th last year, and then applied for L7, L9, M7, and M9 on the 21st.
Since X01 has been named L series now, it is speculated that the M series may be reserved for the MPV series. Ideal’s MPV model has been rumored for a long time. According to previous news, the Whale platform corresponds to the MPV model, which prioritizes space.
It can be confirmed that Ideal’s naming for the current L9 was relatively late. On August 31st last year, Ideal registered LX, LM, and LS three series from 1 to 10, indicating that they were named according to X, M, and S series, possibly corresponding to SUV, MPV, and small SUV and Cross models.
However, the use of a single-letter L series for naming, without registering an entire trademark sequence for trademark protection ahead of time, is puzzling.
If the L series is used for SUVs, the next generation of Ideal ONE is likely to be named L7, occupying the 300,000 to 500,000 yuan range. Considering the brand positioning of 200,000 to 500,000 yuan, only one SUV model smaller than that can be accommodated, and the fear is that the L series can only go down to L5. The fact that Ideal has not continued to register further down makes us speculate boldly that Ideal may not have planned to launch an SUV smaller than the ONE in the short term.
Conclusion
As a benchmark for new forces, NIO has launched five models, and Xpeng has launched three models, while Ideal has only welcomed the second one, which is indeed late in terms of pace.However, when it comes to sales performance, LI (Li Auto) is the most successful. Specifically, L9 has no rivals in its level. Throughout the entire passenger vehicle market, there are no full-size SUVs that sell for less than RMB 500,000. Furthermore, L9 is a range-extended electric vehicle that delivers an outstanding intelligent driving experience.
But isn’t the full-size SUV market very narrow?
Two years ago, Zhang Xiao, LI’s product director, said the following to the 42Garage:
Segments cannot determine sales; sales are a comprehensive issue. If the BMW X7 is priced at RMB 500,000, what do you think its sales would be?
Perhaps we can predict the secret to L9 becoming a hot product by carefully considering this statement.
Finally, let’s warm up for upcoming content. We will continue to release more exciting content about X01 on the 42Garage and the App. Please come to our community and join the LI L9 interest group to discuss and interact with us. The second article in the “Garage X01” series will be online next week. Stay tuned~
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.