Author: Qiukai Jun
Editor: Wang Lingfang
The most unexpected information during the Ideal Auto Q2 earnings call on August 15th was that the sales of Ideal L9 had a big impact on the sales of Ideal ONE.
The CEO of Ideal Auto, Shen Yanan said:
When we provided guidance for Q3, we had already noticed the slowing of orders for Ideal ONE. We believe the main reason is that as new products continue to enter retail stores, consumers are more attracted to Ideal L9.
This was almost unexpected for everyone, including Ideal Auto itself. Shen Yanan said:
We were also surprised to see that after customers came to the store to test drive Ideal L9, some customers who originally planned to buy the Ideal ONE model chose Ideal L9 instead.
Of course, Ideal Auto must have spotted this phenomenon earlier than the industry and has taken measures. On the one hand, Ideal ONE has started a promotion in some areas where customers can buy insurance in-store and get a discount of 7,000 yuan; on the other hand, the launch of Ideal L8, which is an alternative model to Ideal ONE, has been accelerated.
However, if L9 is stealing Ideal ONE users, and then L8 comes out, will it also hurt L9?
Ideal Auto is preparing to distribute 1 model for every 100,000 yuan in the 200,000-500,000 yuan range, to effectively correspond to user needs without hindering each other.
Some people think that this is the consequence of Ideal Auto pursuing “hot-selling models.” Ideal ONE, L9, and even L8 are all family-oriented cars with little difference in price. They do not have any differentiation, and there can only be one “hot-selling model” that exists.
Looking forward, this debate also raises a general question: In the era of intelligent electric vehicles, how to do product differentiation? Has software begun to define automobiles?
Ideal ONE Suddenly Falls From Favor
In Q2, when the epidemic was devastating, Ideal Auto performed well.
Looking at various financial indicators, they basically increased year-on-year, but slid somewhat significantly from a normal Q1 incresae.
Of course, the most crucial factor was the car sales performance.
In Q2 2022, Ideal ONE delivered 28,700 vehicles, an increase of 63.2% year-on-year,but a decrease of 9.55% month-on-month.
Ideal Auto’s delivery volume in the past five quarters:
As the only current product of Ideal Auto, Ideal ONE can still sell so many models during the epidemic, which can be considered good.However, the third quarter is more than halfway through and the Ideal ONE has seen a sharp decline in sales.
“In July, Ideal ONE delivered 10,400 vehicles, a year-on-year increase of 21.3% from July 2021, but a drop of nearly 20% from 13,000 vehicles in June.”
“Looking at the number of insured vehicles in the first two weeks of August, Ideal ONE was less than 2,000, with a drop of more than 60%, which is very alarming.”
This situation is expected to continue. When Ideal Automobile released its Q2 report, it expected sales in Q3 to be between 27,000 and 29,000 vehicles. Since 10,400 vehicles were already delivered in July, and Q3 includes nearly 10,000 vehicles expected from L9, this means that Ideal Automobile itself expects Ideal ONE to deliver only about 6,600-8,600 vehicles in August and September, which is consistent with the trend in the number of insured vehicles.
How did Ideal ONE, an SUV single product that sells for more than 300,000 yuan, suddenly lose its popularity?
The main reason is that Ideal has launched a more powerful L9.
Why does L9 replace Ideal ONE?
The impact of L9 on Ideal ONE has also exceeded Li Xiang’s expectations.
At the communication meeting held when Ideal L9 was released, Li Xiang said:
“People are worried that the sales of Ideal ONE will decline after the release of Ideal L9, but they haven’t. Yesterday, the sales of Ideal ONE rose again because people who want to buy new cars costing 300,000 to 350,000 yuan still buy new cars costing 300,000 to 350,000 yuan. As for those who suddenly want to buy a car costing 500,000 yuan with a budget of 300,000 to 350,000 yuan, they are probably less than 10% of the market. Users are very pragmatic and choose the best among those costing 300,000 to 350,000 yuan.”
However, as Shen Yanan mentioned, after entering the store, many consumers directly crossed the interval of more than 100,000 yuan, abandoned Ideal ONE, and chose L9.
Why?
I analyze that there may be three reasons.
First, L9 surpasses ONE of the previous generation.
In terms of power systems, Ideal ONE is a first-generation hybrid platform, while L9 is a second-generation hybrid platform. The range extender has been upgraded to a 1.5-liter four-cylinder engine, eliminating the criticism of the 1.2-liter three-cylinder engine. The maximum power has increased from 245 kW to 330 kW, and the range has been extended from 1080 kilometers to 1315 kilometers. The suspension system has been upgraded from the McPherson + multi-link suspension of Ideal ONE to double wishbone + five-link.
In terms of intelligent driving, the L9 is equipped with NVIDIA Orin-X chip, which significantly improves the computing power of the vehicle system. The vehicle is also equipped with a 128-line lidar and many other powerful sensors. The assistance driving level has been upgraded from the L2 of the Ideal One to the self-developed AD Max of the Ideal, which will support full-scene intelligent driving assistance.
In terms of configuration, the Ideal L9 adds a car refrigerator, second-row seat legrest adjustment, seat massage, and electric folding function for the third row, based on the Ideal One. The interior cabin of the L9 also further strengthens its “living room” attributes with features such as the rear entertainment screen and gesture interaction, providing a better family riding experience.
Moreover, the L9 is also larger in space compared to the Ideal One.
Overall, the L9 is like the second-generation iPhone to the first-generation, compared to the Ideal One.
Secondly, with the help of finance, the price difference between the two cars is easy to overcome.
Shen Yanan said when introducing the car owners who had planned to purchase the Ideal One and then switched to the L9, “especially for customers with relatively flexible car purchase budgets.”
“On the one hand, customers who purchase the full-priced car can add more to the car’s price. On the other hand, it is not difficult to cross the hundreds of thousands of yuan gap when buying cars on loan with today’s consumption concept.”
Based on the default financial plan provided by the Ideal Car APP, it is not much different between the Ideal L9 and Ideal One. The L9’s down payment is 33,000 RMB higher, and the monthly payment is an extra 1,540 RMB.
Thirdly, consumers who purchase new energy vehicles with prices above 300,000 RMB are looking for the brand and the sense of label that the car brings. The L9 is the flagship model of Ideal, and the Ideal One is not as high-end as the L9, which leads some consumers to switch to the L9.
Under these circumstances, the Ideal L9 has become the terminator for explosive sales of the Ideal One.
Can L8 and other models coexist with L9?
The L9 has accelerated the withdrawal of the Ideal One. What will happen after the L8 is launched? Li Xiang plans to layout at least three cars (including pure electric and boost systems) in the 300,000 to 500,000 RMB price range, which can coexist and complement each other.We first explain the logical product strategy of Li Xiang’s products using the example of Apple’s iPhone product strategy. Li Xiang said that the Ideal car series will be very similar to the iPhone, “using an effective technology platform to launch a series of different products such as iPhone 12 Pro Max, iPhone 12 Pro, iPhone 12, and iPhone 12 Mini to meet different consumer demands at different prices accurately.”
According to the information disclosed by Li Xiang, for example, in the 300,000-400,000 yuan range, the extended-range electric vehicle model will be replaced by the L8 instead of the Ideal ONE, and there will be two versions, MAX and PRO, depending on the level of intelligence. The MAX version, like the L9, will carry a lidar and the Ideal AD MAX smart driving level, while the PRO may not carry a lidar and may be equivalent to the current Ideal ONE in terms of smart driving level.
This product layout strategy can be summarized as platform-based power system and differentiated intelligent system. However, regardless of the intelligent system, they are high-end intelligent and guarantee experience, like intelligent driving, which is definitely beyond L2.
For intelligent cars to be comparable to Apple’s iPhones, there is a prerequisite: homogeneity of original functions. In other words, the driving abilities provided by intelligent electric vehicles should not be significantly different. Otherwise, people still have to choose endurance, power, and space as before.
When purchasing an intelligent electric vehicle, horsepower doesn’t need to be considered. Everyone only considers computing power and what functions and experiences can be provided based on this computing power.
According to this idea, the Ideal ONE is not a product that can be on par with the L9 because it lags behind in power, computing power, and space in all aspects. The L8 is like the L9 in terms of horsepower, but has two choices in computing power, PRO and MAX, in which MAX is the same as the L9.
From this perspective, the blow of the L9 to Ideal ONE will not repeat itself when the L8 is released because the L8 and L9 are products of the same generation, only differentiated in price and size.
Will there be a situation where there is such a generational gap between the L9 and Ideal ONE again after Ideal introduces two new products every year?
Regardless of the power system or the intelligent system, car companies will definitely iterate and upgrade. However, I believe that the upgrade of the power system will not be significant, and the gap between new and old cars in Ideal’s future rolling iteration of products will not be as big as the gap between Ideal ONE and L9.
Is the impact of Ideal L9 on Ideal ONE a unique phenomenon caused by Ideal’s “explosive product” strategy or an inevitable experience for other intelligent electric vehicles?I think it is possible.
Let’s take a look at Tesla. When the Model 3/Y enters China, how many people will still buy the Model S/X? This is also true globally. Only when the updated PLAD version of the Model S is introduced does it regain vitality.
Applying the logic of smartphones, other intelligent electric vehicle companies must first solve the high level of raw functions and homogeneity, whether pure electric or extended range, just like the communication functions of smartphones, they must reach a certain level; and then provide a smooth operating system + differentiated hardware + differentiated functions and experiences in intelligent functions, in order to effectively form a group of products that can compete with each other, otherwise there will be a phenomenon like L9 ending ONE.
If we want to achieve “software-defined cars”, the hardware of car drive needs to be platformed and homogenized. Otherwise, it is still “defining” cars with larger batteries, larger motors, and larger space, rather than software.
Returning to the ideal car itself, the ideal car needs to wait until August and September for the delivery of L8. Looking at the previous circulating information about the ideal car supply plan, L8 was originally scheduled to be delivered in October. However, Li Xiang has stated that it will be delivered much earlier, and the time from release to delivery of L8 will be much shorter.
L8 was originally planned to deliver 25,000 vehicles in the fourth quarter of 2022, basically at the same level as Li Xiang ONE. Coupled with the L9 release, after experiencing a painful third quarter, the ideal car is expected to rebound in the fourth quarter.
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.