Author: French Fry Fish

How to pursue excellence in the post-epidemic era? Our attempt is to “keep the rhythm”.

For “Super Charging Station” in 2022, this year’s National Day holiday has a special meaning- after a two-year hiatus, our company’s overseas exploration team set their sights on Europe and set off again.

Precisely because of this rare opportunity, early in the morning on October 3rd in Berlin, which was the first morning after landing, the teacher had already made a to-do list for the Six-Brains group. During the first 24 hours in Germany, the team sent back two videos. It can be foreseen that the theme of this trip to Europe will definitely be “full of rhythm”.

Before us, there seems to be a car manufacturer who also believes in a similar methodology- ZeroRun.

At the end of busy September, before two major events, ZeroRun organized a media interview. The chairman of ZeroRun, Zhu Jiangming, personally spoke and conveyed his views and attitudes on ZeroRun and C01.

Products Come First

The reason why we say rhythm, the reason why we say busy, the month of September that has just passed is also a month of special significance for ZeroRun.

• In mid-September, the media test drive of ZeroRun’s first mid-to-large-sized car, C01, officially began.
• On September 28th, ZeroRun officially launched C01.
• On September 29th, ZeroRun’s automobile officially landed on the Hong Kong Stock Exchange.

For this new product launch and capital listing, of course, both are good news. But there’s no rest for entrepreneurs. A series of questions follows:

How would the stock market perform? And what about the sales of the new car?

Due to the fact that this communication took place before the listing, Zhu Jiangming’s focus was squarely on the C01.

As the first domestic electric vehicle utilizing CTC battery and chassis integration technology, C01 is not only ZeroRun’s latest application of technology, but also an upward attempt by the ZeroRun brand.

In the previous dynamic experience video of the LI ONE C01, we mentioned that compared to the C11, the C01 is still a cost-effective car and a more comprehensive one.

However, in Zhu Jiangming’s view, the advantages of the C01 are even more significant. “After comparison, we believe that in the price range of 200,000, the C01 is a product without competitors.”

His reasons are twofold. Firstly, the C01’s car system is the first to introduce an Android virtual machine, which solves the problem of the richness of car applications. However, based on our experience with the engineering car before, this system still has occasional lagging issues, which hopefully can be addressed in mass-produced cars. Secondly, the C01 has made many configurations standard, such as the front double-wishbone and rear five-link suspension on the chassis, and the 23 item L2+ level intelligent driving assistant on the intelligent driving system.

Standard configuration for the entire suite can indeed be considered LI’s traditional practice. Starting from the C11, their slogan has been “entry-level comes with full configuration,” and the difference between various models of the C01 mainly lies in the battery capacity and motor power.

However, whether consumers recognize these advantages still depends on specific comparison with similar products at the same level.

Breaking through with “luxury”?

Although Zhu Jiangming is very confident, looking at the niche market in which the C01 is located, especially this year, domestic friendly competitors have been making moves in the field of new energy midsize sedans, which provide consumers with unprecedented choice.

Looking specifically at C01’s potential competitors, looking forward, there are BYD Han EV, XPeng P7; looking backward, there are BYD Hippo, Deep Blue SL03, NETA S, and more…

How to break through? Lynk & Co believes that there is a key factor on C01 called “luxury”.

“From the perspective of the entire new energy market, we have moved from a dumbbell-shaped market to an olive-shaped one. New energy vehicles have gone through this stage, and we can see that there is now a penetration rate of 30%. More people who used to look at B-class and A-class cars for fuel cars will pay attention to pure electric B-class cars.”

This is Zhu Jiangming’s judgment on the big market.

More car purchase intentions are flowing into the new energy B-class car. On the one hand, it is constantly enlarging the cake in this subdivision field. According to statistics, the capacity of the medium and large car market is about 2.6 million, and the pure electric proportion is only 11.6%, indicating huge potential, which is also the reason why many competitors are entering the market; on the other hand, this part of consumers’ inherent obsession with B-class cars will also become their requirements for choosing electric cars.

In other words, the days when electric cars “only pay attention to intelligence” may never return, and luxury, texture, taste…these synonymous words of “old forces” may become the new standard of “new forces”.

But from the performance of many new forces’ products’ interiors, luxury is not as simple as stacking materials in obvious places, but rather a kind of mystery that needs to be meticulously pursued from inconspicuous details.

Regarding this, Zhu Jiangming also mentioned a C01 interior detail, “like the suede roof lining, which is standard and can be said to be unique in the 300,000 or even 400,000 price range”.

The interior atmosphere created by C01 is aimed at the target group of 30-40 year-olds, and as I have not yet entered this age group, I will not forcibly interpret the luxury of Leapmotor.

However, Zhu Jiangming used an extremely confident sentence to summarize their latest product, “Leapmotor C01 is the ceiling of 200,000 yuan cars.”

Zhou Ying, general manager of Leapmotor’s marketing department, added a more down-to-earth conclusion, “the price of a Camry, the enjoyment of a BMW 5 Series.”

It can be seen that even when talking about luxury, Leapmotor still emphasizes the cost performance attribute. The art of balancing and the self-developed route of Leapmotor are both in consideration of how to fit luxury and cost performance into the basket that consumers are willing to accept.

Self-developed Future

Leapmotor has always put the self-developed label in a prominent position. In order to distinguish from other companies’ “full-stack self-development”, they even used a new term, “whole-domain self-development”.

Regarding the difference between the two, Zhu Jiangming previously stated that most of the other companies focus on software and algorithms, while Leapmotor is “able to do everything from hardware to software”.

However, the automotive industry is a typical manufacturing industry, and the chain is long. Domestic independent brands like BAIC and Chery no longer pursue whole-domain self-development, why does Leapmotor persist?

“Regardless of traditional fuel vehicles or new energy vehicles, whole-domain self-development has been most successful.”

Zhu Jiangming gave the example of Toyota and Volkswagen in traditional automakers. “They are both giants with annual sales of tens of millions, but their financial reports are a world apart. This is the difference between different car companies, including whole-domain self-development, parts, and procurement. Core things like Volkswagen’s engines and transmissions are still their own.” “In the future, automotive electronic products will account for a higher percentage, with 70% being electronics and 30% being cars, so whole-domain self-development will also have more advantages.”Looking to the future, ideals are beautiful, but looking at reality, losses are also painful. According to the prospectus disclosed by Leapmotor, from 2019 to the first quarter of 2022, Leapmotor’s losses exceeded 5.8 billion yuan.

Obviously, the advantage of full-area self-research needs to be supported by quantity. So where is the balance point of this profit and loss? Zhu Jiangming has a calculation in his mind.

“We have calculated that when we reach 20,000 units per month, the gross profit of our core components can be basically balanced with external purchases, and we can make a profit if it exceeds 30,000 units.”

However, the current Leapmotor is still some distance away from this balance point. In the just-released September delivery report, Leapmotor delivered 11,039 vehicles.

Of course, this cannot be called a poor performance, but like other leading new forces, Leapmotor seems to have encountered the bottleneck of “selling 10,000 vehicles per month.”

In response to this, Cao Li, senior vice president of Leapmotor, believed that “there are two bottlenecks for 20,000 units: one is sales orders, and the other is production capacity. In fact, what new forces have encountered are similar problems.”

In the face of these two problems, for the latter, Cao Li said that Leapmotor has done a lot of platformization and standardization work for factory capacity bottlenecks and supply chain bottlenecks, hoping to break through this bottleneck with a multi-supplier model; for the former, Leapmotor has always had no shortage of orders, and they firmly believe that the launch of the C01 will bring explosive growth of orders.

“But to turn orders into sales, it still depends on delivery.”

Among these peer competitors, Leapmotor C01 was almost the first to be released, but it was the latest to be officially launched. Leapmotor explained that they have made very comprehensive preparations for the C01 internally.

“Perhaps our delivery speed is at the forefront,” Zhu Jiangming responded optimistically on September 26th.

Even more optimistic, there is still more room for Zhu Jiangming.On September 29th, the first day of Li Auto’s IPO on the Hong Kong Stock Exchange, its stock price suffered a substantial decline. Zhu Jiangming stated that “the current market environment means that Li Auto’s IPO is not a very good timing, but we do not care about how the stock market is during this period because building a car company is a long journey, and true value can only be reflected in the later stages.”

The “long race theory” and “all-domain self-development” maintain a consistent core ideology — vision must be far-sighted. For a long race, pace is even more important.

In response to this optimism, on October 3rd, which was also the first trading day for Li Auto stock in October, the stock price rose by 6.85%. However, compared to the previous two days of decline, this can only be considered as an aperitif.

Li Auto’s September delivery volume increased by more than 200% YoY, and the first batch of deliveries for the C01 is imminent. If the C01 can achieve a good sales and delivery pace, Li Auto’s stock price should enter a new phase.

So now, the pressure is on the C01.

-END-

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.