Author: Dayan
Recently, Ideal Auto released its unaudited financial performance for the first quarter of 2022. During this quarter, Ideal Auto performed steadily and exceeded market and investor expectations.
Looking ahead to the second quarter, although the challenges of the epidemic and supply chain persist, Ideal Auto faces even greater challenges. However, with the continuous launch of new models and the continuous improvement of the model matrix later, Ideal Auto’s prospects are still worth all parties’ expectations.
Steady Financial Performance Data
Due to the substantial growth in delivery volume compared with the same period last year, Ideal’s main financial data has increased significantly year-on-year.
Specifically, with only the Ideal ONE model, Ideal Auto delivered 31,716 vehicles in 22Q1, compared to 12,579 in Q1 21; the total revenue for this quarter was RMB 9.56 billion, an increase of 168.7% year-on-year; Ideal Auto recorded a net loss of RMB 10.9 million during the reporting period, a significant decrease of 97% year-on-year, and the adjusted net profit was RMB 477 million.
Of particular note, the vehicle gross profit margin this quarter was 22.4%, which further increased compared to the 16.9% in the first quarter of 2021. Even in the whole year of 2021, Ideal Auto ranked first among new energy vehicle companies with a gross profit margin of 21.3%, and it is very difficult for Ideal Auto to maintain the overall upward trend of gross profit margin despite the ongoing chip shortage crisis and significant increases in commodity and raw material prices.
Currently, Ideal Auto is advancing the research and development of multiple models, and the research and development expenses for the first quarter were RMB 1.37 billion, an increase of 167.0% year-on-year.
In terms of network expansion, as of March 31, 2022, the company owned 217 retail centers covering 102 cities. Without the influence of the epidemic, this number will reach 400 by the end of this year.
In the next two years, Ideal Auto will also launch multiple models for marketing, which will require significant resources.The above factors will result in significant short-term expenditures, posing a certain challenge to IDEAL’s cash reserves. As of March 31, 2022, IDEAL had a total of RMB 51.19 billion in cash and cash equivalents, restricted cash, time deposits, and short-term investments.
Adequate financial reserves can ensure IDEAL’s high investment in all directions and ensure the sustained strength of its competitiveness.
Creating a product matrix using the iPhone strategy
Currently, IDEAL Automobile only has one model on the market. According to sales data, in 2021, the delivery volume of IDEAL ONE reached 90,491 units, accounting for more than 30% of the market share in the new energy vehicles priced between 300,000 to 400,000 yuan in China.
Such achievements not only lead other competitors in the new energy vehicle sector but also have outstanding performance even in the entire 300,000-400,000 yuan SUV vehicle category in China.
However, relying on only one model is far from enough to continuously increase sales.
Next year, IDEAL Automobile will launch three new models, including L9. These three models are: a new generation of extended-range flagship models, a product with a new BEV high-voltage platform, and IDEAL’s first mid-size car priced at 200,000 to 300,000 yuan.
These models will build a more complete product matrix with IDEAL ONE, laying a solid foundation for IDEAL Automobile to become bigger and stronger.
Overall, by 2025, IDEAL Automobile will focus on the 200,000 to 500,000 yuan price range and release products with a price range of every 100,000 yuan. IDEAL ONE primarily targets the 300,000 to 400,000 yuan range, while IDEAL L9 will expand to the 400,000-500,000 yuan range.
Next, IDEAL Automobile will also release a model in the 200,000 to 300,000 yuan price range.
For different price points, IDEAL will adopt a strategy similar to that of Apple’s iPhone, that is, using an effective technology platform to develop models for different price points, similar to the iPhone 12 Pro Max, iPhone 12 Pro, iPhone 12, and iPhone 12 Mini series to better meet consumers’ individual needs.
Market excitement for the new body-shaped electric vehicle is high.In the next two years, it will be a big year for new energy vehicle makers to launch their new products. NIO will release three new models, including the L9, to enrich its product matrix.
While continuously launching new models, we can see that NIO is also emphasizing its breakthroughs in the research and development of the five platforms of the new generation of range extension, 800V voltage platform, intelligent driving, intelligent cockpit, and electronic and electrical architecture. Only by making breakthroughs in these forward-looking core technologies can NIO ensure that its models have sufficient competitiveness in the segmented market.
The price range of the L9, targeted at the full-size SUV market, will be set at 450,000-500,000 RMB. The adoption of new range-extended technology will enable the L9 to have a range of 1,200 kilometers in the CLTC cycle, including 200 km on battery power and 1,000 km on gasoline.
Accompanying the launch of the L9, NIO is also rolling out its charging network. According to NIO, it has established an internal team to set up ultra-high-voltage fast charging facilities near highways and cities, to fully utilize the 10-minute charging for 400 kilometers range.
Currently, the biggest bottleneck restricting the development of electric vehicles is the charging time. With the continuous improvement of NIO’s fast charging network, it will provide strong support for the sales of NIO’s pure electric vehicle models.
Moreover, NIO’s different power forms will undoubtedly match different body shapes, which is a highlight. According to NIO’s plan, range-extended SUV models are the most efficient form, while pure electric will adopt a completely new form, which is different from any product form on the market. The brand new body shape will not only better match the pure electric technology, but also ensure that there is no competition between the range-extended and pure electric models at each price point, forming a 1+1>2 situation to maximize its market share and sales.
Holding a Large Order Book, NIO is Unafraid of Dual Challenges
For domestic automakers, especially the new energy vehicle makers, they are currently facing dual pressures of cost and supply chain.
On the one hand, with the substantial increase in prices of bulk commodities such as lithium and nickel mines around the world, automakers’ cost pressures continue to mount. From April 1, the price of NIO’s ONE has been adjusted from the previous RMB 338,000 to RMB 3,498,000.From the perspective of orders, Ideal ONE experienced a large wave of demand at the end of March. After the price adjustment in April, the growth of orders slowed down relatively in the first half of the month. However, from the last week of April to the first week of May, except for Shanghai that was affected by the epidemic and faced suspension, Ideal’s overall order volume showed a strong rebound.
In addition, considering that Ideal’s Changzhou base is located in Changzhou, the center of the Yangtze River Delta, where more than 80% of its supply chain enterprises are distributed, most of which are located in Shanghai and the adjacent Kunshan in Jiangsu Province.
Therefore, in the short term, Ideal’s supply chain is still under great pressure. Ensuring the stable operation of the supply chain and delivering vehicles smoothly to consumers are the top priorities of Ideal.
For Ideal, holding a large number of orders waiting to be delivered is much better than having no orders. The epidemic will eventually pass, and resumption of work and production and unblocking logistics bottlenecks have become national policies.
As long as Ideal continues to deepen its core technology and enrich its product portfolio, especially the entry-level product priced between RMB 200,000 and RMB 300,000 to be launched next year, Ideal’s prospect is worth looking forward to.
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.