Written by: Xiong Xing
Edited by: Wang Pan
After the release of Ideal L9 in June, Ideal launched a combination attack on the last day of September, introducing two plug-in hybrid SUVs, L8 and L9. The design languages of the three cars are consistent, with minor differences in configuration, and the main difference lies in size, which became the main differentiation reference for product price.
Li Xiang said: L9 is a 180 square meter three-bedroom apartment, L8 is a 120 square meter three-bedroom apartment, and L7 is a 120 square meter two-bedroom apartment. The real estate logic of explaining the main reason for price difference is also very appropriate. It seems that the L series is currently “selling cars by area”.
In addition to the Ideal ONE, which is about to exit the stage, the L series of three models have already appeared, and with the unreleased L6, Ideal Auto has officially transitioned from a solo combatant to “adding new members” stage.
At the press conference, Li Xiang compared Ideal ONE to “Pangu” of Ideal Auto, praising its achievements. Then, surprisingly, Li Xiang launched the second new car. It was not until then that everyone suddenly realized that the end of “Pangu” was what Li Xiang wanted to emphasize: without sacrifice, how can we open a new era of Ideal’s family-oriented development?
BBA, Volkswagen, Toyota, Tesla, NIO, XPeng, etc., adopt a family-style strategy to establish a product matrix, which is now the mainstream. In addition to enhancing brand recognition, the more important thing is to achieve cost reduction and efficiency improvement in development, after-sales, and parts commonality. For Ideal Auto, which often looks to Apple, the iPhone 4 is just a gorgeous opening, and the series of iPhones becoming mature products is a sign of success.
Huawei surrounded by Ideal
Ideal’s two new products, pointing directly at the car industry.
After the embarrassing sales of Saibaixiles, its successor，AITO, maintained a relatively restrained pricing policy. During the period when the “intentional” car companies attack the price range of over 300,000 yuan in succession, AITO M5’s starting price is only 259,800 yuan, which obviously does not conform to Huawei’s high-end positioning in the smartphone industry.
Furthermore, after the steady monthly sales of M5 stabilized at around ten thousand units, Wengie released the M7 with a starting price of 319,800 yuan in an orderly manner, which maintained a 30,000-yuan threshold with the exiting Ideal ONE.
Perhaps, partnering with Changan and Ningde Times once made Huawei see the hope of products with more persuasive prices. However, prior to the launch of Aivyta, Huawei had only one punch product, Wengie to directly compete with Ideal ONE.
Wengie’s situation is somewhat similar to that of Ideal before. It is “surrounded” by competitors. The M7 with a price range of 319,800 yuan to 379,800 yuan is equivalent to the coverage range of Ideal L7 and L8. The L7 Pro version is priced exactly the same as the M7 middle configuration (four-wheel drive luxury version), and the L7 MAX version is priced exactly the same as the M7 high configuration (four-wheel drive flagship version), forming a head-to-head competition.There are three models with extended range capability, and only the entry-level M7 has a power output of 272 horsepower; the rest have identical power parameters: 330kW/449Ps/620 Nm. As for specific power performance, the ideal performance of the two models is 5.5 seconds from 0 to 100 kilometers per hour, the entry-level M7 is 7.8 seconds, and the middle and high-end models are both 4.8 seconds. In terms of competition between the four models, the L7’s power performance is inferior to that of the middle and high-end M7.
Although the ideal emphasizes household use, Li Xiang proudly announced at the press conference that L7 improved by 1 second compared to ONE in the 0-100 km/h acceleration test. However, it is not necessary to excessively pursue power for household use, and there is still some difference between L7 and M7.
The curb weight of L7 has not been disclosed. From the wheelbase and width, it is completely identical to L8, only the length and height are decreased by 30mm and 50mm respectively. Considering the weight of 2480KG of the latter model and similar acceleration time, it is highly likely that the weight of L7 will be above 2400KG, while that of M7 will be 2450KG. Both are calibrated with 95-octane gasoline, so theoretically, their fuel consumption should also be at a similar level.
Furthermore, the wheelbase of L7 reaches 3005mm, which is 185mm longer than the 2820mm of M7. With a slight advantage in width and length, the theoretical space for passengers will be significantly better than that of M7. This advantage is reflected in the “120 square meters of large two-bedroom” design of L7, which shows a deep understanding of the pain points of Chinese consumers for cars.
In addition, the eye-catching “screen array” of ideal ONE is more powerful in the L series. L7 has not only a co-pilot screen but also a second-row entertainment screen. In addition to audio-visual entertainment, it can also be used as an extension screen for game consoles like the Switch. Not only does it have functions that M7 does not have, but even compared to Tesla’s built-in hardware to provide game performance, the ideal’s “extension screen” is more sustainable.
In catering to different levels of consumer demand, ideal L7 is relatively more meticulous. For users who buy Huawei, a significant portion of them are attracted by Huawei’s full-family products. In addition to the subjective car system UI, operating logic, APP usability, etc., Huawei’s intelligent driving solution may be a major selling point.
Last year, Huawei’s autonomous driving, which covered 1000 kilometers without a driver in the car, has already claimed to be the first in the industry. Combined with Huawei’s achievements in 5G, chip and other related fields, the hardcore image of the technical school is difficult for other manufacturers to possess. Although Li Xiang spent a lot of time introducing his automated driving technology at the press conference, it may not be recognized by most people in a short period.
“Ideal” faces “rush hour”
In terms of assisted driving technology, the gap between Ideal and Huawei doesn’t matter yet. Both can only achieve Level 2 autonomy in the reality where the car and the road cannot be fully coordinated and regulations are not fully relaxed. At present, the computational power and hardware redundancy possess certain futures attributes.
Regarding the product line, L7 and M7 have different positioning and emphasis on parameters. When facing the formidable Ideal L7 and L8, the question of M7 has been hotly debated in the auto enthusiasts circle. People have brought up the copycat Dongfeng Fengguang IX7, which has caused negative publicity for the brand due to the abundant supply of conversion models. It’s unclear if Huawei will introduce different models to compete with Ideal or ignore this flagship product’s current situation. This is a dilemma.
At the launch event, Li Xiang stated that L9 model sales had surpassed ten thousand in September. As the leading product of the new family series, the L9 model can achieve Ideal ONE’s monthly sales level most of the time. This reflects that consumers are not very sensitive to the additional cost of 110,000 CNY. On the other hand, the M5, with a starting price of over 200,000 CNY, has a monthly sales volume of ten thousand cars, while the M7 with a price of over 300,000 CNY has only sold 1,100 and 2,668 cars respectively in the first two months.
Huawei’s pricing strategy may be related to its advancement in the automotive market. Ideal has deployed its product line in an upgrade-to-downgrade manner, with the flagship L9 leading the way, followed by L8 and L7. The benefits of this strategy are obvious: it is more convincing. This has been the tested and proven strategy of Tesla, NIO, and other manufacturers. On the other hand, the M5 and M7 follow the traditional low-cost/high-value path. If Huawei doesn’t overhaul its strategy and regroup like Ideal, it will be just like other traditional automakers. Moreover, the car priced over 400,000 CNY is a sector already dominated by the Ideal L9.
“Ideal” to deal with the “rush hour”
Ideal is pressed for time in three aspects: the increase of the travel range, profit-making ability, and capital’s patience.
To face the pressure from external forces, Ideal recently accelerated its rhythm by launching two cars in three months. In the first half of the year, XPeng overtook Ideal by selling the most new vehicles, up 124% YoY, while Ideal came in third with only 100% YoY growth rates. In contrast, BYD’s new energy vehicle sales increased by 314% YoY, with a base volume of 246,600 cars, while Geely’s growth rate nearly quadrupled.
In the second half of new energy vehicles, the environment in which carmakers are trying to survive will be more crowded, with the attacking forces of traditional carmakers and new entrants. New power companies that have not yet stabilized their profits have no choice but to seize the opportunity.
Before L9, Ideal was undoubtedly an industry “anomaly.” Although the strategy of single configuration products has been recognized by the market, the narrow coverage was a weakness. From 2018 to 2021, within four years, Ideal lost 1.532 billion CNY, 2.438 billion CNY, 1.517 billion CNY and 320 million CNY, respectively.It seems that the ideal loss is not significant, but in Q2 of this year, the ideal loss reached 1.392 billion yuan. The single product issue is hard to avoid, and it is an important factor for Ideal to push for new products. The factors such as the pandemic and the rise in raw material prices have played a role.
During Q2’s earnings conference call this year, CEO Shen Yanan confirmed that Ideal ONE’s order volume had decreased. The data in July confirmed her judgment when the sales of Ideal ONE started to plunge in August. Although this may include a consumer observation period for iteration, Ideal ONE has been in service for nearly three years and has lacked new ideas.
Emerging players such as WENJIE, Aiwatte, and Xpeng G9 have entered the market around the same price point as Ideal ONE, incorporating new thinking and new technology for new energy vehicle models. This makes Ideal ONE’s issues more apparent: it needs to iterate its product. Abandoning the single-product strategy may be a key step for Li Xiang to turn losses into profits. However, this step now seems a bit late, and the track is already crowded; time is limited, and Ideal needs to accelerate building its product matrix.
According to the data provided by Li Xiang, the L9 has made a good start. In theory, Ideal L8 and L7, which have a similar product strength, may have monthly sales exceeding 10,000. If L6 starts at just over 300,000 yuan, the entire L series will cover the 300,000-450,000 price range. Overall, the L series is currently the newcomer with the most models in this price range consisting of 4 SUVs with L9’s “explosive gene.”
In addition, Ideal clearly announced its attitude change with “nesting dolls”: it is no longer a manufacturer with a single product. The product matrix moves closer to other automakers, and the product direction maintains a unique perspective, with less youthful recklessness and more maturity and stability. For those who have been obsessed with simplicity and directness, “Ideal has changed,” and for investors who are more concerned with efficiency and actual benefits, “Ideal has become practical.”
Since the end of June, Ideal’s stock price has fallen from around $40 per share to $25 per share, with a decline of nearly 40%, and its market value has fallen from around $40 billion to around $24.3 billion. Ideal is a car manufacturer and a listed company; while focusing on product updates, it also needs to outperform the capital market with patience.
Li Xiang didn’t mention the first pure electric vehicle during the press conference, but he mentioned the high-voltage pure electric platform again. Even though they couldn’t establish a relationship with consumers temporarily, Ideals need to show off as much as possible to attract attention.
Recently, Sinopec and PetroChina collaborated with SAIC and CATL. The battery swap track finally welcomed the national team and giants as partners after several policies. It is highly likely to become one of the mainstream models of new energy vehicles, where pure electric and hybrid have become the indisputable mainstream.
Only range-extender vehicles have always been in controversy, but Ideal ONE has successfully mitigated some of the doubts with its product strength. L7, L8, and the brand-new technological attributes and luxurious configurations easily divert consumers’ attention to the range-extender after adding a four-cylinder engine.
After all, before the arrival of pure electric vehicles, range-extender vehicles were still the only ones available for Ideal. L7, L8, and subsequent L6 will be supported by the idea of “Pro in top configuration and Max in luxury.” Although launching multiple models and changing from single to double configurations make Ideals appear more realistic, it is indeed a clear turning point in their goals.
Meituan CEO Wang Xing raised his affirmation of Ideal to a higher level on WeChat Moments, “for the past twenty or thirty years, the Chinese high-end car market has been dominated by German brands. The next two or three years will depend on Li Weihua [Li Xiang]. Regardless of which side wins, China will win.”
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.