LI Auto, which is actively seeking transformation, has just undergone its biggest price system adjustment since its inception.
This morning, LI Auto announced a new pricing system for the three L-series models L7, L8, L9 and MEGA. Specifically:
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The 2024 LI L7 comes in Pro, Max, and Ultra versions, priced at 301,800 yuan, 329,800 yuan, and 359,800 yuan respectively.
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The 2024 LI L8 comes in Pro, Max, and Ultra versions, priced at 321,800 yuan, 349,800 yuan, and 379,800 yuan respectively.
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The 2024 LI L9 comes in Pro and Ultra versions, priced at 409,800 yuan and 439,800 yuan respectively.
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The latest price for the LI MEGA is 529,800 yuan.
LI Auto stated that all new and old orders for these models will enjoy the new prices. Additionally, cash rebates will be provided for owners of the 2024 models of LI L7, L8, L9, and MEGA.
With this price adjustment, the price range of the LI L series has been adjusted to between 301,800 yuan and 439,800 yuan, excluding the L6. Meanwhile, the price of the LI MEGA has been reduced by 30,000 yuan down to 529,800 yuan.
To LI Auto, this round of price adjustments carries profound implications. Not only is it a reactive measure to increasing market competition, but also a proactive effort from all dimensions through introspection and proactive adjustments.
Simply put, LI Auto is striving to “slowly pull itself out of the hole” through pricing adjustments.
Downward adjustments of L7/8/9 prices; L6 moving from 0 to 1
The pricing adjustment affects mostly the three L-series models before the L6 release, namely the 2024 models of LI L9, L8, and L7.
The logic behind the price adjustments is:
- These three models no longer come with Air versions. This means that air suspension comes standard with all versions of the L9, L8, and L7.
- The Pro versions of these models have been reduced by 18,000 yuan, meaning that the starting price for the L7 Pro has been adjusted to 301,800 yuan, the lowest price amongst the three models.
- The Ultra versions of the LI L9, L8, and L7 have each been reduced by 20,000 yuan, meaning that the highest price for the L9 series has been lowered to 439,800 yuan, while the Max versions for the L8 and L7 have been reduced by 20,000 yuan.This implies that the three models of the LI L series cover a price range from RMB 301,800 to RMB 439,800 seamlessly within the price segment of RMB 300,000 to 450,000.
It is worth noting that when these three models of the LI L series were launched on March 1, they adopted the same price strategy as the old models. However, in mid-March of this year, LI Auto once adjusted the product configurations for these three models, adding a new model of Air, excluding air suspension, to probe the lower price (but the delivery did not start yet).
This adjustment, in essence, is a price reduction for the entire price range of these three models of the LI L series based on withdrawing the Air model. Through these price adjustments, the three models of the LI L series managed to offer price concessions to consumers while maintaining their overall positioning.
While the product adjustment process may seem a bit chaotic, the outcome of this price system adjustment is good news to potential customers.
We learned from related internal channels that behind this adjustment is LI Auto’s comprehensive consideration of market competitiveness, product positioning, and other factors.
On one hand, from the macroeconomic perspective, market consumption demand has become more conservative due to the impact. At the same time, the competition for LI L is becoming more intense, especially after the impact on BBA, leading to widespread price reductions. In light of this, the aforementioned three models of the LI L series adopted a strategy of a total price reduction to proactively respond.
On the other hand, from the product positioning perspective, the LI L7, L8, and L9 are priced between RMB 300,000 and 500,000. Therefore, even though overall concessions were offered, they managed to maintain at the minimum price of RMB 300,000 by discarding the Air model.
Indeed, from the perspective of LI Auto product reorganisation, this price system adjustment is also the outcome of LI Auto’s reduction in the L series.
Interestingly, this price adjustment does not involve the recently launched LI L6.
We learned from related internal channels that actually, LI L6 had previously considered being priced at RMB 269,800 during its early pricing process in 2023. However, with the arrival of 2024 and the difficulties encountered by LI MEGA, LI Auto made the decision to lower the price of the L6 after organizational adjustments.
Hence, the current price of LI L6 has already been based on compliance with the latest LI Auto price system, also fully considering the outcome of market competition.
Furthermore, a source close to LI Auto informed us that within LI Auto, the positioning of LI L6 and its target customer group are inconsistent with the three models LI L9, L8, and L7. After all, the market competition is extremely intense in the price segment from RMB 200,000 to 300,000. LI L6 also has to face competitors such as AITO M7, and the corresponding consumer group is relatively price-sensitive, so the sales strategy is also very different.An insider stated: “Within LI, L6 is currently treated as a journey from 0 to 1, rather than from 1 to 10.”
Why has the price of LI Auto MEGA been reduced by 30,000 yuan?
In this major adjustment of the pricing system, a noteworthy trend is: the price of LI Auto MEGA has been directly reduced by 30,000 yuan, that is, from 559,800 yuan to 529,800 yuan. At the same time, to appease the MEGA owners who have already picked up their cars, LI Auto directly implemented a strategy of returning 30,000 yuan in cash.
This is good news for both old and new users.
According to reliable information we obtained, at the beginning of this round of price system adjustment, the initial consideration was only for the L series; but later, under the suggestion of LI Auto’s president Ma Donghui, LI Auto eventually decided to reduce the price of MEGA by 30,000 yuan as well, which can be regarded as an explanation to the MEGA owners.
In fact, the price reduction of LI MEGA along with the L series is not surprising.
After all, as the first high-end pure electric vehicle under LI Auto, although MEGA does not necessarily need to bear a large sales volume task, it does have a certain sales target internally. It is understood that the initial monthly sales volume expectation for MEGA within LI Auto was 6,000 to 7,000 units; looking at it now, the actual sales performance of LI MEGA is somewhat distant from this goal.
Therefore, using a price reduction strategy to attract the potential target audience of MEGA is not a bad strategy.
An insider told us that LI Auto has conducted a series of retrospections on the poor market performance after the launch of MEGA, and drew several lessons.
The first is the issue of charging.
MEGA targets the high-end pure electric market of more than 500,000 yuan. Among the customer group in this market, their time is more valuable, so they care more about the charging issue of electric vehicles, thus direct-operated charging is a supporting service that car companies must provide. Although LI Auto has also built 5C charging stations before MEGA, they are all limited to highways and not in urban scenarios, which is the biggest problem.
The second is public opinion. The insider stated that, based on the internal review of LI Auto, the public opinion problem faced by MEGA after its launch was much more serious than expected. With the fermentation of public opinion, this has also affected the sales of MEGA to a certain extent.
Of course, the launch of LI MEGA has also affected the rhythm of the sales line to a certain extent. In fact, from the perspective of sales efficiency, the sales strategy adopted by MEGA in the early stage of the launch also consumed the energy of LI Auto’s frontline sales and squeezed the market acceptance of the LI L series. As Li Xiang himself said, “the main model, Li Auto L8, did not even have a place to display in the store.”
From the results, it not only fell short of the set MEGA sales target, but also affected the sales efficiency of the L series.
Furthermore, LI internally also realized during the review that introducing the 2024 models of L9, L8 and L7 together with MEGA in the same event was indeed inappropriate. This essentially reflects the negative outcome of LI’s drive in sales volume desired.
Even so, challenges met after MEGA’s launch carry a silver lining.
An insider close to Li Xiang revealed that MEGA allowed LI Auto to identify and reflect on many shortcomings, absorb numerous lessons, and helped clarify the brand’s strategy in the pure electric market. Consequently, LI Auto will be more prudent when introducing future electric SUVs targeted at greater volume.
Conversely, if a pure electric SUV from LI were to face issues, the predicament would have been far worse.
Another insight from an insider was that Li Xiang admitted during the review that MEGA was essentially designed for him personally; however, LI MEGA would still maintain its product positioning aimed at family users – this will remain as part of LI Auto’s brand identity and is insusceptible to change.
Gradually Recovering and Planning for the Future
The recent pricing system adjustment clearly indicates that after experiencing the unfavorable impacts of the MEGA launch, LI Auto has swiftly entered a state of rapid readjustment.
Such adjustments were signaled in Li Xiang’s internal message communicated in March. Previously, Li has acknowledged that LI Auto’s excessive focus on sales volume led to a significant decline in user value and operational efficiency. Hence, LI Auto aims to taper sales forecasts and focus on achieving healthy growth.
An insider confirmed that LI Auto has been indeed insisting on ‘tapering expectations’, which is both a reflection of the company’s self-adjustment from overconfidence and a predication of the overall market situation.
After this adjustment, many of LI Auto’s actions became definitive, for instance, as to the price adjustments, the concept of “completely letting go of illusions” within the company conveys the determination to put forward real value.
Apart from mindset, LI Auto internal review found that adjustments to organizational structure are also essential to address issues emerging from existing decision-making mechanisms.
An individual involved in LI Auto’s internal review informed us that the company has always been learning and adopting process management, which, while advantageous and enhancing operational capability, has imperceptibly trapped many effective business managers within the confines of the process, leading LI Auto into a traditional command-and-control setup akin to old-fashioned automakers.However, LI Auto has recognized and rectified this issue from top to bottom.
In fact, as we understood from insiders at LI Auto, this major price adjustment is a result of an initiative taken by the newly established product department during the organizational adjustment in early April. Specifically, Liu Jie organized a meeting with the new product team where it was decided that the L series would undergo a price cut, and Liu was able to successfully persuade Li Xiang.
Simply put, “Now at LI Auto, there are people who can challenge Li Xiang’s personal decisions”, a crucial development. Therefore, this price change also reflects the agile internal adjustments of LI Auto.
What needs to be made clear is, despite the significant price adjustment and customer concessions, from a broader business perspective, LI Auto hasn’t lost its footing.
An insider close to Li Xiang told us that Li’s thought process is very clear during this price adjustment. On one hand, he agrees on the proactive response of a price reduction, but on the other hand, he emphasizes to maintain the sales volume while expecting the company’s continued profitability and stable cash flow.
After all, “LI Auto is a business that balances its books.”
Additionally, Li Xiang has repeatedly stressed at internal meetings the necessity of investing in next-generation technology, especially technology with a focus on intelligent driving such as end-to-end and large-scale models. In the long run, as intelligence technology develops in both software and hardware fields, electric vehicles and humanoid robots will become different carriers of the same system, and this is a massive investment that LI Auto is planning and laying out.
From this perspective, even though LI Auto is striving to overcome its present difficulties, they still have their sights set on the long-term big picture.
Looking back at the history of LI Auto, the LI ONE helped LI Auto to grow from 0 to 1, the three models in the L series (L9, L8 and L7) further helped with the construction of their product system and commercial success, whereas the MEGA is leading LI Auto into a new development phase with both extended range and pure electric product lines.
So far, the start of this new phase isn’t running smoothly, and there have even been bumps in the road.
However, the mistakes made by LI Auto aren’t fatal, and they still have ample opportunity, capacity, and ability to make needed adjustments, which needs a considerable amount of time. The price change is only the beginning for LI Auto, and if as Li Xiang says, they want to “slowly climb out of the hole”, it will take a lot more time.
This article is a translation by AI of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.