On May 26th, we participated in a media interview with Li Xiang, the founder, chairman and CEO of Ideal Auto, and Shen Yanan, the co-founder and president of Ideal Auto, at the Ideal Auto Beijing R&D headquarters. The interview summary is as follows:

Is the current number of orders far exceeding the current production capacity?

Shen: We have already prepared pre-production for some mainstream configurations. Since there are different demands for sales terminals in various regions, although delivery will begin on June 1st, the types and configurations of cars available for selection are indeed limited. It is not convenient to disclose the specific order volume now.

The autonomous driving system of the 2021 Ideal ONE is self-developed and equipped with the world’s first mass-produced and delivered 8 million-pixel camera. What are the difficulties in developing the entire system and what benefits can it bring?

Li: The main reason for self-developing the operating system is to improve the development efficiency of the front-end. The first step is to develop the operating system, which is not strongly perceived by users, and it was not announced to the public yesterday. However, in the long run, we still need to do it well. The main purpose of developing the operating system is to replace the role played by QNX in non-entertainment terminals. The difficulty is not as great as that of an open operating system, and we can still define our own needs and development tool chain.

In terms of perception, Bosch has already helped us to do it. General enterprises won’t do radar perception, Bosch gives us the results, and we integrate with other perceptions, which is almost the same for all enterprises.

In the part of the 8 million-pixel camera, we have been accumulating capabilities for a long time, but we were not able to use them during the Mobileye era. Now that we are in the Horizon era, we can use them to recognize traffic lights, horizontal vehicles, roadblocks and barrels, etc. However, due to the “black box,” some functions cannot be modified.

From the perspective of perception, the more cars a company runs on the road, the better the perception ability will be. This is a continuous growth process.

Automatic driving subscription service is the standard configuration of Ideal, while many other manufacturers are promoting the subscription system. Does this mean that Ideal does not consider increasing software service revenue and only relies on automobile sales income? In the future, are there any plans to promote software subscriptions on car models?

Li: Regarding automatic driving and assisted driving, we still hope that they can be included in the standard configuration. But it cannot be said that software services will not be provided or that this type of revenue is not needed. To build a “mobile home,” software services are definitely needed.Personally, I do not accept the concept of a car having different versions. People have different definitions for assisted and automatic driving. We believe that assisted and automatic driving are the underlying operating systems of intelligent electric vehicles. Like an iPhone, whether it is the iPhone 6 that costs more than four thousand yuan or the iPhone 12 Pro Max, the operating system should be the same. I believe that autonomous driving is the bottom and most important system of intelligent electric vehicles, and different people have different understandings of this.

What improvements have been made to the 2021 Ideal ONE based on user feedback?

Li: From the perspective of users, we have listened to many user needs but will also judge some forward-looking things. For example, we used some components, and the supply chain of components will also be upgraded. The supply chain suggested that we should not use a two-in-one motor but a three-in-one motor, which is more efficient.

How does Ideal deal with chip shortages?

Shen: This year’s background is a tight supply of chips, which will continue until the end of this year or even the first half of next year. In the overall environment, due to the large number of orders, our demand for chips is also relatively large, and we are chasing them every day. At the same time, our full-stack self-developed capability enables us to respond more flexibly and quickly.

Li: The shortage of chips in this round is not for main chips but for functional chips. A NOA controller may have more than a dozen or twenty functional chips, which are not expensive, but without a complete set, the whole set cannot be produced. Chips from Qualcomm and Horizon are not in short supply. Because of their advanced processes, TSMC’s entire production capacity is guaranteed in the United States.

Previous releases mentioned cooperation with Nvidia at the chip level. Has there been any change in cooperation with Horizon and Nvidia at the collaboration level or on different projects? What changes have occurred in the cooperation with Nvidia?

Li: From a chip perspective, the full-size SUV that follows will definitely have two Nvidia Orin chips as standard because it is developed completely according to the L4 architecture. The earlier we start self-development, the less likely we are to use more advanced tools later to start from scratch.

The sales in Q4 2020 and Q1 2021 were close. What is the outlook for future sales growth? As the company’s first responsible person and a Weibo celebrity with millions of followers, how do you plan your personal brand? Yesterday’s press conference also showed that the SEV has plans for small car product lines.

(Note: HTML tags have been added to the English text for formatting purposes.)Li: The sales of the entire first quarter of 2021 were affected by the Spring Festival, and the electric car companies basically picked up a few red packets in the fourth quarter of last year: one was the Shanghai policy, and the other was the Zhengzhou new energy policy.

I did not deliberately establish a personal brand. Starting from last year, my personal time was divided into two parts. One part was to achieve strategic goals, and a lot of work was devoted to the construction of the entire organization, which required continuous learning. On the other hand, I focused on the next generation of products and the construction of the management system after multiple products.

SEV was not shown for the sake of yesterday’s press conference. After the new R&D headquarters was built, SEV was placed here. We have made various attempts before, and we always say “eating buns” internally. We ate the first, second, and third buns, but we did not feel full until we ate the eighth bun. The first and second buns were full of value, and it does not mean that the previous attempts had no value. Otherwise, no one would be willing to innovate and try, and they would all wait for ready-made results.

What is the sales target for the 2021 model of Ideal ONE, and what is the future R&D investment plan since the overall R&D investment proportion in 2020 was less than 15%?

Shen: I have great confidence in the 2021 model of Ideal ONE and current orders also show this trend. Our goal is to break through 10,000 units in monthly sales by September this year. There are two supports. First, further improvement of the 2021 model of Ideal ONE’s products. Second, we currently have 75 retail stores in 54 cities. Store coverage is somewhat lagging behind NIO, but we will accelerate the coverage of channels to support further sales growth (it is expected that the number of retail stores will reach 200 by the end of this year) and insist on direct sales.

Li: R&D investment this year will increase to approximately 3 billion RMB (R&D investment was 1.1 billion RMB in 2020), and R&D investment in the next few years will continue to increase. This is because the challenges we face in the next few years are completely different, and because we have more funds after the IPO last year. The most important purpose of financing is to pull R&D up.

The current size of the Ideal Autonomous Driving team is 300 people, and it is expected to reach a size of 600 by the end of the year. This includes the software and hardware of autonomous driving, as well as the operating system and development toolchain behind autonomous driving.

The capital market pays great attention to Ideal Auto. Will you consider financing through Hong Kong and A-share markets? Ideal leads the Beijing, Zhengzhou, and Chongqing markets in specific niches, but lags behind in some southern cities. Do you have any relevant sales strategies for the next step?Li: Money is definitely a good thing in this industry. It’s not just us making cars and our three car treasures. There are also Tesla, and a bunch of super-rich companies like Baidu and Xiaomi. When fighting, logistics reserves are definitely very, very important. We don’t mind any way to obtain more reserves of funds, including capital markets, secondary markets, bank loans, and various ways of issuing bonds.

Shen: As for the sales issue, we sell very well in Zhengzhou, Xi’an, and Chengdu, and we also sell well in the southern cities of Shenzhen and Guangzhou. There won’t be major inconsistencies in our sales policies nationwide in the future. The difference in market share is mainly due to the depth of our store layout and marketing methods in various regions. The next step of marketing methods and store opening will be further and refined according to local conditions.

The market development of electric vehicles in China is very fast, and the regulations are also varied. Recently, there have been some new developments in electric vehicles. How does Li view changes in regulations?

Li: We pay close attention to policies. The first car was stopped by policy, and we have a professional policy team. But in the future, we will face various policy changes, such as the new high-voltage charging standard of HPC. For example, when everyone moves from L2 level assisted driving to higher-level autonomous driving, there will also be policy changes. Moreover, including data privacy, everyone can see that the government is also actively moving forward in this regard, and we must keep up. We must strictly comply with all relevant Chinese laws as a car company.

This year, the competition for intelligent electric vehicles is very fierce (Huawei ADAS will achieve city-level delivery at the end of the year, and city-level L2). The biggest highlight of the 2021 ideal ONE is the Horizon J3, which is not so prominent. How to compete? Tesla and Apple are competitors with competitive threats, how does Xiaomi and Baidu view it?

Li: Let’s wait until they are delivered and see how many are delivered. If spending more than tens of thousands of yuan on a car to make a demo is another matter, if this set of things is more expensive than a normal car by tens of thousands, whether it is market behavior or demo behavior needs to be seen later.

From next year, everyone’s understanding of the development of autonomous driving will undergo a change. I think the mainstream choices made by cars made today were made before 2020, and before that, the progress of the automotive industry in this regard was basically the same as that of traditional cars. From 2021, the progress of the entire autonomous driving will enter the speed of Moore’s Law or even exceed Moore’s Law. When some players in the industry deliver their products next year, it will be a good way to compare the actual level and differences between various companies. For example, our 2020 model car may still be an iPhone 4S, but the next model may go straight to iPhone X.As a translator in the automotive industry, my responsibility includes English translation, spelling check, and wording modifications. Below is the improved English version of the provided Chinese text with preserved HTML tags:

There will always be new things, and the cards played by those who come later will always be newer than those played by those who come before. There is no end to this cycle. Just like mobile phones, the pixels and processors of later models will always be better than those of earlier ones. The automobile industry also has its own cycle. Although we feel that our speed of progress is already slow, old car owners may think that the speed of progress is too fast. With the release of the next model, people may think that the progress has been made at an unprecedented speed. The pace of progress will be different from before.

Regarding Baidu and Xiaomi, I think we should talk about the product itself. Automobiles are products that cannot lie in terms of sales figures. Insurance and licensing data are the best indicators, and there will not be any capital market saying that an auto manufacturer is cheating in terms of sales, especially when it comes to direct sales. It doesn’t even have any batch inventory for wholesale. Whether a car company is good or not doesn’t need to be guessed. The development of cars has occurred during the era of mobile phones. During that time, BAT (Baidu, Alibaba, and Tencent) also got into the mobile phone business and invested in mobile phone companies. The situation with cars is the same now. In the end, it will depend on whether they can produce a real product, whether they are truly all in on creating this product, and ultimately the sales figures will speak for themselves. Other things cannot be speculated on.

Is there any progress in the field of intelligent driving? What are the phased goals? Which parts are self-developed and which parts are considered to be outsourced to suppliers? How will the R&D investment of 3 billion yuan be allocated?

Li: In terms of autonomous driving, we are catching up to Tesla and XPeng. We used to use black box algorithms, and our first phased goal is to catch up to their capabilities.

From an R&D perspective, our software and hardware, including perception, decision-making, planning, operating systems, and R&D supply chains, are all developed in-house. For external collaboration on domain controllers, we work with suppliers for execution and production. We adopt full-stack self-development in autonomous driving. Our R&D budget is divided into two dimensions: vehicle models and technology. These two are intertwined. At the budgeting stage, we can already see that we will need billions of yuan in R&D expenses in the future. These expenses will span many years, with a financial cost of approximately 3 billion yuan this year.

What challenges does a strategic shift from tens of billions to hundreds of billions face?

Translation in English Markdown

Li: All companies face almost the same challenges from this revenue scale to the next sales scale, but the management methods are different. The management style of only making one car and making multiple cars is different. From our previous perspective, or from another perspective, because an intelligent electric vehicle enterprise will basically span multiple organizational forms. Different organizational forms will be covered depending on the different business status, such as supply chain manufacturing, a very mature technological system organization mode. We will also cover the way of the Internet, such as making apps, doing Internet, and doing sales services, and we need complete capabilities and methods. In addition, the ability of complex organizational capability to deal with multiple models and large-scale software research and development must also be obtained. Furthermore, we need to master more open L4 level future autonomous driving and open complex capabilities.

For us, the biggest challenge is how to learn the best industry best practices in different fields in organizational management methods. For example, if I want to manage complex hardware and large-scale software systems, the best performer in this regard is Huawei, and Huawei’s IPD is the most effective, and it is a huge management system. We should learn from it.

The second level is how to use digitalization to bring the different organizations in the four quadrants back to one space. Just like the Air Force, Army, and Navy, everyone cooperates together and cannot look down on the new as before. How to keep everyone working more efficiently in one world is a huge challenge, which is really harder than the difficulty of managing large Internet companies that we see. This is the biggest challenge we will face in the future.

Can the assisted driving of old car models be upgraded? How will the “Catalogue of Automotive Data Security Management Regulations” by the CAC protect user privacy and security in the future?

Li: NOA cannot be upgraded for old car owners. The wiring harness is different, and a small problem will cause a big safety issue. It is basically not possible to change the wiring harness, and there is no way to provide upgrades for old car owners. But the L2 ADAS of the 2020 Ideal ONE will continue to be upgraded, and features like visual parking will be launched and will continue to be improved.

The government’s requirements for data security and privacy are very comprehensive. We just need to follow the government’s requirements, and there is no shortcut. This is not a problem for us. We are careful enough not to install cameras even in the car.

The 2021 Ideal ONE has a high-speed highway NOA function, will the city NOA be launched? What is your view on LiDAR?

Li: We won’t make any promises for the city NOA. It has huge challenges. Currently, the high-definition map coverage for the city is almost negligible. Our NOA based on safety reasons still needs to be combined with high-definition maps. In fact, the coverage of closed roads has not been fully realized, and this is complementary.Additionally, when it comes to advanced driver assistance systems, it is unnecessary to be fixated on whether or not higher-level lidar is included as standard. Lidar is becoming increasingly affordable while cameras are becoming more expensive. An $8 million camera is four to five times more expensive than a lidar, and once the 8 million pixels are used up, the price will increase as the industry moves towards 20 million pixels. In four to five years, a 20 million pixel camera may very well have the same price as a lidar. As for sensor fusion in vehicles, there is no need to worry excessively as it is simply a matter of cost. People work this way, and I believe this is one aspect of it.

In terms of various sensors, a car does not rely on any single sensor to function. It does not rely entirely on cameras, millimeter wave radar, or lidar to operate. Instead, it produces the best results by fusing sensors and matching interactive sensors. An individual sensor’s effectiveness may also become obsolete, so rationality is important. Based on current technology, if there is a white truck parked horizontally, everyone will collide with it head-on. As for what 3D vision will look like in the future, whether it will rely on even higher computational power and be much more expensive than cameras and lidar is a matter of cost.

One issue with lidar is the placement of the lidar, and collision requirements for automobiles are too high. Many existing lidar placement schemes may not be qualified for collisions, which is also a problem.

Concerning the establishment of the Ideal Vehicle Company in Shanghai in April of this year, which includes infrastructure construction for charging and discharging, does this mean that we will also have certain layouts and considerations for battery swapping in the future? The recent significant rise in raw material prices, will this price increase affect the gross profit margin?

Shen: We have started developing a solution for 400 kW high-voltage charging, which is economically and experientially superior to all existing solutions. We have also established a division for charging networks and will make some self-built charging pile actions, which have actually been launched.

Regarding upstream raw materials, currently, commodities are indeed increasing in price, and the pressure on us is still significant even though there has been some fallback in the past two months. We try not to convey this pressure to our customers.### The new Ideal ONE model uses Horizon’s J3, which is the first time for mass production, breaking the traditional automotive mode. Horizon has also successfully developed the Journey 5 chip for L4, will it continue to be used in Ideal products? What do you consider to be the true measure of intelligence for a car?

Li: We are very satisfied with our cooperation with Horizon because a large number of their teams work with us directly. We do all kinds of perception testing and calibration, and whether it’s in our factory in Changshu, our experimental factory, or on controlled roads, they have professional engineers working with us. This is a far cry from what we got from previous chip vendors. Although Horizon’s founder, Yu Kai, used to be a technical guru, he has done far better than we expected in customer management. Our autonomous driving team has encountered various suppliers in the past, and Horizon is the team that has the highest level of cooperation and professionalism. This greatly exceeded our expectations.

It usually takes about two years for a chip to go from tape-out to being installed in a car. Nvidia released the next generation of Orin in the first half of this year, which is slated for maturity in 2025. The cycle from chip to various tests is very long, and automotive specifications are much stricter than those for mobile phones. We are also in constant communication with the Horizon team on J5, just like with J3, conducting evaluations and making further judgments after meeting the evaluation standards.

I think the real intelligence of intelligent cars is only one part of the cabin. The most interesting thing about entering this industry is that in the past, the digital world and the physical world were separate. When I used to work for Autohome, being ahead in the digital world meant nothing in the physical world. In the world of smart cars, the physical world and the digital world are integrated. Cars are the most stable Internet of Things device in the world, and every generation of architecture is capable of connecting various devices together. For example, air conditioning connects various devices such as fresh air systems and lighting, which is nothing like the IoT that breaks down every day. Cars are much more stable than home IoT. When these things are connected, it’s the fusion of the physical and digital worlds, which is what excites us.

It’s a primitive idea to say that they can replace mobile phones. At least the users of the “Three Treasure” cars mostly won’t buy a mobile phone holder. Tesla users love buying mobile phone holders because they really don’t need to use their phones in their cars anymore.

After the release of the 2021 Ideal ONE, the issue of user upgrades was mentioned. Providing user upgrades is an Ideal habit. As the number of users increases, how do you view the pricing issue for users? Will the development of interoperability include reference to upgradable and iterative capabilities?

Shen: We think about pricing from the perspective of serving customers. It is not our main consideration for profit, and our prices will be fair.Li: From the perspective of upgradability, if our cooperative suppliers come from the traditional automotive system, they basically lack the possibility of upgrade. If it is later like Qualcomm and Nvidia, especially Nvidia, from the perspective of display, upgradable solutions become possible, which is still related to the supplier’s system.

For companies like Nvidia, they will provide us with the interface of the next generation and the technical specifications. For some traditional automotive supply chains, they can only give you this generation of supply chain, and they will not mention anything about the next generation. You have no way to make too many reservations on the interface and gateway. These are two different systems.

What is the latest progress of the recall last year? Is there a plan to “go abroad”? Does the product line planning include sedans?

Shen: Our recall has long ended, and we completed all recalls within three months in accordance with national requirements.

Regarding “going abroad”, we are still thinking carefully about it. Our strategy and ultimate goal is to become a global automotive technology enterprise, which is our long-term goal. We are now seriously studying the products and channel layout of overseas markets, and the team has already been established.

Li: Another issue is that there is no sedan plan. We have already announced the product line. There will be a W platform with a space orientation, an S platform with a sports orientation, and multiple orientations to cover the needs of different users.

How to evaluate the feelings of new and old customers when the revised version is released at this time node? The intuitive adjustment of the new car is the steering wheel. Tesla has also had a disruptive design on the steering wheel, and the steering wheel is an important medium for autonomous driving. How to evaluate the “hardware management upgrade mode” of the 2021 model Ideal ONE?

Shen: The industry itself is accelerating its development, and we cannot stop the evolution of products. For users, we focus more on after-sales service to increase everyone’s satisfaction. By constantly improving services, we allow users to be satisfied.

Li: The only change in the angle of the steering wheel is because the NOA navigation assistance driving requires confirmation operations, so this confirmation operation cannot be done by users touching the screen. Our main change revolves around the design of the NOA navigation assistance driving, making it easier for users to adjust their speed, confirm and cancel. This is different from the L2 ADAS in the past, and the purpose is to make such changes.If the whole car is designed for L4, in the future, people may move away from the way of using a steering wheel today. More effective interactions that involve safety will be placed directly on the steering wheel instead of the screen. We believe this is an important trend in the development of the steering wheel.

Not only do I need to achieve this, but our team also strictly requires this when recruiting people. Because product development is not an easy task, everyone must take this important matter seriously. The product team is the research and development strategy, and the strategic department of an enterprise is both important and serious. The necessary systems must be in place. We have very high requirements for building a product team, which includes the 2021 Ideals ONE, in which I was less involved. Basically, the team had mastered the ability to create this product.

Source: Ideal Auto Spring Release Conference, Media Group Interview

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.