GoingOne Hundred, a media under Chengdu GowingOne Hundred Automobile Co. Ltd, focuses on the evolution of the automobile travel industry chain.
Author: Roomy
At the C11 launch event, XPENG made an aggressive statement, “Surpassing Tesla for over 3 years,” “Releasing 8 new cars within 4 years,” and “Achieving 800,000 units sold in 2025.”
Some people say, “XPENG’s car production skills are mediocre, but their ability to draw a vision is superb.”
In the face of these criticisms, the founder of XPENG, Mr. He XPeng, is no longer as nervous as he was when he delivered the first model, S01. He has returned to the habit of “being able to fall asleep in 5 minutes when lying down normally.” He often wears a white shirt, which is smooth and without wrinkles.
Because Mr. He XPeng’s heart is more settled than before.
The beginning of the C11 launch event featured a video of Mr. He XPeng talking about his heart, starting with the question of “Others ask me, if you don’t understand cars, how can you make them?”
In 2015, Mr. He XPeng really did not understand how to make cars. On Christmas Eve of that year, XPENG Technology was established. With the great surge of car production, the fledgling XPENG set sail with the flow of the times. At that time, Mr. He XPeng did not even know that qualification was required for car production and sales. “I thought that I could sell the car after it passed the test.”
“In 2015, when I first wanted to make a car, I really didn’t know what kind of professionals were in the car industry, and when I was recruiting, I didn’t even know who to look for,” said Mr. He XPeng, being forthright.
Six years ago, because of the “unknown” and “not knowing” of car making, XPENG initially kept a low profile. Even though it was a big deal, it was just a piece of paper. “What XPENG was doing and wanted to achieve” was not clear to the outside world, but the goal of benchmarking Tesla was well known to all.
After the first model, S01, was launched, it did not receive good reviews from the market. Instead, it triggered the judgment that “XPENG cannot produce cars.” It wasn’t until the second model, T03, appeared on the market, and the third model, C11, was announced with the Lingxian 01 chip, that He XPeng dared to boldly say, “Next, I hope that XPENG’s brand will be more well-known to the public.”
However, XPENG’s transformation from “keeping a low profile, being pragmatic, and quietly working” to repeatedly announcing “surpassing Tesla in three years” in less than six years, is it too fast for He XPeng?
Because sometimes, benchmarking Tesla can also be a form of praising.
XPENG’s contradiction"Outsider", "poor taste", "not knowing how to make cars"…
These three tags have been closely associated with LI (Leapmotor). When LI’s first car, the S01, was unveiled, many people couldn’t figure out who this “non-serious sports car” was intended for.
In 2019, LI set a sales target of 10,000 units for its S01, a civilian supercar priced at around RMB 150,000. At that time, facing struggling new carmakers such as NIO and XPeng Motors, who were still in the abyss, the “Chinese Tesla” discourse was also rampant, with everyone feeling they had a chance.
LI also believed it had a chance. Then Vice President of LI, Zhao Gang, said, “We want to offer Tesla-level hardware standards at less than half the price of Tesla.” He also claimed that the S01’s intelligent driving assistance system was comparable to Tesla’s.
From the embryo of a carmaker to mass production and sales, LI only took four years. For a time, the industry was somewhat confused as to whether this engineer who dealt more with circuit boards on a daily basis was simply overconfident or just ignorant about carmaking.
This “confidence” can also be called ignorance of the depth of carmaking and the cruelty of the unknown market. At that time, anyone who entered the car industry as an outsider believed they could be the Apple that dethroned Nokia, with all kinds of “calf that’s not afraid of tigers” ambition. Looking back now, these ambitions were really somewhat flimsy.
LI was no exception, although it blatantly held up the banner of wanting to be the Huawei of the auto industry. But no matter how big the ambition, it needs to be verified by the market. LI, with no carmaking background, needs to prove itself to the market through large-scale deliveries.
Some market analysts believe that Zhu Jiangming should thank the poor sales of the S01, which was like a sickle that directly cut through the reality that was outside of the dream. S01’s monthly sales once hovered in the double digits, and the full-year sales in 2020 were only just over 1,000 units, which was only one-tenth of the sales target, enough to deal a heavy blow to LI.
Zhu Jiangming set a sales target of 50,000 units for 2020, of which 20,000 were for the S01 and 30,000 were for the T03, which went on sale on May 11, 2020. “It won’t be difficult, we can definitely enter the top ten new energy vehicle companies.” The market feedback was direct enough; the sales target for that year was 50,000 units, but the actual sales volume was only 11,391 units.
Although sales cannot directly determine the value of a company, no one can deny that sales are one of the most direct measures of market recognition of its products. The disparity between expectation and reality has bluntly exposed the fact that LI (Li Auto) “does not fear the market.”
Looking back at the past few years, the direct blow of being accused of “only talking without action” is not necessarily a bad thing.
However, being labeled as “layman,” “low aesthetic,” and “inexperienced in car manufacturing” has become a challenge for LI to overcome its survival difficulties with technology, sales, and products. Some even think that “the low-key Zhu Jiangming’s reputation in the automotive industry has been damaged, and the gain is not worth the loss.”
The truth is, over the years, there has been a clear trend for LI- it is a contradiction. On the one hand, it is developing step-by-step in R&D; on the other, it has ambitions to surpass Tesla. “Judging from the market performance of Li Xiang’s products, Li Xiang has taken a big step forward,” and some Li Xiang T03 car owners have expressed concerns.
Under the ambitious goals of benchmarking Tesla, LI has set two major brand genes for itself, namely cost-effectiveness and technology. However, to date, how to integrate these two advantages into brand genes and convey them to consumers requires more thought and action from LI.
Do you remember in 2018, when LI claimed they want to be the Huawei in the automotive industry, they once gave the media present a multiple-choice question: “If you were given RMB 80 million, what would you choose?”
LI’s choices were:
A. Host a grand press conference;
B. Further increase R&D investment.
Although these two options are not equivalent, at that time, no one would choose A, especially in the current situation where new carmaking forces are frequently questioned for ‘playing’ and fundraising. Of course, LI’s answer must be B.
However, this is well understood. With Zhu Jiangming’s character, LI is indeed a new car company that is fully focused on internal research and development. But it does not prevent Zhu Jiangming from having the ambition to ‘surpass Tesla’, despite not knowing how far the road is.
With the support of T03, LI entered the top five sales of new car-making forces, and C11’s listing marked LI’s entry into the 2.0 era.
However, the slogan of “surpassing Tesla in the field of intelligentization within three years” and “achieving 800,000 vehicles by 2025,” after causing the new round of splash, became a contradiction for LI again. How will Zhu Jiangming solve this problem in the next 4 years?
After all, LI has yet to fulfill any promises it made.
The two cards in Zhu Jiangming’s hands
Apparently, Zhu Jiangming does not care about this.Facing the new strategic goals, Zhu Jiangming opened two cards, one is the Lingxin 01 chip for autonomous driving, and the other is C11.
In Zhu Jiangming’s plan, “surpassing Tesla in three years” does not aim at sales volume, but aims to put the laser radar scheme into production by the end of 2023 and achieve full-scenario autonomous driving technology in 2024, realizing the overtaking and leading of Tesla in intelligent driving technology.
Zhu Jiangming has always hoped that “independently developed” could become the core competitiveness of LI. In addition, due to the US targeting Dahua’s chip department, he chose to self-develop chips from the beginning and strangle the chip crisis in the cradle.
In LI’s press releases, there are frequently such words: LI is the second automaker with complete R&D capabilities for intelligent electric vehicles after Tesla.
“We have always said that LI is a relatively special automaker except for Tesla. The core components of the car are developed in-house, which reflects some of our advantages from another perspective.”
However, in this era that requires stories and alcohol, LI, which can’t tell stories, seems a bit out of place. Musk and Tesla, Li Bin and NIO, each has endless ups and downs and media coverage.
But Zhu Jiangming, an engineering student, cannot tell stories and cannot effectively convey LI’s advantages. He also realized this and began to actively change.
Like brothers in the trenches, LI’s difficulty also lies in funding.
“We can live another three years without raising a penny in funding within the next three years. This is our own confidence.” Zhu Jiangming once boasted, but now he has broken his word. Currently, LI has launched three major product platforms: T, S, and C. They all require huge investments in product development, channel layout, and brand promotion.
Recently, LI announced that it has completed a pre-IPO round of financing of more than 4.5 billion yuan, led by CICC Capital, with the Hangzhou municipal government participating and an investment amount of 3 billion yuan. The company plans to go public on the science and technology innovation board within the year or early next year.
Under the starting point of strategic goals, how LI strengthens its brand gene in the 2.0 stage has become an important battle on Zhu Jiangming’s desk.
This heavy responsibility is handed over to the C11 model. In official terms, as the first product launched under the “LI 2.0 era”, the C11 is the culmination of LI’s latest self-developed achievements.High specification and low price have always been the way that Leading Ideal (零跑) operates, and the C11 is no exception. The C11 has three configurations available and is priced between 159,800-199,800 yuan after subsidies.
As of the first half of 2021, Leading Ideal has received a total of 21,515 orders, with the C11 being the main model. Zhang Guangyin, General Manager of Leading Ideal’s auto manufacturing department, stated that “high cost performance is still the best way to attract customers, and the C11 will continue to adhere to this principle.”
Unlike the T03, which aims to enter the market in large quantities, the C11 uses the Lingxin 01 chip, China’s first domestically produced AI intelligent driving chip with complete independent intellectual property rights.
“For the C11, we have no competitors in terms of our car manufacturing philosophy or logic. Perhaps in the next 2-3 years, there will be followers who will also provide affordable luxury cars to the general public through self-research and self-production. From a market perspective, all products in the price range of 150,000 to 200,000 yuan, including gasoline and electric vehicles, are our competitors.”
Zhu Jiangming talked confidently but not completely confidently. “We look forward to entering the mainstream market and establishing a benchmark in the market. The C11 is such a product that will challenge the mainstream market and provides the best cost performance.”
For a company with an engineering culture, technology can be done very well, but there is often a lack of understanding of the users. How do you integrate your own technical label into your brand? This is a problem that Leading Ideal, which has been established for six years, must solve in the C11.
Zhu Jiangming’s chip is the Lingxin 01, an intelligent driving chip created by Leading Ideal in cooperation with Dahua.
Public information shows that the Lingxin 01 uses a 28nm manufacturing process, with a power consumption of 4W and computing power of 4.2TOPS. The Leap Pilot 3.0 intelligent driving assistance system mounted on the C11 uses two Lingxin 01 chips with a computing power of 8.4T, three to four times that of and Mobileye EyeQ4.
In addition to the Lingxin 01, nearly all of the core chips in the entire ADAS system of the C11 are domestically produced. In addition to the chips, Leading Ideal’s Leap Pilot 3.0 intelligent driving assistance system, including algorithms, perception, and data, are all self-developed.
As everyone knows, the competition for intelligence is the competition for autonomous driving, and it is also the competition for chips. However, how well the Lingxin 01-equipped C11 will perform is unknown as it has not yet been widely delivered, although Zhu Jiangming has been working on intelligent transportation for decades under Dahua before the establishment of Leading Ideal.
With years of experience as a foundation, the possibility of Lingxiang 01 standing out when facing numerous chips with more powerful and mature computing abilities, such as Tesla HW3.0, Huawei’s self-developed SoC, and Horizon Journey 3, will determine the sales volume of C11, as well as the achievement of 800,000 Zero Run’s vehicles in 2025.
Moreover, under the various difficulties such as the slow progress of self-developed chips with Lingxiang 01’s current computing power and sufficient funds to support independent research and development, the possibility of Zero Run surpassing Tesla within three years to achieve full-scenario autonomous driving technology in 2024 is minimal, to put it more seriously.
After all, survival and profitability are still unresolved issues for Zero Run. And, how does Zero Run, which has always pursued the low-margin and high cost-performance route, generate profits?
Zhu Jiangming responded, “Through scale. Why do we need to develop our own chips? It is for the scale”. By implication, the scale of C11’s sales volume has become a prerequisite for “surpassing Tesla within three years.” He also revealed a small goal, “C11’s goal for this year is to strive towards the delivery of more than 6,000 vehicles.”
“I hope that Zero Run can have sales scale like Toyota and Volkswagen one day,” he added. However, it is obvious that with the current vehicle matrix and sales volume, the grand goal of 800,000 vehicles cannot be supported.
This is another paradox. Currently, Zhu Jiangming’s problem-solving ideas are clearly not clear enough.
Excerpts From Zero Run’s Interview
Q: Can you use three words to express C11’s product competitiveness? What are they? And how will the current global chip shortage affect C11? After the launch of C11, will it have an impact on the T03, reducing its production?
A: Perhaps two words can summarize C11 more accurately. The first is intelligence, which is C11’s greatest advantage in the same market segment. The second is convenience, including space, endurance, and many humanized technological configurations.
For Chinese manufacturers, the chip problem should be a good thing, a positive thing. It will promote Chinese enterprises to accelerate research and development, and we are one of the representatives of self-research and self-manufacture. Of course, there will be short-term impacts. The chip panic has evolved into a competition for resources. If you make one, others will make one less.
The launch of C11 will not affect the production of T03. There will be a certain amount of production fluctuation during the process, but it will not compress production.
Q: How can Zero Run make the cost-performance ratio of C11 so high? Is it because other car companies are too expensive, or are we selling too cheaply?A: The cost of a car is closely related to the structure design of the product. By optimizing the structure design, costs can be reduced. In addition, by allowing manufacturers to benefit users, the cost-performance advantage of the product can be further enhanced. As you can see, many of our core components are made in-house, which can also save a lot of costs. Therefore, combining several aspects, Leapmotor can provide users with products with higher cost performance.
Q: We are taking a high cost-performance route, making some gross profit sacrifices in the early stages to quickly generate users, and then raising profits later?
A: Not exactly. I remember that Lei Jun had a saying that the gross profit of his products should never exceed 5%, exceeding this number is wrong.
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.