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produced by radar finance hongtu | edited by xiao sha | deep sea

ideal auto, which has been profitable continuously, slowed down its pace of making money in the first half of the year.

recently, ideal auto released its second quarter financial report for 2024. data showed that the company's revenue in the second quarter reached 31.7 billion yuan, a year-on-year increase of 10.6%; net profit in the same period reached 1.1 billion yuan, a year-on-year decrease of 52.3%.

the decline in profits was mainly due to the price cut in april and the increase in sales of ideal auto's l6 low-priced model, which lowered the gross profit margin. correspondingly, ideal auto's vehicle gross profit margin in the second quarter was 18.7%, down both year-on-year and month-on-month.

in the second quarter, ideal's overall gross profit margin was 19.5%, while it was 21.8% in the second quarter of 2023 and 20.6% in the first quarter of 2024. the decline in gross profit margin compared with the second quarter of 2023 and the first quarter of 2024 was mainly due to the decline in vehicle gross profit margin. li xiang, founder, chairman and ceo of ideal auto, once publicly stated that the healthy threshold is a gross profit margin of 20 points.

throughout the first half of the year, ideal auto's operating profit turned from a profit of 2 billion yuan in the same period last year to a loss of 117 million yuan. fortunately, the profit was supported by the interest income of 1.439 billion yuan and the net investment income. the net profit attributable to the common shareholders of ideal auto in the first half of the year was 1.695 billion yuan.

after the setback in mega's market performance and the price adjustment of all its products, ideal auto delivered a total of 189,000 new cars in the first half of this year, a year-on-year increase of 35.8%, which is considered strong. however, at this earnings conference, the management lowered the full-year sales guidance to 500,000 vehicles, 300,000 less than the target set at the beginning of the year.

in addition, considering the full competition with huawei's "hongmeng intelligent driving" in the suv field and the uncertainty of trying pure electric models again, it is far from time for ideal to celebrate. citi issued a research report saying that due to the slowdown in sales of bev (pure electric) models and unfavorable supply and demand relations, ideal auto's gross profit margin will be lowered in the next two years, and it is expected that there will be a risk of valuation reduction in 2025.

the number of r&d personnel has decreased by more than 1,300

tianyancha data shows that ideal auto is an intelligent new energy vehicle developer that focuses on providing intelligent transportation vehicle research and development and services.

in 2023, ideal auto had a year of great performance. the company achieved total revenue of 123.85 billion yuan for the whole year and achieved its first annual profit, with a net profit of 11.81 billion yuan, becoming china's first emerging car company to achieve annual profit.

however, the situation changed in 2024. in the first quarter, ideal's revenue and net profit fell sharply month-on-month, and operating profit turned into a loss of 585 million yuan. this result, which was far below expectations, caused the company's stock price to plummet after it was announced.

faced with the "turnaround" in performance, ideal quickly launched a series of adjustments in personnel, prices and goals. first of all, in terms of cost reduction, ideal auto announced layoffs in early april, but was quickly denied by the company.

in mid-may, many media reported that after the may day holiday, ideal auto was carrying out a new round of company-wide personnel optimization, with an overall optimization rate of more than 18%. the 2023 financial report shows that ideal auto has nearly 31,600 employees. according to the optimization ratio, this round of optimization involves more than 5,600 people.

compared with the last quick denial, ideal auto did not comment on the report of layoffs this time. judging from the financial report, ideal did lay off employees.

as of june 30, 2024, the company had a total of 30,899 employees; as of december 31, 2023, the company had a total of 31,591 employees.

based on this calculation, the total number of ideal auto employees has been "reduced" by 692 in half a year. among them, r&d personnel are the hardest hit by layoffs. at the end of the first half of 2024, ideal auto had 5,373 r&d personnel, a decrease of more than 1,300 from 6,726 at the end of the previous year.

the ideal cost reduction and efficiency improvement also played a role. the financial report shows that due to the reduction of employee salaries, the r&d expenses in the second quarter decreased by 0.7% month-on-month; at the same time, due to the reduction of marketing and promotional activities and employee salaries, the sales, general and administrative expenses in the quarter also decreased by 5.5% month-on-month compared with the first quarter.

another major move by ideal in the second quarter was to launch low-priced models and cut prices to join the price war.

on april 18, ideal l6 was officially launched. the new car is available in two versions, pro and max, priced at 249,800 yuan and 279,800 yuan respectively, becoming the first model of ideal auto priced below 300,000 yuan.

on april 22, ideal officially reduced the prices of its entire series of models by 18,000 to 30,000 yuan, and compensated owners of new models including ideal mega and the 2024 l series before the price reduction by making up the price difference. the company subsidized ideal mega owners with 30,000 yuan in cash and l series owners with 15,000 to 20,000 yuan in cash.

among them, the low-priced ideal l6 model has continued to contribute to ideal's delivery volume since its launch. the cumulative deliveries exceeded 50,000 vehicles in three months after its launch, and in june, the monthly delivery volume exceeded 20,000 vehicles for the first time.

however, the sales growth did not drive the growth of gross profit margin. data shows that ideal auto's gross profit margin in the second quarter was 19.5%, down 2.3 percentage points from the same period last year and 1.1 percentage points from the first quarter of this year; in the second quarter, ideal's vehicle gross profit margin was 18.7%, while it was 21% in the second quarter of 2023 and 19.3% in the first quarter of 2024.

at last year’s spring media communication meeting, li xiang said that as a smart electric vehicle company, ideal auto’s gross profit margin of 20% is the threshold for the healthy development of the company.

however, as the gross profit margin has further declined since the beginning of this year, ideal auto's profit momentum, which was originally upward last year, has turned downward. data shows that in the second quarter, revenue reached 31.7 billion yuan, a year-on-year increase of 10.6%; net profit reached 1.1 billion yuan, a year-on-year decrease of 52.3%; adjusted net profit was 1.5 billion yuan, a year-on-year decrease of 44.9%.

in this regard, ideal auto cfo li tie expressed confidence in the earnings call, saying that with the optimization of economies of scale and the adjustment of sales policies, ideal's vehicle gross profit margin is expected to rebound in the third quarter to more than 19%, and the overall gross profit margin is expected to return to more than 20%.

china merchants securities also believes that the improvement of ideal in the third quarter is highly certain. this is mainly due to the explosion of ideal l6, which has led to a significant increase in total sales in the third quarter, and the enhanced scale effect has promoted the improvement of gross profit margin. in addition, the cost reduction and efficiency increase such as layoffs in the second quarter have significantly reduced the expense rate compared with the previous month. if the effect continues in the second half of the year, the expense rate in the third quarter will continue to decline, improving profitability.

however, the bank believes that there are still uncertainties for ideal in the fourth quarter as the company lacks blockbuster new products, and if its peers expand aggressively, the company may be forced to cut prices to defend itself.

a pure electric model will be released next year

on march 1 this year, ideal auto launched its first pure electric mpv model, ideal mega, but as soon as the car was launched on the market, it aroused doubts about its appearance, price and sales.

20 days after the new car was launched, li xiang issued an internal letter to reflect on a series of doubts that ideal mega had received recently. he bluntly stated that the company's failure to control the market rhythm of ideal mega and its excessive focus on sales were the main reasons for the doubts about the model.

after the failure of ideal mega, the company made timely adjustments and delayed the launch of pure electric products.

however, under the influence of this incident, ideal significantly lowered its annual sales target. initially, li xiang announced in february 2024 that the sales target for 2024 would be raised to 800,000 vehicles. however, ideal officially lowered its full-year sales guidance from 800,000 vehicles to 560,000-640,000 vehicles in march.

at the performance meeting after the second quarter report, the company's management said that if the passenger car market develops healthily in the second half of this year, it is confident of completing the delivery of 500,000 vehicles for the whole year.

in response, goldman sachs released a research report saying that management's guidance for third-quarter auto sales is 145,000 to 155,000 units, and revenue will reach rmb 39.4 billion to rmb 42.2 billion. the bank pointed out that management lowered the full-year sales guidance to 500,000 units in the business meeting, which was in line with the bank's expectations.

however, it is not easy for ideal to achieve the annual delivery of 500,000 vehicles without new cars on the market in the second half of the year. some analysts pointed out that the number of models of the same level as ideal l6 is increasing, and the price is also better than ideal l6. its old rival wenjie launched wenjie m7 pro with a starting price of 249,800 yuan to compete for market share.

in terms of pure electric vehicles, ideal originally planned to launch three pure electric suvs in the second half of the year, but after mega's poor performance, the company has postponed the release of new pure electric products to the first half of 2025.

according to ma donghui, president of ideal auto, the overall progress of pure electric product research and development is normal. currently, multiple small-batch prototype vehicle test productions have been completed, and the vehicle production plant has been completed.

making a comeback again, li xiang still has high expectations for pure electric vehicles, saying that he hopes to enter the first echelon of high-end pure electric products in about two years.

to this end, li xiang emphasized that two issues need to be resolved next. one is the product design, and the other is to be able to provide users with more than 2,000 supercharging stations when pure electric products are delivered.

however, it should be noted that the growth rate of pure electric vehicle sales is not high. according to the data from the china passenger car association, my country's narrow plug-in hybrid sales in july were 318,000 units, a year-on-year increase of 73% and a month-on-month increase of 3%; the wholesale sales of extended-range vehicles were 122,000 units, a year-on-year increase of 115% and a month-on-month increase of 5%. in comparison, the wholesale sales of pure electric vehicles in july were 505,000 units, a year-on-year increase of 0.9% and a month-on-month increase of 9%, respectively.

the industry believes that the growth rate of pure electric vehicles continues to slow down, and the market share may be overtaken by plug-in hybrid vehicles. against this background, some institutions are not optimistic about ideal's re-entry into the pure electric market.

citi released a research report saying that due to the slowdown in sales of bev models and unfavorable supply and demand, it lowered its gross profit margin forecast for ideal auto in 2025 and 2026 by 0.1 percentage point and 0.8 percentage point to 18.8% and 17.9% respectively. the target price was reduced from 113.8 yuan to 100.7 hong kong dollars, and it is expected that there will be a risk of valuation reduction in 2025.

more and more competitors

just as ideal was preparing to make a second effort in pure electric vehicles, strong competitors continued to emerge in its home market, the extended-range track.

the first to bear the brunt is huawei's "hongmeng intelligent driving", which also focuses on extended-range models. recently, with the launch of the second model jointly developed by huawei and jac motors, the number of huawei's hongmeng intelligent driving models has increased to 6, namely the m5, m7, and m9 developed in cooperation with seres, the s7 and r7 developed in cooperation with chery, and the s9 developed in cooperation with baic blue valley.

it is not possible to quantify the extent to which ideal auto's high-priced models ideal l9 and l8 are affected by the wenjie m9 in market competition. however, in terms of sales, according to agency statistics, the sales of l9 and l8 in the first quarter were about 24,000 and 21,000 respectively, but in the second quarter, the sales of l9 and l8 in that quarter dropped to about 20,000 and 16,000 respectively.

in addition, this year, many pure electric vehicle companies have announced that they will launch extended-range models. on august 21, at the avita extended range technology conference, avita technology released the extended-range technology kunlun extended range, and will release a number of pure electric and extended-range power models within the year.

on the same day, geely auto also announced at its mid-term performance conference that the zeekr large flagship suv will be equipped with two power modes, including pure electric and super electric hybrid, and is expected to be released in the fourth quarter of next year. it is reported that the zeekr super electric hybrid system is a new power mode that integrates the advantages of pure electric, plug-in hybrid and extended range technology.

earlier, in may, volkswagen announced that it would expand its product lineup of plug-in hybrid vehicles; in june, gac aion’s general manager gu huinan revealed that gac aion will add plug-in hybrid, extended-range and other models, and plans to launch them next year.

according to cailianshe, the third car planned by xiaomi auto is an extended-range suv, mainly for home use, and will be launched in 2026.

in the industry's view, in addition to the better sales of extended-range electric vehicles, the immaturity of pure electric technology is also the reason why car companies "enter" the hybrid camp.

qu fang, an investment consultant at wanlian securities, said that the layout of plug-in hybrid vehicles by automakers is related to the slowdown in the growth of pure electric vehicles abroad on the one hand, and the growth of domestic market demand on the other hand; plug-in hybrid vehicles were once considered a transitional stage for pure electric vehicles, but because the technology of pure electric vehicles is not yet fully mature, the market will choose plug-in hybrid vehicles with greater practicality.

as more brands join the race, the extended-range hybrid track is becoming more and more crowded, and the competition is undoubtedly becoming more and more fierce. as an early car company focusing on extended-range, ideal has long reaped the dividends of the extended-range market, but now it needs to face more competitors to grab a piece of the "cake".

talking about the current market competition, li xiang said at the performance meeting, "hongmeng zhixing is ideal's strongest competitor in the market. we believe that the two sides will coexist healthily in the long run."

but ideal’s competitors are not just huawei. what will ideal do in the future? radar finance will continue to pay attention.