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from the rapid growth in 2023 to the brakes this year, mega has become a watershed in the development of ideal auto.

the second quarter financial report released by ideal auto recently showed that its revenue growth rate slowed down further and its net profit also dropped sharply. the aftershocks of the ideal mega storm are still continuing. overall, ideal auto made up for the impact of the ideal mega failure on sales through the ideal l6. however, the relatively low-priced ideal l6 also brought certain side effects. in the second quarter of this year, the gross profit margin of ideal auto's vehicles fell to 18.7%, which was lower than the 20% red line set by li xiang.

this year, ideal auto's annual sales target has been lowered from 800,000 vehicles at the beginning of the year to 500,000 vehicles today. in the future, ideal auto will face two major variables: one is whether the pure electric model postponed to next year can be recognized by consumers; the other is the competition with huawei hongmeng zhixing, its strongest rival.

after mega's failure, l6 came to the rescue

in the second quarter of 2024, ideal auto delivered a total of 108,581 vehicles, a year-on-year increase of 25.5%. although it still achieved year-on-year growth, the growth rate has declined compared with the previous period. for example, in the first quarter of 2024, ideal auto delivered a total of 80,400 vehicles, a year-on-year increase of 52.9%.

the slowdown in sales growth is still due to the "aftermath" of ideal mega's previous failure.

in march this year, ideal auto launched its first pure electric mpv model ideal mega. although li xiang had high expectations for it, the car caused a public opinion storm about its appearance as soon as it was launched, which also affected the sales of this model.

in fact, ideal mega was originally the first pure electric product launched by ideal auto this year. ideal auto initially planned to launch eight products in 2014, of which four were extended-range models and four were pure electric models. li xiang even set the goal of "challenging annual delivery of 800,000 vehicles and achieving the goal of becoming the top luxury car brand in the chinese market."

but the public opinion storm of ideal mega,this completely disrupted ideal's layout of pure electric products, and it had to readjust its strategic rhythm for this year.

in late march, li xiang sent an internal letter to all employees, admitting that he had misjudged the market rhythm, "we mistakenly treated the mega's stage from 0 to 1 as the stage from 1 to 10." this caused the sales team to significantly reduce its energy for the l series, affecting the service and sales of the main model ideal l8.

afterwards, ideal took several major actions. first, it delayed the launch of pure electric products; second, it launched the ideal l6 in april this year, which was priced at 249,800 yuan and was also the first model under ideal auto to be priced below 300,000 yuan; then, ideal officially reduced the prices of all its models in april, with the price reduction ranging from 18,000 to 30,000 yuan, and compensated the owners who bought the new models before the price reduction by making up the price difference.

from february to april this year, the monthly delivery volume of ideal auto ended its previous rapid growth and fell below 30,000 vehicles. in april this year, the monthly delivery volume barely increased. after the launch of ideal l6 and the price cut of the entire series, the monthly delivery volume of ideal auto began to return to the high-speed growth track starting from may this year.

however, the delay of pure electric models has also greatly affected ideal auto's overall delivery expectations for this year. ideal first lowered its full-year sales guidance from 800,000 vehicles to 560,000-640,000 vehicles in march this year; in the second quarter earnings call this year, ideal cfo li tie said that if the passenger car market develops healthily in the second half of this year, he is confident that he will be able to deliver 500,000 vehicles for the whole year.

it is difficult to balance sales and profits

however, although ideal l6 boosted ideal auto's sales, it also affected its profit level.

in the second quarter of this year, ideal auto's total revenue was 31.7 billion yuan, a year-on-year increase of 10.6%, but its net profit was 1.1 billion yuan, a year-on-year decrease of 52.3%. excluding us gaap, its net profit was 1.5 billion yuan, a year-on-year decrease of 44.9%.

in contrast, in the first quarter of this year, ideal auto's total revenue was 25.6 billion yuan, a year-on-year increase of 36.4%; its net profit was 591.1 million yuan, a year-on-year decrease of 36.7%. excluding us gaap, its net profit was 1.3 billion yuan, a year-on-year decrease of 9.7%.

this means,in the second quarter of this year, ideal auto's revenue growth rate dropped sharply and the decline in net profit further expanded.

it is worth noting that in the first half of this year, ideal auto's operating profit also turned from profit to loss, from a profit of 2.031 billion yuan in the first half of 2023 to a loss of 1.168 billion yuan in the first half of this year. fortunately, ideal auto's interest income and investment income increased significantly to 1.439 billion yuan in the first half of this year, which also saved its net profit to a certain extent.

in addition, the increase in sales of the low-priced ideal l6 has also led to a downward trend in its gross profit margin. in the second quarter of this year, ideal auto's 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 profit margin of the automotive business was 18.7%, while it was 21.0% in the second quarter of 2023 and 19.3% in the first quarter of 2024.

previously, li xiang said that as a smart electric vehicle company, ideal auto's gross profit margin of 20% is the threshold for healthy development. in the first and second quarters of this year, ideal auto's vehicle gross profit margin has been lower than the red line set by li xiang for two consecutive quarters.

ideal cfo li tie said that under the product mix, the vehicle gross profit margin is expected to continue to rise in the third quarter, probably around 19%, and the company's total gross profit margin will be around 20%.

uncertainty of pure electric vehicles

ideal has postponed the release of several pure electric models that were originally planned to be launched this year to next year.

previously, the outside world also exposed the product spy photos of ideal pure electric models. it seems that there are no major changes in the appearance, and it still continues the style of ideal mega. however, whether this will be recognized by consumers is still uncertain.

li xiang said that for pure electric suvs, ideal needs to solve two problems: one is the product design, and the other is to provide users with more than 2,000 super charging stations when the pure electric products are delivered. "therefore, we are still very confident in the competitiveness of pure electric suvs. we hope that in about two years, ideal auto will be able to enter the first echelon of high-end pure electric products."

ma donghui, president of ideal auto, revealed that the overall r&d progress of pure electric models is normal. several small batches of prototypes have been trial-produced, and relevant tests and performance surveys such as high temperature and humidity, quality and durability have been completed according to the calibration and test verification plan. in terms of production capacity preparation of the industrial chain, the overall progress is also normal. the production capacity planning of pure electric models can meet the sales demand. the plant for producing complete vehicles has been completed, and the production lines of the four major processes are also being installed and debugged.

ideal is also steadily advancing the layout of the charging network, which is also an important factor in the success of pure electric models. the financial report shows that as of june 30, 2024, ideal auto has 614 super charging stations in operation in china, equipped with 2,726 charging piles.

in addition, another variable is huawei hongmeng intelligent driving. wenjie is the main sales support of hongmeng intelligent driving, and wenjie's product line and price range are direct competitors of ideal auto.

data shows that in the first half of 2024, the total delivery of hongmeng intelligent driving was 194,027 vehicles, while the delivery volume of ideal auto was 188,981 vehicles. hongmeng intelligent driving also surpassed ideal auto to become the sales champion of china's emerging forces brand in the first half of the year.

li xiang admitted, "i think hongmeng zhixing is our strongest competitor in the market." he also said that the core attitude of ideal auto is to learn from huawei's technology research and development system and business management system in the long term and continuously.

intelligent driving is one of the distinctive labels of hongmeng intelligent driving. huawei's qiankun intelligent driving has been upgraded to version 3.0, and the qiankun intelligent driving basic edition has been launched to cover relatively low-priced models.

ideal is also increasing its layout in intelligent driving. at the previous chengdu auto show, ideal auto focused on the latest progress and future plans of intelligent driving. lang xianpeng, vice president of intelligent driving research and development of ideal auto, said in an interview that in terms of intelligent driving technology architecture, ideal auto is not much different from tesla, and is even a little ahead; in terms of training computing power and training data in china, at least from now on, ideal auto is ahead of tesla, because tesla is subject to constraints in data compliance and other aspects.

however, from the user's perspective,in terms of the label of intelligent driving, ideal auto still needs to further strengthen its influence in user minds.