“Wei Xiaoli”, who used to keep pace with each other, has ideally set aside the other two.
Recently, Ideal Auto announced its first-quarter financial report. In the first quarter of 2023, the total delivery volume of ideal cars is 52,584, a year-on-year increase of 65.8%. This is also the first quarterly delivery of ideal cars to exceed 50,000.
In addition to the delivery volume, the revenue of Li Auto has also achieved rapid growth. The total revenue in the first quarter was 18.79 billion yuan, of which vehicle sales revenue reached 18.33 billion yuan, a year-on-year increase of 96.9% and a quarter-on-quarter increase of 6.1%. Driven by the economies of scale, Ideal turned losses into profits, realized a net profit of 930 million yuan in a single quarter, and a gross profit margin of 20.4%, making it the first among the three small players to achieve profitability.
After the financial report was released, the stock price of Ideal Auto rose sharply by 18.85% to US$29.44, and its latest total market value was US$30.7 billion, surpassing the sum of Weilai (US$13.7 billion) and Xiaopeng (US$8.5 billion).
01 Wei Xiaoli “Differentiation”
For a long time, Wei Xiaoli, as the first echelon of new forces, has been compared together for a long time.
Today, this competition has been divided into phased results, and Li Auto has successfully come to the fore. The biggest advantage of the latter is precise product positioning and efficient execution. Since the end of last year, Li Auto has launched three models, L9, L8 and L7, and stopped selling Li Li ONE.
This strategy has enabled Ideal to achieve a successful replacement and further consolidated its market position. In the first quarter, Li Auto delivered a total of 52,600 new cars, a year-on-year increase of 65.8%. This also set a record for the company’s single-season delivery. In April, the monthly delivery volume of Ideal Auto reached 25,700 units, a year-on-year increase of 516.3%.
This has reached the lower edge of the previous guidance given by Li Auto, which is a very good performance among peers. Previously, Li Auto’s 2022 annual report revealed that in the first quarter of 2023, the delivery volume of Li Auto is expected to be between 52,000 and 55,000 vehicles.
Ideal Auto at the Shanghai Auto Show booth | Ideal Auto
In contrast, the performance of Weilai Automobile and Xiaopeng Automobile appears to be relatively weak. According to the data, Weilai delivered a total of 31,000 vehicles, a year-on-year increase of 20.5%; Xiaopeng only delivered 18,200 vehicles, a year-on-year decrease of 47.25%. In April, NIO delivered 6,658 vehicles and Xiaopeng delivered 7,079 vehicles.
Compared with the industry’s broader market, the performance of Li Auto clearly outperformed the market average, while the performance of Weilai and Xiaopeng was lower than the market average. According to data from the China Association of Automobile Manufacturers, from January to March, the production and sales of new energy vehicles were 1.65 million and 1.586 million, respectively, a year-on-year increase of 27.7% and 26.2%, and the market share reached 26.1%.
From the perspective of income, the total income of Ideal Auto is basically in line with market expectations. Data show that Ideal Auto achieved revenue of 18.79 billion yuan in the first quarter, a year-on-year increase of 96.5%. The average price of a bicycle is 357,000, a slight decrease from 380,000 in the fourth quarter, because of the delivery of L7.
In the operation of new energy vehicle companies, gross profit margin is a very critical factor. It can be regarded as the “blood” of the enterprise and is crucial to the development of the company. Only by maintaining an appropriate level of gross profit margin can a company ensure long-term healthy development; otherwise, the company will not be able to sustainably invest in long-term investments such as R&D and delivery, thereby limiting its future development prospects.
In terms of gross profit margin, Li Auto performed solidly. Overall, the comprehensive sales gross profit margin of Ideal Auto in the first quarter was 20.4%, lower than the 22.6% in the first quarter of 2022. Among them, vehicle gross profit margin slipped slightly to 19.8%, compared to 22.4% in the first quarter of 2022 and 20% in the fourth quarter of 2022. Li Auto explained that this was mainly due to the difference in product mix between the two quarters.
Despite this, the gross profit margin of Ideal Auto is still at the top level in the industry. The data shows that BYD’s gross profit margin in the first quarter was 17.86%, an increase of 5.46 percentage points year-on-year, but lower than the highest gross profit margin of 19% set in the fourth quarter of last year; among them, the gross profit margin of the automobile business reached 20.8%, and the net profit margin was 3.64. percentage points, a year-on-year increase of 2.28 percentage points.
In contrast, Tesla’s gross profit margin in the first quarter was under greater downward pressure, at 19.3%, a year-on-year decrease of 9.8 percentage points and a quarter-on-quarter decrease of 4.4 percentage points. This is the lowest single-quarter gross profit margin since the fourth quarter of 2020, and it is temporarily lower than the full-year guidance of maintaining more than 20%. Among them, the gross profit margin of automobile sales was 18.3%, a year-on-year decrease of 11.3 percentage points and a quarter-on-quarter decrease of 5.4 percentage points.
02 Achieved positive operating profit for the first time
Different from NIO’s focus on user relations and Xiaopeng’s hard work on technology, Li Auto gives people the feeling of a “super product manager”. Through its strong product definition ability and the ultimate cost-effectiveness, it quickly creates explosive models. At the same time, Ideal is also a company that places great emphasis on operating efficiency.
In 2022, Li Auto’s research and development expenses will be 6.78 billion yuan, sales, general and management expenses will be 5.67 billion yuan, a total of 12.45 billion yuan, accounting for 27.49% of the expenses. Especially in the fourth quarter, the overall expense ratio of Ideal Auto was only 21%, of which the research and development expense ratio was 11.7%, and the sales and management expense ratio dropped to single digits (9.2%) for the first time.
In contrast, NIO and Xpeng both have expense ratios in excess of 40%. Among them, Weilai Automobile’s revenue was 49.3 billion yuan, expenses were 21.34 billion yuan, and the expense ratio was 43.3%; Xiaopeng Automobile’s revenue was 26.9 billion yuan, the total expenses were 10.915 billion yuan, and the expense ratio was 40.5%.
Ideal L9 Smart Cockpit | Ideal Car
Entering the first quarter of 2023, Li Auto will be more refined in the control of research and development and sales expenses. In terms of research and development expenses, Ideal Auto invested 1.85 billion yuan, an increase of 34.8% year-on-year, but it experienced a quarter-on-quarter decline for the first time, which was less than the 2.07 billion yuan in the fourth quarter of last year; in terms of sales expenses, the total sales, general and management expenses of Ideal Auto in the first quarter 1.65 billion yuan, a year-on-year increase of 36.5% and a month-on-month increase of 0.9%. This is closely related to the increase in ideal car deliveries.
This also means that the total cost of Ideal Auto in the first quarter was 3.5 billion yuan, with an expense ratio of 18.6%, which is far below the industry average. Recently, Li Xiang posted on Weibo, “The market expense ratio of our brand is 0.6%, and the expense ratio of mainstream brands is about 2-3%, which is 4-5 times that of Ideal Auto; luxury brands include full-caliber brands and channels. The sales expense ratio is also about 4 times that of Li Auto.”
After Li Xiang revealed the rate, Geely Senior Vice President Yang Xueliang also took the initiative to say: “(Ideal) is worth learning from all brands.”
While maintaining sales in the first quarter of 2023, Li Auto has achieved profitability for the second consecutive quarter through extreme operating efficiency. The data shows that the net profit of Ideal Auto in the first quarter was 934 million yuan, compared with a net loss of 10 million yuan in the same period last year, an increase of 252% compared with the net profit of 270 million yuan in the fourth quarter of 2022; The profit was 1.414 billion yuan, a new high.
Among them, a key indicator is that Ideal has achieved positive operating profit for the first time. According to the data, the operating profit of Ideal Auto in the first quarter was 405 million yuan, while the operating loss in the same period last year was 413 million yuan, and the operating loss in the fourth quarter of 2022 was 134 million yuan.
Turning positive operating profit means that the company’s revenue from operating activities has exceeded its expenditure, and it has achieved profitability. It also shows that the company’s business model and strategy have been validated by the market.
In addition to achieving profitability, Li Auto’s operating cash flow performance in the first quarter of 2023 is also very strong. The data shows that the operating cash flow in the first quarter reached 7.8 billion yuan, a substantial increase from the 1.83 billion yuan in the same period in 2022. At the same time, due to the reduction in capital expenditures, Li Auto once again achieved positive free cash flow in the first quarter, reaching 6.7 billion yuan.
It is worth mentioning that Li Auto has achieved positive free cash flow for three consecutive years, and it is also the company with the largest cash reserves among the three. As of the end of March 2023, Li Auto’s cash and cash equivalents, restricted cash, time deposits and short-term investments totaled 65 billion yuan.
03 Impact annual sales of 300,000 vehicles
The development of a company is a “pas de deux” with its time. From the current point of view, the ideal car “jumps” very well.
Li Xiang once pointed out that the biggest problem facing the industry is still charging and battery costs. Among charging problems, the most deadly cause is slow charging, not short range. In terms of battery cost, the key is how to achieve the performance and functions of the vehicle with less battery cost under the effective mileage.
Ideal L8 | Ideal Car
In the long run, Li Auto’s goal is to achieve annual sales of 1.6 million vehicles in 2025. In order to accomplish this goal, the ideal car plan is divided into three steps:
- The first step is to use the L series to take the first place in the market share of 300,000-500,000 SUVs, accounting for 15%-20% of the market share;
- The second step is to use the range-extended SUV and pure electric models to achieve the first place in the entire passenger car market of 300,000 to 500,000;
- In the third step, Ideal will mainly attack the 200,000-300,000 market.
The goal of Li Auto in 2023 is to challenge the 20% market share of the 300,000-500,000 yuan luxury SUV market, that is, hit the annual sales of 300,000 vehicles.
At present, the ideal car is in a very good state. For the second quarter, Ideal Auto is expected to deliver 76,000 to 81,000 vehicles. The latest data shows that Li Auto delivered a total of 25,700 new cars in April, which means that the average monthly delivery volume in the next five and six months will remain at least above 25,000. The certainty of this growth trend is also one of the key factors for the sharp rise in stock prices after the release of Ideal’s first-quarter financial report.
In addition to sales performance, Li Auto’s layout in terms of intelligent driving and product planning is also worthy of attention. Li Xiang said that the company’s next stage of development will be promoted in accordance with the “smart” and “electric energy” – “dual energy strategy” released on April 18. On the one hand, it will enter the era of intelligent driving 3.0 represented by urban NOA. It is understood that the urban NOA will push the early bird test in June, and plans to push it in 100 cities by the end of this year.
On the other hand, Li Auto will also open a new stage of extended-range electric and high-voltage pure electric. In terms of range-extending electric vehicles and high-voltage pure electric vehicles, Li Auto will adhere to two routes in parallel. One is to improve the efficiency of range-extending vehicles and provide users with a better experience than fuel vehicles; Travel radius, to achieve pure electric users’ energy replenishment experience on par with refueling.
According to the plan, by 2025, the ideal product matrix will include one super flagship model, five extended-range electric models and five pure electric models. It is understood that the first pure electric model of Li Auto will be released in the fourth quarter of this year. After the release, users can go to the store for a test drive, and then start delivery, maintaining a release rhythm similar to Li L7, Li L8 and Li L9.
2023 is destined to be a year of continuous “involution” and “anxiety”, and car companies begin to “differentiate” and “fall behind”. Against such a background, although Li Auto is not perfect, it is a “top student”. In the current rapidly changing market environment, Li Auto has taken advantage of this round of competition.