Shentucar original
Author | dawn
Edit | Wei Jia
The ideal of the most economical new forces in car-making has finally "cut" the profits out.
On February 25, Ideal released its unaudited financial results for the fourth quarter and full year of 2021. There are several figures that have caught the attention of Shentu: the ideal fourth quarter of operating profit, net profit, Non-GAAP net profit, all turned positive, for the first time in history.
This means that the ideal has achieved a real quarterly profitability, both at the operational and corporate level. This is the first of China's new car-making forces.
However, from the perspective of the whole year of 2021, the ideal is still a loss, and it is only profitable under the caliber of Non-GAAP.
In the industry, the ideal is known as the "cutting factory". Compared with Weilai, who "spends money without blinking" and Xiaopeng who "does not do business", it has always been an ideal strategy to use the fewest people, spend the least amount of money, and sell the most cars.
This strategy is pragmatic and also brings positive financial returns. But whether it is necessary or not, and how long it can last, there are different voices in the industry. After all, Ideal has only launched one car until now, and its opponents Weilai and Xiaopeng have six and four models respectively.
The single model means that the cost of R&D investment, operation management, and organizational consumption is lower, which is an important reason for the ideal to take the lead in profitability.
In addition, in the most expensive automatic driving research and development, Weilai and Xiaopeng are earlier and more comprehensive than the ideal layout, and spend more money. There is a consensus in the industry that autonomous driving will be the focus of future smart car competition.
However, at the same time as the financial report, there is also the news of the departure of the ideal CTO Wang Kai, who was previously responsible for the research and development of automatic driving, computing power platform and other technologies in the ideal, and is the highest level executive recruited by the ideal from the outside in the past two years.
Ideal, not yet won.
Is the ideal really profitable?
In 2021, Ideal delivered a total of 90,491 vehicles. Revenue of 27 billion yuan, nearly double compared with 2020.
The first quarter is usually the off-season for car sales, and the fourth quarter is the peak season. The ideal performance also peaked in the fourth quarter of 2021, with quarterly revenue exceeding 10 billion yuan for the first time to reach 10.6 billion yuan.
In addition to revenue, the most noteworthy indicator is another indicator - operating profit.
Ideal achieved an operating profit of 24.1 million yuan in the fourth quarter, turning around for the first time. This means that ideals at the operational level are no longer losing much money.
In terms of net profit, the fourth quarter ideally had a surplus of 296 million yuan, while the first three quarters were losses. Excluding changes in equity incentives, exchange gains and losses, and the value of some financial instruments, Non-GAAP's net profit in the fourth quarter was 686 million yuan.
Ideal has achieved quarterly profitability at the operational level since its inception, which is the first time; quarterly profitability at the company level, this is the second time (the last time was the fourth quarter of 2020).
Cartography / Deep Path
So overall, the performance of the fourth quarter is quite good in the ideal history.
There is a key node in this, the ideal ONE in May - the second and third quarters of the alternating time point, the mid-term restructuring, June batch delivery.
This time the change, although some old owners feel that the leeks have been cut, but the new owners feel very fragrant. The ideal ONE of the 2021 model, the biggest difference compared to the old model, is that it has been upgraded in the hardware configuration, using two horizon "Journey @ 3" autopilot chips, and the number of millimeter-wave radars has increased from 1 to 5. To enable this car to support a higher level of assisted driving functions, the price increased by 10,000 yuan.
The promotion of sales by the change is obvious. Sales in June directly crossed 7,000 vehicles, 8,000 in July, and 9,000 in August. If it weren't for the shortage of millimeter-wave radar, the ideal sales volume in September would have exceeded 10,000.
It was also from the third quarter that the ideal level of revenue and profit has been greatly improved.
We're looking back at the annual numbers.
First of all, from the operational level, the ideal 2021 is still a loss, the amount is 1 billion yuan. This is mainly because there were too many losses in the first and second quarters, which added up to 940 million yuan.
The company level is also loss-making, with a loss of 320 million yuan for the whole year, which is even higher than in 2020 , which is 150 million yuan in 2020. This is also due to too many losses in the first and second quarters.
But if we change the statistical caliber slightly, in terms of Non-GAAP, the ideal 2021 is actually profitable - net profit of 780 million yuan, more than any previous year.
Therefore, under different statistical calibers, the ideal profit situation is different. But one thing is for sure, Ideal is not yet fully profitable.
Where do you "cut" the profits?
In any case, the ideal operating and financial situation is improving, at least revealing a signal of full profitability. Curiously, where did these profits come from?
The ideal business is actually very simple, that is, to build and sell cars, and by the way, sell value-added services such as new energy points, charging piles, and PLUS members. Unlike Xiaopeng, who took the assisted driving function to charge, the ideal function is standard and free. Revenue from car sales accounts for more than 98% of the ideal total revenue, and other income is almost negligible at this stage. For example, in 2021, the ideal total income is 27 billion yuan, and the income from car sales will account for 26.1 billion yuan.
But here is a point to note, the income obtained from selling new energy vehicle credits has almost no cost, and it is earned by selling it.
In September 2021, Ideal sold all the more than 70,000 new energy credits accumulated in its hands, which correspond to all the cars produced in 2020, and this transaction brought 200 million yuan in revenue to Ideal, and basically converted into profits.
So in the third quarter, ideal other revenue hit a record high, and the company's overall profitability improved significantly.
However, in the fourth quarter, the ideal did not sell new energy vehicle points, and the profit mainly depended on scale effect and refined management.
Ideally, you can make money just by selling cars. One direct proof is that the ideal gross margin on car sales has been improving — from 8.4 percent in the first quarter of 2020 to 18.7 percent in the first quarter of 2021 to 22.3 percent in the fourth quarter of 2021.
Although there is still a gap between Tesla and Tesla, it is necessary to consider that the ideal annual sales volume is less than 100,000. In the future, with the expansion of sales scale, this indicator still has a lot of room for improvement. This is the premise for the establishment of the car sales business.
In the daily operation and management, the ideal is enough to be careful enough.
Operating expenses are the most direct indicators affecting the profitability of a company, and this piece is also the most flexible, and the enterprise can play the largest space. In 2021, Ideal spent a total of 6.78 billion yuan in this regard, accounting for 25% of total revenue.
This is already quite economical. In contrast, INO has spent 7.17 billion yuan, accounting for 27% of the corresponding revenue, in the first three quarters of 2021. Xiaopeng also spent 5.75 billion yuan in the first three quarters, which is sure to exceed the ideal for the whole year, and Xiaopeng's operating expenses account for 46% of revenue.
The combination is that the ideal "saves" all the money. "Cutting factory" is worthy of the name. Therefore, it is not surprising that ideals become the first profitable player in the new forces. In other words, "cutting the factory" is not "cutting", and the ideal is not "ideal".
In terms of business, the ideal is becoming more and more aggressive, and it is expanding rapidly throughout 2021.
At the end of 2020, there were 4181 people in the ideal, and after a year, this number has become 11901 people, nearly tripling. Ideal officially joined the camp of companies with more than 10,000 employees.
In addition, the ideal number of stores, from 52 at the end of 2020, has expanded explosively to 206 at the end of 2021, covering 102 cities across the country. In January this year, in a month's time, Ideal opened 3 new cities and added 14 stores.
While saving money and expanding, the ideal account is clearly calculated.
It is easy to make money for a while, but it is difficult to make money in the long term
The ideal challenge is whether the future can maintain high gross profits and low expense rates while expanding at a high speed, while technology research and development is not left behind.
The first is product line expansion.
Until now, the ideal has only one production model , the ideal ONE for extended range. A product hits the world, and multiple products go hand in hand, corresponding to completely different technical capabilities, organizational capabilities, supply chain management capabilities, its difficulty is not an order of magnitude, of course, the final embodiment in the financial statements, the impact on profit margins is also different.
Ideal plans to deliver a new model in the third quarter of this year, but still increases the capacity. The pure electric model is still under development, and the launch time is to be determined. As the ideal product line becomes more complex, so does the demands on all aspects of the company.
Source / Weibo @ Ideal Car
The other is the research and development of autonomous driving technology.
In Wei Xiaoli, the ideal car is the latest in the market, and the layout of research and development is also the latest. The ideal ONE's driver assistance performance has not become a core selling point, mainly relying on third-party suppliers. Xiaopeng and Weilai attach great importance to assisted driving from the beginning, Xiaopeng began software full-stack self-research as early as 2018, and Weilai restarted research and development in 2020, and it is self-developed in the full stack from the hardware and software levels.
Ideal did not start to increase self-research investment until after the IPO in the second half of 2020 and recruited a large number of people. In September 2020, Former Visteon Global Chief Architect Kai Wang joined Ideal as CTO. This is seen as a sign of the acceleration of the development of ideal autonomous driving.
After catching up in 2021, Ideal has achieved some results. For example, in December 2021, the OTA3.0 car-machine software was pushed to users, and the 2021 Ideal ONE realized navigation assisted driving (NOA) and visual fusion automatic emergency braking (AEB).
The speed of the ideal's catch-up in autonomous driving depends largely on how many resources the ideal is willing to invest, which may affect the company's profitability indicators in the short term.
Ideal founder Li Xiang has shown determination, he said, the ideal R & D expenses as a proportion of revenue, to be controlled at more than 10% for a long time. The financial report shows that in the four quarters of 2021, this proportion has been above 10%, and the highest reached 14%. In 2021, the ideal R&D expenditure is 3.29 billion yuan, which is double the 1.1 billion yuan in 2020.
However, compared with Xiaopeng, the ideal self-research is not radical enough. Xiaopeng's research and development expenses have been at a high level, and in the first three quarters of 2021, its proportion of revenue is about 20%, which is higher than ideal.
CTO Wang Kai's departure at this time will have a certain impact on the ideal research and development. This at least shows that the ideal of poaching technology from the outside to lead the research and development of the program, encountered problems.
In addition, the expansion of offline stores also needs financial support.
In 2021, ideal offline stores expanded from 52 to 206, and the sales and marketing team increased sharply from 1563 to 6019. This is currently the largest number of people within the ideal company, more than the total number of R & D personnel and production personnel. The ideal spending in 2021 is not research and development, but sales and management.
Ideally, achieving quarterly earnings makes a lot of sense. It's important to maintain good financial ratios, but it's also important to focus on future expansion and layout. From "small and beautiful" to "big and strong", it is not as simple as selling a few more cars.
*The caption image comes from Weibo @ Ideal Car.