Ideal car: losses intensify in 2022! How far is the 100 billion "ideal"?

Introduction: Ideal Car has officially gone through the stage of relying on Ideal ONE to "eat fresh in one trick, eat all over the sky". But correspondingly, the loss of ideal cars is also intensifying; Next, how far is the ideal path to profitability?

On the evening of February 27, Li Auto announced its fourth quarter and full year 2022 financial results. Data show that Li Auto will achieve revenue of 45.29 billion yuan in 2022, a year-on-year increase of 67.7%; For the full year of 2022, the net loss attributable to Li Auto's common shareholders (hereinafter referred to as the "net profit attributable to the parent company") was 2.012 billion yuan, an increase of 528% from the loss of 320 million yuan in 2021, and the gross profit margin also decreased by 1.9% to 19.4%.

Such a financial report that increases revenue without increasing profits seems to be nothing compared to NIO's loss of more than 14 billion yuan, but it also shows the signal that ideal cars are still difficult to extricate themselves from in the quagmire of losses.

At the end of 2022, Li Auto began to change its matrix-type organizational structure, and in addition to the personnel changes of the president, CTO and other senior executives, it also determined the grand goal of moving towards "100 billion yuan" revenue this year.

In this way, ideal cars are becoming more and more competitive in the new energy vehicle market, and the entire automotive industry is in a price war, and it is difficult and stressful to achieve this goal.

1) Q4 made a profit again, but did not win itself again

Although Li Auto's full-year loss in 2022 was more severe than before, the fourth quarter was similar to 2021, achieving a short-term profit.

Data show that in the fourth quarter of 2022, Li Auto's net profit attributable to the parent was 257 million yuan, down 15.27% from 296 million yuan in the same period of 2021. The overall fourth quarter was profitable, but not outperformed the year-ago quarter.

"Image from Ideal Auto Announcement"

It is also worth noting that Li Auto achieved revenue of 17.65 billion yuan in the fourth quarter, a year-on-year increase of 66.2%, an increase of 88.9% over the third quarter, accounting for about 39% of the year's operating income. Therefore, it can be seen that for the ideal car's 2022, this did not outperform its fourth quarter, but contributed a lot to the full-year revenue.

In the fourth quarter of operating income, vehicle sales revenue was 17.27 billion yuan, an increase of 66.4% over the same period in 2021 and 90.9% from the third quarter of 2022, accounting for nearly 98% of the overall revenue in the fourth quarter.

In this regard, Li Auto said that the increase in vehicle sales revenue was mainly due to the gradual suspension of the ideal ONE of more than 300,000 yuan from August, the delivery of the ideal L9 of more than 450,000 yuan at the end of August, and the delivery of the ideal L8 of more than 330,000 yuan in November, which increased the average selling price of vehicles in the fourth quarter.

"Image from Ideal Auto Announcement"

In terms of deliveries, in the fourth quarter of 2022, Li Auto delivered a total of 46,319 units, a year-on-year increase of 31.5%. Unfortunately, this did not reverse the fact that the ideal car could not achieve its full-year goal. In 2022, the total number of Li Cars delivered reached 133,246 units, a year-on-year increase of 47%, and only 78% more than the target of 170,000 units.

For 2023, the ideal car with extended range will face more and more strong competitors entering the field, and it may not be easy to maintain a high growth rate of sales and revenue.

2) Losses have increased year after year, and R&D investment has been strengthened

Among the three new automakers of "Wei Xiaoli", Li Auto was the first to announce the latest financial report. From the perspective of the announcement time, Li Auto may be more satisfied with its own profits.

From the perspective of gross profit performance, the gross profit of Li Auto in 2022 will be 8.79 billion yuan, an increase of 52.6% from 5.76 billion yuan in 2021. However, its overall gross margin and vehicle gross margin both decreased year-on-year. Li Auto's gross margin was 19.4% in 2022, compared to 21.3% in 2021, and its vehicle gross margin was 19.1% in 2022, compared to 20.6% in 2021.

Li Auto said that the decline in vehicle gross margin was mainly due to the loss of inventory provisions and purchase commitments related to Li ONE in 2022, partially offset by higher gross margin of Li L series vehicles that began deliveries in the third quarter of 2022.

Throughout 2022, Li Auto is still in a loss, with a net profit attributable to the parent of 2.012 billion yuan, a year-on-year increase of 525.97% over the previous year's loss, and a five-year loss of more than 6.4 billion yuan since 2018. From this data, it also shows the cost control ability of the ideal car and the clever position in route selection. After all, NIO and Xiaopeng have lost tens of billions in recent years.

Although the loss has intensified, the R&D investment of Ideal Auto has not decreased in the slightest, and with the continuous improvement of the ideal automobile product matrix, the company's R&D expenditure has also risen to make up for the lack of lessons in the initial car manufacturing.

"Image from Ideal Auto Announcement"

According to the financial report data, Li Auto's R&D expenses in the fourth quarter of 2022 reached 2.07 billion yuan, a year-on-year increase of 68.3%; In 2022, its R&D expenses reached 6.78 billion yuan, a year-on-year increase of 106%.

In the earnings call, Li Xiang, CEO of Li Auto, also recognized the increase in R&D expenses, saying that Li Auto's performance depends on the company's continuous investment in R&D and business capabilities. But the problem is that the price war between Tesla and traditional car companies may disrupt Li Xiang's wishful calculations.

3) How far is the "100 billion" revenue target

In the conference call after the earnings report, Li Auto also gave an outlook for the first quarter based on the development of 2023: the company expects vehicle deliveries of 52,000 to 55,000 units in the first quarter of 2023, an increase of 64.0% to 73.4% compared with the first quarter of 2022; As of January~February 2023, Li Auto has delivered a total of 31,761 units.

Overall, with the enrichment and improvement of the ideal automotive product matrix, the company has achieved rapid growth in revenue and delivery results. However, in the face of Tesla, which has cut prices against the trend, most of the new car-making forces, including Ideal Auto, do not have the confidence to "directly follow", after all, no one has the profitability that impresses the global auto industry like Tesla.

Cui Dongshu, secretary-general of the National Passenger Vehicle Market Information Association, said that under the condition of strict cost control, Tesla can ensure product profit margins even if prices are reduced, and low prices promote more consumers to buy products, but may achieve "small profits and quick turnover".

In the face of the ideal car under multiple factors such as rising raw material costs and increased R&D investment, there are still too many things to do to achieve the "100 billion" revenue target.

However, at the end of 2022, Li Auto's cash reserves reached RMB58.45 billion, an increase of 16.5% over the same period of the previous year, significantly higher than NIO's RMB45.5 billion and Xpeng's RMB38.2 billion.

Perhaps, the new brands of car manufacturing are about to face more severe challenges, and may even be the test of life and death, and the ideal car with more cash flow may have more possibilities in the current market environment.

It is reported that in 2023, Li Auto will not only release its own pure electric model, but also release a new product series, and the current L series is likely to usher in a major upgrade.

People always believe that Ideal is the most promising company among the new forces in China's car manufacturing industry to achieve full-year profits. Ma Donghui, the new president of Li Auto, who just took over from Shen Yanan, said that 2023 is a "key year" for Li Auto to sprint towards the goal of 100 billion.

So, can the ideal car successfully complete the challenge? We'll see in a year.