Last week, Li Xiang, CEO of Ideal Auto, posted several Weibo posts discussing the issue of marketing expenses for car brands.
Bluntly said, "I have to approve tens of thousands of yuan of expenses to avoid spending money indiscriminately."
Li Xiang is not a whim, and ideals have always had the label of "cutting the door".
Judging from the latest quarterly report, is the ideal really keyed?
8.8%
Looking at the expense data for the first quarter, the ideal is not only to pick the door, but also to be more and more critical.
In Q1, ideal selling, general and administrative expenses were $1.65 billion, up 36.8% year-on-year and 0.9% quarter-on-quarter. It seems to be an increase, but the desired revenue increase is even greater. The first quarter increased significantly by 96.5% year-on-year and by 6.4% sequentially.
Revenue grew faster than expenses, which led directly to an overall reduction in selling and administrative expense ratios.
The ideal selling and administrative expense ratio is 8.8%.
The ideal indicator has been volatile over the past few years, but has never fallen below 10%, and now it is below 10% for the second consecutive quarter.
Considering that the ideal counts the sales and management expenses together, the actual sales expenses are lower, and the expenses spent on media and advertising are naturally lower. Li Xiang revealed on Weibo that its brand market expense ratio is 0.6%, including all the brand's public relations, activities, advertising, auto shows, press conferences, car owner operations, etc.
R&D expenses were RMB1.85 billion, up 34.8% year-on-year and down 10.5% month-on-month.
The R&D expense ratio fell to 9.8%, falling below 10% for the first time in two years. Since Ideal does not disclose the amount of R&D expenses capitalized, the expense ratio measured at this ratio is already the lowest level in recent years.
In the context of the general setback of the new energy vehicle market in the first quarter of this year, the ideal expenses were indeed successfully controlled.
Especially compared with the new forces, the ideal is worthy of the title of the most critical.
On a comparable basis, for the full year 2022, the ideal selling and administrative expense ratio is 12.5%; The R&D expense ratio is 15%, which is lower than that of NIO, Xpeng, and Zerorun. The first quarterly report was 31 percentage points lower than zero.
But special doesn't mean special. Ideal is only outstanding in the new forces, compared with traditional car companies, ideal these two data are not low.
In order to be comparable, the sales and management expenses of traditional car companies are added and measured, and in the first quarter of this year, the expense ratio of BYD, GAC, SAIC, Great Wall and Changan was less than 9%. The R&D expense ratio is generally less than 7%.
If you compare Tesla, the latter never even invests money in brand PR. The selling expense ratio in 2022 is as low as only 4.8%; It was only 4.6% in the first quarter. The R&D expense ratio is also well below ideal, at 3.8% in 2022 and 3.3% in the first quarter of this year.
The ideal is still a long way from Tesla's door-picking gap.
So, is there value in "slamming the door"?
4.97%
The control of expenses is more of a microcosm. Control in one expense, tighten in others.
The most immediate effect of this is profit.
In the first quarter, the ideal overall gross margin was 20.4%, which surpassed BYD and Tesla. Whether it is a new force or a traditional car company, the ideal is to be one of the few manufacturers that can control the gross profit margin of about 20% all year round.
The importance of gross profit stability needless to say, Tesla is precisely because of high gross profit that it dares to continue to reduce prices and roll other car companies. Ideal high gross margin, more room to maneuver when dealing with price reductions.
At the same time, due to proper expense control, Ideal achieved a net profit of 934 million yuan in the first quarter, a significant turnaround year-on-year, an increase of 252% month-on-month. The net profit margin reached a new high of 4.97%.
This figure further demonstrates the robustness of the ideal operation. In a state where new forces are generally losing money, and even many traditional car companies involved in new energy are losing money, Ideal has achieved profitability for two consecutive quarters.
Good profit performance is a further improvement for cash.
At the end of the first quarter, the total amount of ideal cash and equivalents was 65 billion, an increase of 6.55 billion from the beginning of the period. Operating cash flow was RMB7.78 billion, an increase of 324.3% year-over-year and 58% sequentially. Free cash flow was RMB6.7 billion, up 12.35 times year-on-year and 105.8% sequentially.
The ideal current ratio is 2.16 times, which is also the short-term debt repayment pressure of car companies, including BYD. The gearing ratio is 50.4%, although it has increased, it is still in a very stable state.
Throughout the quarterly report, the ideal performance is ideal, which is no wonder that many rating agencies have given overweight ratings, and the stock price rose 14% after the earnings report.
So, is "door picking" really so obvious?
Obviously, purely saving money can only solve the problem of profits, and sales are king in the stage of β growth of the new energy industry. The improvement of ideal performance is undoubtedly the core reason for sales.
In the first quarter, deliveries of the lower-priced L7 series began, and although the low price led to the ideal ASP falling to 349,000 yuan, down 24,000 yuan from the fourth quarter, it drove sales growth. Ideal sales reached 52,584 units, a record high.
Starting in April, the L7 and L8 Air models were delivered, and the ideal sales volume reached 25,681, a record high. According to Ideal's plan for Q2 7.6-81,000 units, Ideal may set a record high every month and reach a new level of 30,000 units in June.
In other words, the ideal dares to save costs, to a large extent, the product is welcomed by the market.
For the new forces in the fierce competition, many car companies do not want to save costs, but at this stage high cost investment is inevitable.
31.3 days
Compared with the technology that has been formed by fuel vehicles, the relatively stable market pattern has forced large-scale investment in the early stage of new energy.
The product needs to be well known to the public, and it needs to spend money on branding and advertising. Technologies such as three electricity, intelligent cockpit, and intelligent driving need to be accumulated, and R&D investment is inevitable. This also explains why Ideal compresses expenses so much, and the expense ratio is still higher than that of traditional car companies.
If the product continues to strengthen, the expenditure related to brand advertising may be compressed, but at present, the technology is still very variable for the future, and the ideal R&D expenditure in the first quarter even returned to the level of the third quarter of last year.
The ideal pure electric model is still not mass-produced, and the main focus is still on family SUVs. In Wei Xiaoli, the ideal automatic driving and cockpit are not as prominent as its products.
Li Xiang said that the barrel theory of the three comprehensive capabilities of technology, products and delivery is indispensable. Product force is ideal for the longest board, delivery is the middle plate, and technology is probably the shortest board.
How to get technology to keep up with the long board of products as soon as possible?
As the ideal revenue rises, the absolute value of its R&D expenses will gradually increase. But Li Xiang cares more about efficiency than investment.
The ideal expense ratio and high sales volume have always been low, which objectively reflects the ideal management ability. Since the organizational management reform last year, the ideal efficiency index has been further improved.
As a rough estimate, the ideal single-store sales volume increased from 98 units in Q3 last year to 174 units in Q1 this year.
The ideal inventory turnover days have also been compressed to about 31 days, second only to Changan Automobile among domestic manufacturers.
Before the release of the earnings report, a blogger posted a screenshot saying that the order and inventory coefficient (inventory/sales) of the ideal car are 0.5, which is accurate management. Orders must be delivered within 14 days; Weekly production, supply, and sales plans, most car manufacturers do it on a monthly basis. This move means that Ideal is trying to push the limits of inventory with more refined management.
According to the current ideal performance and sales performance, it is foreseeable that in 2023, the ideal will walk on the road of prosperity. The excellent performance of the L series allows it to balance low expenses and high sales.
Ideal is indeed the car company with the clearest thinking and the best current development trend among the new forces, but there is no need to over-deify the ideal car.
The current competitive situation is very complicated, according to the data of the passenger association, in April, the ideal L9 series fell out of the top ten, while L7, L8, and L9 are regular customers on the list, but they have not yet made it to the top 5. Ideal ONE was a top 5 regular.
In other words, the ideal performance is good, but the competitive environment has changed. As the pressure of last-place elimination continues to advance, the difficulty of the ideal competition continues to increase. The product level of the L series is not rich, and pure electric models will shoulder an important mission in the future.
Brief report:
Resources:
Financial reports, passenger association data
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