Li Auto also officially announced a price cut.
On April 22, Li Auto announced that all products except L6 will be reduced by 18,000-30,000.
Among them, the price of MEGA was reduced by 30,000 yuan, L9, L8, L7 Ultra, and Max versions were reduced by 20,000 yuan, and L8 and L7 Pro versions were reduced by 18,000 yuan.
Ideal said, "This new price, the Pro model has covered the original Air model price, and at the same time, the L6 is selling well, and it can also provide a good CDC suspension to meet the demand." The L7 and L8 will no longer be available as Air models. ”
In addition, for car owners who have made a decision (regardless of whether they have picked up the car or not), the ideal scale will enjoy the same discount, and it will be returned to the consumer in the form of cashback. At the same time, users who have not yet purchased a car, from now on, all ideal models will also participate in the insurance price, and the period is 120 days.
Why did you choose to reduce the price, the ideal official said, "From the feedback from the sales front line and the judgment of the overall situation, we all feel the different sales pressure and competitive pressure from 2023." Although the flow of customers into the store is very good, compared with last year, the average decision-making cycle of users is longer, the conversion is more difficult, the overall wait-and-see mood is getting stronger, and consumers are looking forward to the price reduction of various car companies. ”
Xinzhijia learned from people familiar with the matter that the ideal was discussing specific measures to reduce prices when adjusting the organizational structure on April 3, "price reductions must be done, as for when to lower, how to lower, and how to communicate with users, this is more important." ”
According to @Garage 42-Daji, Liu Jie, vice president of the product line, organized the new product line team to discuss the price reduction of the L series, but did not discuss the price reduction of MEGA, which was proposed by President Ma Donghui.
Price reductions will be obvious to boost sales, but at the same time, gross profit will also be affected.
Gross profit margin is the "blood" of enterprise operation and development, and it is ideal that the gross profit margin can only be maintained at more than 20% to ensure the long-term healthy development of a car company, otherwise it will not be able to continue to invest in R&D, delivery and other links.
An investor told Xinzhijia, "Before the ideal, it could maintain a high valuation, and the capital market gave it according to 20 times PE (price-earnings ratio), because the market values that the ideal can guarantee high gross profit while ensuring the scale." After the price reduction, the ideal may be able to get the scale, but the gross profit will be diluted, and it is difficult to say whether the existing PE value can be maintained. ”
At the financial report meeting at the beginning of the year, CFO Li Tie also reiterated that the gross profit margin target for the whole year of 2024 "is still above 20%" when answering questions from analysts.
This was the consensus of the ideal decision-makers before the release of the MEGA and the new L-Series.
Under the guidance of such a gross profit target, the price of Ideal's first pure electric flagship MEGA is 559,800 yuan, and the new L series maintains the original price but the configuration is full. However, this goal ignores the changes in the competitive landscape of the industry and the dilution of the ideal own competitive advantage.
Compared with last year, the competition faced by Ideal this year is more complex and more difficult than last year, and the opponents faced by Ideal have developed from opponents of the same echelon such as Wenjie and Denza to the whole industry.
The outside world believes that the ideal can achieve a phased breakthrough of 30,000, 40,000, and 50,000 monthly sales because its product positioning is accurate enough and the product power is online - before the popularization of pure electricity, the range extension and plug-in hybrid are used to solve the user's battery life anxiety, and the target user is the big car that the family needs.
This has led to car companies emulating their product definitions. Some car companies believe that large cars without range anxiety are the current market with the best sales.
The most ideal to learn is zero run.
Leap's sales at the beginning of 2023 are very dangerous - 1,139 units in January and 3,198 units in February. After testing the waters and releasing the C11 range extender in February, Leap's sales exceeded 10,000 units (12,058 units) in May, and maintained sales of more than 13,000 units in the next three months, returning to the top three of the new forces.
Not only that, Leap also launched the C10 in the third quarter, known as the half-price ideal L7, with a similar appearance and interior, but the price is only half of the ideal L7.
In addition to Leap, Chery also launched the Star Era ET this year, which is aimed at the family market, providing pure electric and extended range power, and the extended range version is sold from 199,900 yuan.
Almost all car companies are aiming for the ideal.
When the excellent product definition is gradually equaled by competitors, Ideal has not launched enough new technologies or new products to form competitive barriers at this stage.
Not only that, but the price reduction trend in the industry is even worse than last year.
Since the beginning of this year, BYD has fired the first shot of the price war, announcing the launch of two plug-in hybrid models, the Qin PLUS Glory Edition and the Destroyer 05 Glory Edition, with a starting price of 79,800 yuan. Compared with the previous version of the Champion Edition model, the new version of the model has a higher configuration, but the price has dropped by 20,000 yuan.
Immediately afterwards, SAIC-GM-Wuling, Changan Qiyuan, Nezha, Xiaopeng, and GAC Aion are also following up to varying degrees. The price of the Wuling Starlight plug-in hybrid model has been reduced to less than 100,000 yuan, the starting price of the Changan Qiyuan Q05 and A05 models has been reduced to 73,900 yuan, and the price of the Nezha X model has been reduced by 22,000 yuan to 99,800 yuan.
The day before the official announcement of the price cut, Tesla also officially announced the price reduction of all models (Model Y, Model S and Model X) on sale in the Chinese market, with a price reduction of about 10,000 yuan.
Ideally, the gross profit margin target in 2024 can be achieved, provided that the sales growth trend since last year can be continued. However, this year's competitive landscape is more complex than ever, in addition to the emergence of competitors, the wait-and-see mood of the masses has also become a major obstacle to the ideal of boosting sales.
An investor told Xinzhijia, "We all know that we buy early and enjoy early, buy late to enjoy discounts, consumers have a strong wait-and-see mood, at this stage they want both product power and price, in front of the price, everything seems redundant." We have reached the stage of fighting for blood, product power is the foundation, but price is the key. ”
This wait-and-see sentiment among consumers is further exacerbated by the "trade-in" replacement subsidy introduced by the government that has arrived or is about to be introduced.
For example, on April 20, a new round of 10,000 yuan of new energy vehicle replacement subsidy policy in Shanghai has been released. At the same time, it is reported that in May, the nationwide "trade-in" policy subsidy will be implemented.
The obvious wait-and-see sentiment and changes in the competitive landscape may be important factors that promote this round of ideal price reductions.
However, after the official announcement of the price reduction, the ensuing question is, who will bear the cost?
@42号车库-Daji said that President Ma Donghui proposed that MEGA should also reduce the price, and also believed that the cost after the price reduction should be borne by the supply chain.
An investor told Xinzhijia, "At present, the overall gross profit margin will drop by 5 percentage points on the surface, but how much it will actually drop depends on how much the supplier can bear, and it is very difficult to squeeze 20,000 yuan from the supplier." ”
But it's not impossible. The investor explained, "The supply chain has no bargaining power, the production capacity at the beginning of the year is ready, and if you don't follow the ideal, you will lose more." ”
At the beginning of this year, Ideal set a sales target of 800,000 units for 2024. However, after the loss in March, Li Li lowered its sales forecast to 560,000-640,000 units.
"At the beginning of the year, all the staffing, production capacity, and parts procurement were all set in accordance with the established goals. If you can't do it, it's a very large inventory loss and a waste of personnel costs. (Recommended reading: With annual sales of 800,000 units and 800 stores, are the ideals too inflated or are we too conservative?)
However, in this fierce competition, the ideal has not been lost.
An industry insider told Xinzhijia, "Today, everything still has to be based on volume, and first seize enough market share." In the face of product power and price, users will definitely return to reason, and the ideal product power is still very advantageous in the price band where they are located. ”
Only 4 months have passed in 2024, and Ideal has sounded the alarm in time to send a signal to the company's internal and supply chain - in the next time, Li Auto will tighten its belts and count the money to live a hard life as in the past.
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