Ideal first-quarter revenue fell by nearly 40% quarter-on-quarter! There are also large layoffs! What's wrong?

Outpost Wang Yuquan

2024-05-30 14:06Published in Beijing Hywin CapitalFounding Partner Creator in the field of technology

A brief background of the important news

In the first quarter of this year, Li Auto's performance was not satisfactory.

Li Auto's financial report for the first quarter of 2024 showed that its revenue in the first quarter was RMB25.6 billion, an increase of 36.4% over the same period last year, but a decrease of 38.6% over the fourth quarter of 2023. net profit was 591 million yuan, down 36.7% year-on-year and 89.7% month-on-month.

At the same time, according to "Upstream News", Li Auto's internal employees said that Li Auto is currently laying off employees, involving all departments, and the specific proportion is unknown.

Moreover, Li Xiang, CEO of Li Auto, announced in response to investors' questions that no new pure electric models will be released this year.

It seems that the ideal is facing a considerable challenge. So, what's wrong with idealism?

The following is Wang Yuquan's important news commentary:

Recently, Li Auto released its quarterly report for the first quarter of 2024, and the results are not very ideal, the revenue is still growing year-on-year, but it is declining quarter-on-quarter, that is, it is lower than the fourth quarter of 2023, and the most important thing is that the profit has fallen sharply.

The other thing is that it has also started to lay off employees, and it has announced that it will postpone its plans to make pure electric vehicles, and it looks like Ideal is in trouble.

Once upon a time, China's three giants of electric vehicle manufacturing, "Wei Xiaoli", ideal is the most brilliant one, because it has a range extender. What are the benefits of a range extender? That is, everyone has no range anxiety, and it doesn't matter if the range extender is out of power, you can burn oil.

However, when we talk about electrification, it is a big trend, and the trend of electrification will definitely go to pure electric.

The reason is actually quite simple. The structure of electricity is comparatively much simpler. The range extender must first have a set of electric system and a set of oil-burning system, which is relatively complicated to maintain.

One of the big advantages of electric cars is that they can almost get rid of the 4S shop, because there is nothing to repair, mainly the battery. But if it's a range extender, the 4S store really can't be abandoned.

This is a bad thing in the long run. Because buying a car is all about the long-term impact, especially the value of a used car.

Many people buy a car, for example, after ten or eight years, it is not scrapped, but sold as a used car. When you sell, the salvage value is critical. Then you can imagine what this residual value is related to, and what kind of car you want on the market now.

If the car is a range extender, it is very good to buy now, there is no range anxiety, but after 5 years, the streets are all pure electric, and the range extender used car will not be sold to anyone, which is actually a potential loss.

Another problem is that if you put your time, energy, and R&D investment into the range extender, your R&D of pure electric vehicles may not be so in-depth and thorough.

And pure electric has a more important feature, it and intelligence is a natural match, intelligent system is best superimposed on the electric vehicle.

Of course, it can be superimposed on the fuel vehicle, but the response speed of the fuel vehicle, including the processing process, is much more complex than that of the electric vehicle. In other words, if I want to step on the brakes, I need to let the mechanical transmission step on the brakes, and the machinery has a problem with the transmission time, which may lose a few tenths of a second. A few tenths of a second means a loss of tens of meters of braking distance, and there may be an accident when driving automatically.

So to put it simply, the transformation from electrification to intelligence must also start with electric vehicles. No matter how you look at it, we believe that the general direction of the future is pure electric.

Although the range extender now solves the range anxiety of some people, it is a transitional product after all. What's wrong with that? That is, one day the transition effect will slowly fail, then you will have to bear the consequences of the transition failure. Now it seems that the ideal is bearing the consequences of the failure of the transition.

We have always emphasized that the trend of technology development is a process of continuous performance tuning, so that the level of new technology greatly surpasses that of old technology. So in the past few years, we have witnessed the performance tuning of electric vehicles, from the beginning of the battery life is only 100 kilometers, charging takes several hours, to now the battery life can reach 1,000 kilometers, charging takes twenty or thirty minutes, this performance tuning speed is very fast.

Once these performance tuning problems are solved, the innate advantages of electric vehicles themselves are incomparable to traditional fuel vehicles.

So you know that the decision-makers of the enterprise need to learn to use the medium and long-term strategy to guide their own development. That is to say, you can't just look at the front, as if the user's mileage anxiety is solved in front of you, and it sells very well, but don't forget, everyone will slowly accept that electric vehicles are the mainstream, and they will mainly buy electric vehicles, not range extenders.

If you come up and do range extension, when will you be able to make a smooth transition? Transformation brings with it another problem.

Of course, we want to transform when we encounter difficulties, but in most cases, the result is that a company pauses its transformation when it encounters difficulties. Because transformation requires cost, cost, and determination. And when you encounter difficulties, you tend to retreat instead of being more aggressive.

Just like we see the ideal situation, in fact, it is not optimistic, if they can break their wrists and make up their minds to focus all their energy on pure electricity, there may be a few quarters or a year or two of poor performance in the future, but there are still great opportunities in the long run.

But, after all, the pressure of quarterly reporting is there, in order to perform a little better, what is it easier to do? In fact, it is not to transform to pure electricity, but to continue its own range extender route and stop pure electricity. What does it become? Drinking to quench thirst, in the long run, it does not solve the problem.

Therefore, the enterprise strategy mentioned in the textbook is one thing, but the strategy of most enterprises in actual combat is another thing, because when the enterprise really formulates the strategy, it also depends on your ability to bear.

Ideal is now facing such a dilemma, and the problem of the transition period was solved at the beginning, but in the long run, it does not conform to the general trend and trend. And now, when the general trend has become and everyone is actively embracing pure electricity, they are naturally not so keen on hybrids, so the pressure of ideals comes.

But when the pressure comes, the transformation is particularly difficult, because investors will look at the quarterly statements to see if it can achieve transformation. At this time, a company will often use some short-term means instead of long-term means, so it will stop the production of pure electric vehicles, and the future will be even more troublesome.

Therefore, for enterprises, especially scientific and technological innovation enterprises, it is indeed difficult to solve the immediate survival problem, and we must not forget the poetry and distance of the future.

Because the characteristic of technology is that poetry and distance will always come, and they will come faster than we think.

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