"This layoff was very sudden without prior notice." Recently, Zhang Tong, an employee of Ideal Automobile, told a reporter from First Financial that the company has adopted a phased allocation method for personnel optimization and adjustment.
There are external reports that the layoff rate is 18%, corresponding to 5600 people, and there are also reports that the number of layoffs is as high as 10000 people. Ideal Automobile did not respond to this news. Several personnel from different departments of Ideal Automobile told reporters that there is no clear number of layoffs within the company. However, based on the intuitive perception of employees, many departments are laying off employees, and the proportion is not small.
The failure of Ideal Automobile's first pure electric vehicle Mega was the beginning of adjustment, and this product was once highly anticipated. Several executives at Ideal Auto have repeatedly claimed that Mega will become the top selling luxury car in the market for over 500000 yuan, regardless of category or body form. This car will be an important support for Ideal Auto's sales target of 800000 units this year. But the reality is that Mega encountered significant public opinion after its listing, and its sales far fell short of expectations.
Recently, reporters visited the Beijing Intelligent Factory of Ideal Automobile and found that a large number of Mega products were parked in the factory park. At the same time, the reporter noticed that the work vehicles were parked in the park, and under normal circumstances, there would be work vehicles shuttling back and forth in the park to transport materials; Moreover, even during peak commuting hours, there are few employees entering or leaving.
With Mega's failure, Ideal Automobile quickly made a series of adjustments, including lowering delivery guidelines, annual sales targets, official price reductions for all models, major organizational restructuring, and delaying the pace of subsequent pure electric product releases. A bigger change is that the previously high-profile Ideal Automobile has significantly reduced costs, leading to a large-scale layoff scandal.
"After this personnel optimization, many people left, some only started working for about half a year. This has created a feeling that the company's overall organizational direction or planning is wrong, and employees have to pay for it," said Zhang Tong.
The automotive industry is also closely monitoring the adjustment and progress of Ideal Cars. Since its inception, Ideal Automobile has always been a leader among new forces, and the automotive industry is generally a benchmark and a "top student" of learning. In 2023, Ideal Automobile's revenue exceeded 100 billion yuan for the first time, with a net profit exceeding 10 billion yuan, making it the first company among new forces to achieve a revenue exceeding 100 billion yuan and a positive net profit.
"I think Mega's failure is a necessary experience on the growth path of Ideal Automobile. It has gone too smoothly in the past few years, and because of this, it has become too confident. However, on the other hand, Ideal Automobile's adjustments reflect its strong learning ability and execution ability, which is similar to Tesla. However, from big expansion to big contraction, Ideal Automobile has performed too extreme," said a management representative of a car company.
Internal people are in a state of panic
The department responsible for recruitment has become the hardest hit area for layoffs.
In May of this year, it was reported that the overall optimization ratio of Ideal Automobile exceeded 18%, and it is expected to involve more than 5600 employees. Among them, the sales and service operations department will optimize over 400 personnel, the recruitment department will be reduced from over 200 to 40 to 50 personnel, and the intelligent driving team will be reduced to less than 1000 personnel.
"Starting from around April this year, Ideal Automobile has made personnel optimization plans, which will be implemented in mid May. Starting from outsourcing, edge employees and frontline employees who do not have direct income output or work volume will be included in the optimization list." Zhang Tong told reporters, among which, the proportion of employees in the recruitment team who have been optimized is the highest. ".
The reporter learned from within Ideal Automobile that the sales department has also been greatly impacted. In order to support the sales target of 800000 vehicles, Ideal Automobile originally planned to expand the number of stores from 467 last year to 800, with an average of one new store opened per day. A large number of personnel recruitment, store renovation, and construction of new stores were carried out. But in this round of adjustment, the expansion plan for stores has rapidly shrunk, some stores have stopped renovating, and some newly constructed stores have also stopped renovating. "Some newly renovated stores have been temporarily suspended, and employees who have signed up have also been suspended from joining," said staff from multiple Ideal Automobile stores in cities.
The middle department of Ideal Automobile has also undergone organizational restructuring and personnel optimization. Taking the online customer service team as an example, from May 2022 to present, the team has undergone three organizational changes. After the most recent adjustment, the online customer service team has adopted a semi outsourcing form.
In addition to personnel optimization, Ideal Auto employees also feel that the company has various means to reduce costs. For example, in the past, employees could work overtime until 8 pm and take a public taxi home. In May, it was adjusted to after 9 pm; The company's gym is no longer free to use.
It is worth noting that this is not the first time an ideal car has optimized its personnel. In May 2022, Ideal Automobile received much attention for breaking contracts with fresh graduates; At the end of that year, Ideal Automobile underwent another personnel adjustment, but the affected departments and personnel scope were not as extensive as this year. It mainly involved production and research, technical personnel, and did not involve departments such as stores, retail, delivery, repair centers, and customer direct experience.
There are reports that if the situation in the third quarter of Ideal is still not satisfactory, the company is likely to launch a second wave of layoffs in September this year. Some ideal employees claim that there is no clear standard for personnel optimization this time, and it is not solely based on performance evaluation to eliminate the fittest. Multiple employees believe that it is not open and transparent, and the subjective factors of department heads to some extent determine the optimization candidates. Due to unclear information, a large number of internal employees are in a state of panic.
"Employees who are usually in the downstream of their work tend to feel anxious at this time, so they have a mentality of lying flat because they don't know when they might be optimized. Due to the subjectivity of the screening mechanism, people in the middle of their work state also have a similar mentality. The entire team's downstream employees are anxious, and the team's efficiency is relatively low." A middle-level person from Ideal Automobile said that the company is currently going through a painful period of adjustment.
From large expansion to large contraction
"Since March, we have seen a problem where the market forecast for this year is too optimistic," Liu Jie, President of Ideal Automotive Product Line, told reporters in April.
Ideal Automobile has readjusted market expectations and made price adjustments. On April 22nd, Ideal Automobile announced that the 2024 Ideal L7, Ideal L8, Ideal L9, and Ideal MEGA will adopt a new pricing system starting from today. Among them, the Ideal L9 series has been reduced by 20000 yuan, the prices of L7 and L8 have been reduced by 18000-2000 yuan, and the prices of MEGA have been reduced by 30000 yuan to 529800 yuan.
It is worth noting that Mega, which is in a near new car state, has already entered the second-hand car market. The reporter found on the second-hand car trading platform that a nearly new MEGA car that has traveled over 30 kilometers is priced at around 488000 yuan in the second-hand car market. Usually, the entry of quasi new cars into the second-hand car market is due to manufacturers voluntarily dumping goods due to excessive inventory pressure.
At the same time, on April 3rd, Ideal Automobile released the "Matrix Organization 2.0 Upgrade Announcement for a Billion Dollar Scale", announcing multiple organizational structure adjustments. This is the largest internal adjustment since Ideal Automobile launched the matrix organization upgrade at the end of 2022. The organizational change this time mainly focuses on the CEO office of Ideal Automobile, changing from the original department covering Brand Department, Product Department, Business Department, Strategy Department, and Supply Department to the "Product and Strategy Group".
At the first quarter financial report, Ideal Automobile has significantly lowered its annual sales target from the initial 800000 units to 560000 to 640000 units. At the same time, the pure electric new product originally planned to be launched in the second half of this year will also be delayed until next year. The changes in market and sales targets have caused manpower redundancy, and the newly constructed storefronts also need to shrink, which is the main factor in the personnel adjustment of Ideal Automobile this time.
From the underlying reasons, both of Ideal Automobile's organizational restructuring were related to the market challenges they faced at that time. Before June 2022, Ideal Automobile had only one Ideal ONE under its umbrella, and subsequently launched its second product, l9. Since the second half of 2022, with the launch of the Wenjie M7, the sales of the Ideal ONE have begun to decline. The M7 was launched in July 2022, and in August of that year, the Ideal ONE delivered a total of 4571 cars, a year-on-year decrease of about half. In September, Ideal ONE encountered another wave of generational changes. After personnel and organizational restructuring by the end of 2022, the sales of the L series products have exploded.
Some employees believe that Ideal's adjustment this year is a positive example of the 2022 adjustment. "Faced with sales pressure this time, Ideal may reconsider this issue, but the proportion of popularization and optimization this time is much higher than before." Some employees also believe that the large-scale layoffs reflect the company's extremely pessimistic attitude towards performance expectations.
Mega's failure was the trigger for the adjustment of Ideal Cars this year. Zhang Tong told reporters that before the launch of Mega in the market, both external and internal expectations for this model were high, especially within Ideal Automobile, which even established an exclusive service channel for this model. But after its launch, Mega's sales were dismal.
Li Xiang pointed out in a letter to all employees that there are two major issues with Ideal Automobile in March, namely the rhythm of Ideal MEGA and the desire to overly focus on sales. The second is that the wrong operation of the ideal MEGA rhythm has led to a significant reduction in the sales team's time and effort in serving L-series users.
In April of this year, Ideal's first product, L6, which was priced below 300000 yuan, was released and began delivery. Although the L6 has achieved good market performance since its launch, internal friction issues between models have also arisen. Multiple store salespeople told reporters that although orders for L6 were booming after its launch, orders for major models such as L7 and L8 suddenly disappeared. They analyzed the reason as L6 "sucking" away customers from L7 and L8.
In May, the delivery volume of Ideal Automobile was 35000 units, marking the first time this year that Ideal Automobile's monthly sales exceeded 35000 units, a significant boost from April's 25800 units. However, on the other hand, Ideal Automobile's May performance is far from the delivery volume of over 50000 units at the end of last year. Under the dual drag of declining performance and personnel expansion, Ideal Automobile suffered operating losses in the first quarter of this year, a significant decline in performance compared to the fourth quarter of last year. According to the financial report released by Ideal Automobile, the operating profit for the first quarter of this year was -580 million yuan, with an operating profit margin of -2.3%.
Success or failure are all dolls
The success of Ideal Cars has always been controversial in the automotive industry. Supporters believe that Ideal Automobile's ability to perceive user needs and operational efficiency is second to none in the industry. Opponents believe that Ideal Automobile has not demonstrated its core technological strength, and its dominance over the 6-seater mid to large SUV market is only due to insufficient competition. The product nesting strategy will eventually backfire. From the current results, opponents have the upper hand.
"The efficiency and cost awareness of Ideal Cars are very strong. The L6, L7, L8, and L9 models are not just exterior dolls, but also have high reuse rates when you look at some accessories such as wheels." A person from the product planning department of a car company told reporters.
The nesting strategy has brought Ideal Automobile far superior business performance to its competitors. In the fourth quarter of 2020, Ideal Automobile achieved a positive quarterly net profit for the first time. That year, Ideal Automobile invested 1.08 billion yuan in research and development, accounting for about 11% of its operating revenue. Compared with NIO and Xiaopeng, its research and development investment was relatively small. At the same time, thanks to the production, research and development, and cost reduction brought about by the nesting strategy, the gross profit margin of Ideal Automobile sales reached 16.4% in 2020, and has since exceeded 20%, leading the way in new forces. These factors together led to Ideal Automobile being the first to achieve profitability among new forces.
With the intensification of market competition, especially the emergence of Huawei Wenjie, Ideal Automobile has begun to face the challenge of sales growth. A salesperson from Ideal Automobile reviewed that with the increase of 6-seater SUV products in the market, the market dividend period of Ideal Automobile is gradually fading, and the L-series nesting car model is difficult to bring greater increment. On the other hand, in the early days, Ideal Automobile quickly occupied the market with its product definition of "refrigerators, sofas, and large color televisions" based on its positioning as a household user. However, with the influx of car brands such as Huawei, Xiaomi, and Jike, this form has become a standard configuration, and Ideal Automobile products no longer have unique competitive advantages.
Looking at the ideal car in the entire market, its performance growth is highly challenging. Firstly, Huawei Wenjie has emerged as a new force, with the core products of the two companies nibbling at each other. From the current performance, Huawei Wenjie benefits from lower product prices, Huawei's reputation, and leading intelligent driving systems, giving it a competitive advantage. In the first quarter of this year, Wenjie's monthly sales exceeded expectations continuously. In addition, traditional car companies such as BYD, Geely, and Chery are intensively laying out and launching 6-seater mid to large SUVs, and Ideal Automobile's once dominant 6-seater mid to large SUV blue ocean market is turning into a red ocean market.
Secondly, the nesting strategy that Ideal Automobile is proud of has begun to backfire. At an Ideal Auto dealership in Beijing, a salesperson told reporters that the store's monthly sales can reach around 300 vehicles, with L6 accounting for about half of the sales. He said that after the launch of the L6, sales quickly stopped falling and rebounded, but it also had a certain diversion effect on other products in the L series.
"The goal of L6 is to occupy the market space of 200000 to 300000 yuan in gasoline powered cars, but in reality, most of it is occupying the market space of other products in the L series. Essentially, it is because the nesting is too serious, and the customer's message to us is that except for the size difference, the rest of the L6 and other products in the L series are almost the same, which makes customers unwilling to spend more money to purchase expensive L series models." The above salesperson said.
A person from the product planning department of a car company said that the lack of product spectrum planning ability is almost a common problem among new car making forces such as NIO, Ideal, and Xiaopeng. They can define a popular product, but it is difficult to plan a reasonable product matrix that will not "fight" with each other. The person also believes that Mega, as the most expensive product at the current ideal price, has not reflected "expensive value".
"From L9 to Mega and then to L6, it is difficult to see technological innovation and breakthroughs. One of the reasons for Mega's failure is that the interior is no different from L9, and some customers feel that the product lacks sufficient sincerity." An ideal car salesperson said.
In the eyes of competitors, the Xiaopeng X9's sniping at Mega is commendable in both product and marketing. The Xiaopeng X9 not only has a slightly inferior space compared to Mega, but also highlights its intelligent performance, chassis technology, and charging technology. However, its price is nearly 200000 yuan lower than Mega's.
After the release of the Ideal L6, Wang Xing, a shareholder of Ideal Automobile and founder of Meituan, said, "Mega is a bit like a car made for Ideal CEO himself, and the L6 is the car that Ideal employees made for themselves."
Reflection
Although the ideal experience of the market stalling, Li Xiang stated at the financial report that he did not lose confidence due to short-term sales fluctuations. On the contrary, this is the result of the company's calm evaluation of the competitive environment and its own strength after experiencing market baptism. Simply relying on sales figures cannot fully reflect the company's competitiveness and market position.
Li Tie, CFO of Ideal Automobile, revealed that in less than two months, Ideal Automobile quickly adjusted its resource allocation in various aspects based on its operational goals for this year. Ideal Automobile places great emphasis on operational efficiency internally, and it is expected that the impact of these adjustments on operational efficiency will gradually become apparent from the second quarter of this year.
In early April, Ideal Automobile released a full staff announcement, announcing the launch of the Matrix Organization 2.0 upgrade and the adjustment of organizational structures across multiple departments. This is also the largest round of organizational changes since the launch of the matrix organization upgrade aimed at a scale of billions by Ideal Automobile at the end of 2022.
This organizational change mainly focuses on the CEO office department of Ideal Automobile. The department has officially been renamed as the "Product and Strategy Group", with a greater focus on products and strategy, weakening the supply chain and commercial sales functions. Among them, Liu Jie's commercial department was renamed "Product Line", and in the future, he will be responsible for the full lifecycle operation of the ideal car model. The PDT team of the car model in the product department previously under the jurisdiction of Fan Haoyu has also been transferred to this department. Under the leadership of Senior Vice President of Sales and Service, Zou Liangjun, Ideal Automobile has officially established a new GTM (Go to Market) team, responsible for coordinating the implementation of the new product launch plan and taking responsibility for market results. Previously, the department directly reported to Li Xiang, covering the brand department, product department, business department, strategy department, and supply department, with about 500 people.
From an ideal current strategy perspective, this year we will focus on the extended range products of the L series, and postpone the release of pure electric SUVs to the first half of next year. Li Xiang stated that there are two main factors in adjusting the product rhythm. Firstly, the number of self operated supercharging piles of Ideal Automobile has not reached an acceptable scale. Secondly, the number of store booths is difficult to support such a large product system, otherwise it is easy to increase the number of products without increasing sales.
However, some internal employees believe that the biggest reason for the delayed release of pure electric products is that Mega's design language has been denied by the market, and the three pure electric vehicles developed on the same platform as Mega are inevitably affected. In addition, the current pure electric vehicle market is very competitive, and the existing solutions of Ideal Automobile do not have sufficient competitive advantages, requiring a re polishing in terms of products.
Ideal Automobile is expected to deliver 105000 to 110000 vehicles in the second quarter, lower than the market estimate of 130000 vehicles; The expected revenue for the second quarter is 29.9 billion to 31.4 billion yuan, lower than the market estimate of 38.63 billion yuan.
It is worth noting that almost all the interviewees talked about Li Xiang's personal influence on the company. "In my opinion, after the personnel optimization and organizational restructuring, there has been a situation where some things have become powerless. Each department prioritizes revenue, and the demand for low revenue results will be abandoned. From this perspective, there are some things that are beneficial to customers, and it may not be possible to measure their actual benefits. We can only adjust according to the overall direction of the company, and even if it is beneficial to customers, we cannot provide feedback." A representative from the Ideal Automotive customer service department told reporters that in the past, everyone worked together in the same team to solve problems, but now when there are some mistakes, the first thing to discuss is the issue of responsibility attribution.
The person also believes that within Ideal Automobile, the company revolves around the decisions made by Li Xiang himself. The advantage of this management model is that it has a unified direction and can quickly unify ideas, but once decisions are made incorrectly, there may be systematic directional deviations. On the other hand, due to the frequent changes in organizational structure and the large number of personnel, the efficient effect of flat management cannot be achieved, and the information transmitted downwards in execution will gradually deform.
In addition, Li Xiang once emphasized the importance of building organizational capabilities that can continuously launch successful products. Therefore, whenever faced with a crisis, the habitual action of Ideal Automobile is to adjust the organizational structure. However, in the eyes of multiple internal employees, the most important thing for Ideal Automobile is to break free from the inertia of blind and optimistic thinking, especially in the successful inertia of the nesting strategy.
In an internal reflection, Li Xiang said, "We focus too much on sales and competition from top to bottom, allowing desires to surpass value and significantly reducing the user value and business efficiency that we were originally best at. The pursuit of desires has turned us into people we dislike."
(At the request of the interviewee, Zhang Tong was given a pseudonym)