Interface News Reporter | Zhou Shuqi
Ideal Auto emerged from the shadow of its pure electric strategy failure at the beginning of the year and reported a strong third quarter performance. But it still hasn't proven to investors the possibility of maintaining sustained high growth. The unexpected sales guidance for the fourth quarter led to a 13.6% drop in Ideal Auto's US stock market, and today the Hong Kong stock market opened with a drop of over 10%.
According to the third quarter report disclosed by Ideal Auto, the company's quarterly revenue reached 42.9 billion yuan, a year-on-year increase of 23.6%, setting a new historical high, but slightly lower than Wall Street analysts' expectations of 42.99 billion yuan. From the perspective of revenue growth rate, compared to the nearly doubled growth rate of last year, Ideal Auto's revenue in the first three quarters of this year only increased by 22% year-on-year.
Thanks to the hot sales of the low-priced model Ideal L6, Ideal Auto has returned to the growth track from its pure electric failure, but its profit margin has also been affected by the decrease in average selling price. The company's net profit in the third quarter increased slightly year-on-year to 2.8 billion yuan, achieving profitability for eight consecutive quarters. The profit margin of the automotive business decreased from 21.2% in the same period last year to 20.9%, but higher than the 18.7% in the second quarter.
Ideal cars aim to increase profit margins through cost control. In the third quarter of this year, the R&D expenses of Ideal Automobile were 2.6 billion yuan, a year-on-year decrease of 8.2%, and a decrease of 14.6% compared to the 3 billion yuan in the second quarter of this year. The company's explanation is that the cost of designing and developing new products and technologies has decreased, as well as the salary of R&D personnel has decreased.
Ma Donghui, President of Ideal Automobile, stated at the performance meeting that Ideal Automobile seeks opportunities to reduce costs and increase efficiency through technological innovation, procurement volume, reducing quality waste, improving capacity utilization with partners, and implementing more efficient logistics and distribution methods.
Investors are more concerned than ever about the potential for further growth of Ideal Auto. In December last year, Ideal Motors achieved its monthly sales target of 50000 units with the L7, L8, and L9 models. However, the launch of the new L6 this year did not bring significant sales gains, which to some extent squeezed the survival space of the mid to large sized SUVs Ideal L7 and Ideal L8.
Ideal Automobile has given a relatively conservative growth forecast for the fourth quarter, with an expected delivery volume of 160000 to 170000 vehicles this quarter. This means that Ideal Automobile's annual delivery volume is expected to not exceed 520000 vehicles, with an increase of no more than 30%. In February of this year, Li Xiang, CEO of Ideal Automobile, announced in a high-profile manner that his sales target for this year was 800000 units before the launch of the pure electric model. Later, there were reports that it was lowered to 480000 units.
Based on the estimated fourth quarter revenue of 43.2 billion yuan to 45.9 billion yuan, the average price per bike for Ideal Auto is expected to continue to decline to less than 260000 yuan this quarter. The implicit message is that there may be more aggressive promotional actions to achieve the year-end target, and the sales proportion of Ideal L6 will continue to increase.
Zou Liangjun, Senior Vice President of Sales and Service at Ideal Automobile, did not respond to the growth potential of the L series at the performance meeting, but he stated that Ideal Automobile's sales target for next year is twice the growth rate of the new energy vehicle market with a value of over 200000 yuan.
The leader of this hybrid model can feel that its competitors are becoming more numerous. The preference of Chinese car consumers for hybrid models has prompted various car manufacturers to increase research and development of corresponding models, many of which directly benchmark against the Ideal L series and even have similarities in appearance and design.
Li Xiang believes that automobile competition is a comprehensive competition of business capabilities including technology, products, supply chain, sales, services, etc., and extended range technology is just one of them. He believes that the Ideal L series products will still be in their prime in the next one to two years. Due to the fact that the Ideal L6 is still in a hot selling period where production capacity cannot meet orders, Ideal Auto is expected to make production line adjustments during next year's Spring Festival.
This conservative car manufacturer has not promised investors to launch new business segments. In Li Xiang's view, the biggest variable in the next three to five years will come from artificial intelligence, including intelligent driving and intelligent assistants, which will bring consumers a completely different experience from today and also mark the beginning of a qualitative change. Considering the potential growth of artificial intelligence in the home market, Ideal Auto is not eager to explore more other markets.
Another potential growth point for Ideal Auto is in overseas markets, but so far no substantial actions have been taken to open up markets and increase sales. Zou Liangjun stated that the Middle East and Central Asia will be the first target markets for Ideal Auto's exports, but he did not provide a specific timeline for entry.
On the other hand, the plan promised by Ideal Auto to install 2000 charging stations this year may be delayed, which is an important guarantee for the launch of pure electric products next year. As of October 31st, Ideal Auto has launched a total of 1000 charging stations, with an average of 2.4 stations built per day. To achieve the goal, the ideal car needs to build at least 16.1 seats every day.
The speed of establishing ideal car channels is not fast enough, and there may even be some reduction. As of the end of the third quarter, Ideal Auto had 479 retail centers in 145 cities across the country, compared to 148 cities and 497 retail centers three months ago.
Zou Liangjun mentioned that Ideal Automobile is adjusting the number, scale, and proportion distribution of retail stores, gradually phasing out the existing network of mall stores and replacing them with top tier car city center stores. According to estimates, by the end of 2024, the proportion of central stores will reach over 40%, the number of booths nationwide will increase by 1000 compared to last year, and the network will be expanded to third tier cities.
In order to stimulate sales growth in the short term, Ideal Automobile launched a new round of management rights transformation in the second half of this year. The sales managers in each province of the company have shifted from being solely responsible for sales to being responsible for overall operations. This is beneficial for each province to carry out marketing activities according to its own market situation and local conditions.