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Li Xiang, founder, chairman and CEO of ideal Automobile, said in a post on his personal social account last night: "an automobile company with basic common sense will generally set the stable gross profit margin of its products at between 15% and 25% (corresponding to the retail price of standard pricing, rather than the sales price after promotion and reduction)." At worst, it will not be lower than the gross margin of 15% (the agency model needs to take into account the dealer's sales gross margin).

For the final actual gross profit margin is much lower than the product planning goal, Li also listed four reasons in the article: 1, sales are far lower than expected (very high cost sharing of bicycles); 2, market fluctuations in spare parts costs (such as the increase in battery prices caused by lithium carbonate); 3, sharp price cuts caused by competition; 4, too many purchases.

In addition, Li also pointed out: "the gross profit margin of the product is much lower than expected, and the gross profit margin fluctuates greatly, not because of the enterprise's pricing conscience, but because of the need to improve the operation and management of the enterprise, as well as continue to expand the scale." After reaching a revenue scale of hundreds of billions of dollars, a gross profit margin of 15 per cent and 25 per cent of products is the benchmark requirement for a healthy auto company, as are BYD and Tesla, which are among the leading sellers. " And stressed: "only for the views of the whole industry, not for any enterprise, do not: do not be persecuted paranoia!"

It should be noted that this is not the first time Li wants to have a "gross margin". Li Xiang also said in an article last month: "if the total sales of the ideal L9, L8 and L7 fall to 5,000 or 6,000 vehicles per month, the gross profit margin of the ideal car will become negative." At the same time, Li wants to say, "the cost control ability of most of our peers is obviously better than ours, and it is worth our serious study." It is not the cost but the sales volume that is more likely to go wrong. The attribute of the automobile industry is too demanding on scale. "

According to the analysis of the financial results released by the ideal car, in recent quarters, the gross profit margin of the ideal car has been basically controlled at around 20%. According to the financial report, the ideal gross profit margin for cars in the first quarter of 2023 was 22.4%, compared with 22.6% in the same period last year, and 20.4% in the fourth quarter of 2022. In contrast to Xilai and Xiaopeng, the latest financial report shows that the gross profit margin of Lulai fell to 1.5% in the first quarter of 2023, compared with 14.6% in the same period last year, while Xiaopeng's gross profit margin also fell to 1.7%. It was 12.2% in the same period last year.

For the reasons for the decline in gross profit margin, Xilai Motor and Xiaopeng Motor give such an explanation. NIO said: "Gross profit margin is also affected by external factors, if lithium prices now return to a rational level, with long-term improvement in scale, management efficiency, as well as progress in vertical integration and self-research in key components, we feel that there is a realistic basis for achieving a gross margin of more than 20%." Xiaopeng Motor said: "this is a short-term phenomenon. In the first quarter, there was a price war in the automobile market. Xiaopeng carried out a 'Spring Festival price adjustment', superimposed the impact of the end of the subsidy period for new energy vehicles."

It is worth mentioning that the gross profit margin, which has been stable at around 20% for two consecutive quarters, has also allowed the ideal to take the lead in entering the moneymaking mode. The ideal automobile business income in the first quarter of 2023 was 18.79 billion yuan, an increase of 96.5% over the same period last year, of which vehicle sales revenue was 18.33 billion yuan, an increase of 96.9% over the same period last year. The net profit was 934 million yuan, which turned a profit from a net loss of 10.866 million yuan in the same period, and an increase of 252.0% over the net profit of 270 million yuan in the fourth quarter of 2022. In contrast, the financial report shows that in the first quarter of 2023, the net loss of Lulai Motor was 4.74 billion yuan, while that of Xiaopeng Motor was 2.34 billion yuan.

Although "Wei Xiaoli" was earlier praised as the three swordsmen of the new domestic car-building forces, with the intensification of market competition, this situation no longer exists. Since entering 2023, ideal car has been ranked first in the new power market for many times. In May 2023, the ideal car delivery volume is 28300, with more than 20, 000 for three consecutive months, making it the top seller of new power brands in the Chinese market in May. At the same time, ideal car continues to rank among the top five luxury brands in the Chinese market, becoming the highest-ranked Chinese brand on the list, surpassing other traditional luxury brands except BBA.

At present, ideal Auto's models on sale include L7, L8 and L9, with a price of more than 300000 yuan. Li previously made it clear that the ideal car would increase its market share of 30-500000 yuan SUV from 9.5% in 2022 to about 20% in 2023. According to the FIFA data, the capacity of this segment in 2023 is about 1.4 million-1.5 million, which means that if the ideal car wants to achieve this goal, its sales target will reach about 280000-300000. Li Xiang had previously said that China is expected to sell more than 8 million smart electric vehicles in 2025 and that gaining more than 20 per cent market share is a necessary condition for becoming a leading Chinese company.

It should be noted that this year is regarded by the industry as the year when the new energy track starts the knockout race, and the current competition in the car market is particularly fierce. He Xiaopeng, chairman of Xiaopeng Automobile and CEO, believes that the knockout stage of the automobile industry has just begun, and in the future, the annual sales of 3 million vehicles will only be tickets for automobile companies. From next year, the decline of fuel vehicle sales will accelerate. In the next decade, there will be only eight mainstream car companies, sub-brands will be merged into big brands, and eventually become "giant enterprises". In these enterprises, 3 million or 5 million sales will be the foundation. Li Bin, founder and CEO of Xilai Automobile, said: "the car company's annual sales of 2 million vehicles is a line of life and death, and it will be very difficult if you don't see the hope of sales." Even said bluntly: "if NIO still sells 10,000 people a month, both Qin Lihong and Qin Lihong (president) are going to look for a job."

In addition, at the 2023 China Automotive Chongqing Forum held in the past two days, Huawei Managing Director, Terminal BG CEO, and Smart car solution BU CEO Yu Chengdong also said that in the future, the annual output of head car companies will not reach 5 million or even 10 million vehicles, it will be difficult for enterprises to gain a foothold, and small and medium-sized enterprises will be merged.

In other words, whether it is the new power of car building or other car companies, with the changes in the car market, car companies will face more pressure this year than ever before.

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