The product positioning is single and the quality control is not strict. Ideal Auto’s problem is not just MEGA

The concept of a refrigerator, color TV and large sofa in domestic new energy vehicles has been deeply rooted in people's hearts. Ideal Auto can be said to be a typical example in this regard. As the new car-making force with the highest sales in China, it has become popular in the market early on by virtue of its positioning as a "super dad car".

However, the "big sofa" of Ideal Auto seems to be not very useful now. Recently, a media exposed the rights protection of the Ideal L7 owner. One year after purchasing the Ideal L7, the owner found that the seat had bulges. In the car quality complaint media, the "seat problem" of Ideal Auto is also common in all models from L7 to L9.

It is indeed wrong for Ideal Auto, which focuses on home use and comfort, to make such a low-level mistake. Given Ideal Auto's current position in the industry, it is not the case that it cannot even handle such a small matter as the seats, but since such a problem has occurred, it may prove that Ideal Auto may also have some unresolved issues in the supply chain.

As early as December last year, the news that the former purchasing director of Ideal Auto was arrested for suspected corruption was already making the rounds. Purchasing has always been a high-incidence area for corruption, and the quality problems of many manufacturers actually stem from the purchasing process. Judging from the current situation, Ideal may need to continue to deepen its anti-corruption efforts in the purchasing process.

The deeper reason is that Ideal Auto has expanded too fast in the past two years, and its control over supply chain and other links has declined. In 2021, Ideal Auto's sales were only 90,000 vehicles, which increased slightly to 133,000 vehicles in 2022, but soared to 370,000 vehicles in 2023.

The rapid increase in sales is a double-edged sword for young car companies, and it poses a huge challenge to Ideal's operational capabilities. Automobile manufacturing is a very complex modern industrial category, and it is not surprising that Ideal Auto, as a small manufacturer, has problems with quality control and procurement.

In fact, this is not the only trouble that rapid expansion has brought to Ideal.

On the evening of May 20, Ideal Auto released its first quarter financial report for 2024. Data showed that Ideal Auto's revenue in the first quarter reached 25.6 billion yuan, but it suffered an operating loss of 585 million yuan. In comparison, Ideal Auto's operating profit was 405 million yuan in the same period last year, and it was as high as 3 billion yuan in the fourth quarter of 2023.

At the same time, Ideal Auto's cash flow in the first quarter turned into negative 5.1 billion yuan, compared with 6.7 billion yuan in the same period last year, and the figure was as high as 14.6 billion yuan in the fourth quarter of last year.

Ideal Auto's net profit in the first quarter was still 1.3 billion yuan, but the reason why Ideal was able to maintain profitability was because it received 1.069 billion yuan in interest and investment income. It should be noted that Ideal Auto's operating profit had been positive for four quarters before, but it came to an abrupt end in 2024.

One of the main reasons for Ideal's quarterly losses is the poor performance of its first pure electric vehicle, MEGA. This vehicle was originally highly anticipated. If it could achieve the expected goals, Ideal Auto would have opened up two fronts in pure electric and extended-range vehicles. However, Ideal MEGA was caught in a huge public opinion whirlpool soon after its launch, with sales of only 1,145 units in April.

According to common sense, even a strong company like BYD has some unsuccessful products such as the Denza N7, Denza N8, and Frigate 07. If a car fails, it will not affect the sales of the entire brand. But Ideal is different. It is a new car manufacturer with a shallow foundation. Unlike BYD, which is a large company, a strategic mistake in one car may cause a collateral damage to the entire brand.

The setback of MEGA quickly caused a chain reaction within Ideal. CEO Li Xiang publicly admitted that the previous business strategy was overconfident, which led to the company investing a lot of resources in the MEGA car, becoming the main reason for the company's quarterly losses. Affected by this, Ideal also had to lower its sales target for 2024.

During the first quarter earnings call, Li Xiang, CEO of Ideal Auto, also stated that Ideal Auto will not release new pure electric SUV products this year. Previously, Ideal Auto planned to launch three pure electric SUVs in the second half of 2024, but now it has been postponed to the first half of next year.

In addition, in order to offset the adverse effects of MEGA, Ideal Auto has also launched a strategy of reducing prices for all models. In order to reduce costs and increase efficiency, Ideal Auto has also recently started a large-scale layoff, with the layoff rate exceeding 18%. Prior to this, Ideal's performance has always been relatively stable. Such a large-scale layoff seems to prove that Ideal's problems are more serious than the outside world sees.

The excessively high sales targets, overestimation of market demand, and aggressive business strategies caused Ideal Auto to suffer greatly when the crisis occurred. In fact, Ideal Auto's development strategy has always been relatively aggressive, and the crisis did not occur recently.

There are two key factors that have enabled Ideal Auto to stand out among many new forces. First, it insists on the extended-range electric route, seeking recognition from users who like the experience of using new energy vehicles and are sensitive to the range; second, it insists on the positioning of "super dad car" and designs models around the needs of family users. Large space, first-class comfort, powerful entertainment functions, etc. are more in line with user needs, thus occupying a unique ecological niche and avoiding entanglement with other friendly companies.

These strategies are the key to Ideal's success, but they also pose huge hidden dangers for Ideal Auto.

The positioning of Ideal's models is too single. Once it deviates from the positioning of extended-range electric + high-end family cars, it seems difficult to play. At present, Ideal Auto has a total of 4 SUVs, namely L6, L7, L8, and L9. However, people who know Ideal Auto know that these 4 cars are actually one car, but they are different in size and configuration, and they are all aimed at high-end family users. This product structure is obviously unhealthy.

No manufacturer wants to have problems with their products, but from an objective point of view, some problems are better if they appear earlier than later. Ideal Auto should be clear that if it wants to become an influential auto company, it must strengthen internal management and improve its application level, rather than blindly expand based on temporary enthusiasm.

In addition, Ideal Auto also needs to continue to explore new segments. The positioning of high-end family SUV is actually a niche market and cannot support a large-scale automobile brand. Since Li Xiang wants Ideal Auto to be on par with Mercedes-Benz and BMW, he should not only focus on those limited markets.

What Ideal Auto needs most now is to accumulate experience and work harder on product positioning and quality control. In fact, even if its sales volume is lower than expected, Ideal Auto is still the leader among the new forces in car manufacturing. If it can solve its own problems and develop more market segments, it can still return to its peak state.

The development of any manufacturer will encounter setbacks, and Ideal Auto is no exception. The shock wave brought by MEGA may not be all bad for Ideal Auto. As a new car-making force with a shallow foundation, Ideal Auto needs to take this opportunity to re-examine itself.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.