LI AUTO lowers sales expectations: 560,000-640,000

A document named “LI AUTO Internal Communication Minutes” was exposed, and LI AUTO may lower its annual sales target. The internal communication minutes show that due to the lower-than-expected sales orders, the expected delivery volume in the first quarter of 2024 is 76,000-78,000 vehicles. After the downward adjustment of the guidelines, the annual sales target will change. The sales growth rate in 2024 is 50%-70%, corresponding to a sales guideline of 560,000-640,000 vehicles, which is 160,000-240,000 vehicles lower than the previous 650,000-800,000 vehicles, which also means that LI AUTO’ goal of challenging the sales in the BBA China region may fail.

In addition, in response to various problems that have arisen after the listing of MEGA, LI AUTO made it clear that even if the performance of MEGA is less than expected, there will be no pricing adjustments. It will boost the market performance of MEGA through three aspects: 1. strengthening the construction of charging pile infrastructure; 2. further seizing the core user group of MEGA; 3. down-to-earth problem-solving. For infrastructure construction, the latest guideline is to have more than 10,000 urban charging piles and more than 3,000 high-speed charging piles in 2024. It is understood that LI AUTO has lowered its sales expectations for MEGA to 2,000 vehicles/month. After the above changes, it is expected to increase the monthly delivery volume in Q4 to 4,000-5,000 vehicles. Previously, LI AUTO’ monthly sales expectation for MEAG was 8,000 vehicles, challenging the first place in the sales of all categories of more than 500,000 vehicles.

At present, LI AUTO mainly relies on the L series to increase sales. Although the L series product market is now suppressed by WENJIE, the market share has not changed much, and LI AUTO will not consider price reductions for the time being. LI AUTO stated that the price reduction of luxury brands will have a negative impact on the brand power, especially the price reduction of new models is no different from drinking poison to quench thirst. The Ideal L6 is likely to be launched after the 2024 Beijing Auto Show, with a monthly sales expectation of more than 20,000 vehicles.

However, as of the time of publication, LI AUTO has not commented on the relevant information. An LI AUTO insider told the media that the internal has not received the notice of the adjustment of the annual sales target, but if the adjustment will effectively reduce internal pressure and focus on responding to the product offensive of WENJIE. On March 21, Li Xiang, CEO of LI AUTO, issued a full-company letter internally, reflecting on the pace issue and sales volume of Ideal MEGA, and at the same time, made targeted adjustments to product management, dealers, charging network layout, and sales expectations.

Li Xiang mentioned in the internal letter that Ideal MEGA and high-voltage pure electric must go through a stage similar to that of Ideal ONE and extended-range electric, and cannot have the operating potential from 1 to 10 as soon as the Ideal L series is launched. However, LI AUTO internally mistakenly treated the business validation period of Ideal MEGA from 0 to 1 as a period of rapid development from 1 to 10, resulting in a misjudgment of the pure electric strategy pace. Li Xiang said that due to the chaotic pace of MEGA, the sales team has significantly reduced the time and energy to serve L-series users, and even the main model, Ideal L8, does not even have a place in the store. Next, it will abandon the all-round sales strategy and focus on the large retail centers in the top cities for product experience and test drives, and accelerate the construction of supercharging stations in these cities.

In the all-staff letter, Li Xiang also reflected on the issue of excessive attention on sales by all employees: “We are too focused on sales and competition from top to bottom, which allows desire to surpass value, and significantly reduces our originally best user value and operating efficiency. The pursuit of desire has made us become the people we dislike.” To this end, LI AUTO will lower its expectations and desires for sales, return to healthy growth, return to the improvement of the most skilled user value, and return to the improvement of the most skilled operating efficiency.

In addition, LI AUTO will abandon the all-round sales strategy, focus on large retail centers in the top cities for product experience and test drives, and accelerate the construction of supercharging stations in these cities. After effectively completing the stage from 0 to 1, it will be promoted to more cities and a larger user group. It is understood that LI AUTO will build large-scale urban supercharging stations this year, and it is expected to reach 600 in the second quarter and 2,000 by the end of 2024. By the end of the year, the number of high-speed + urban supercharging stations will reach 2,700.

Not long ago, LI AUTO delivered a perfect financial report. In 2023, its revenue will reach 123.85 billion yuan, becoming the first new energy vehicle manufacturer in China to break through the 100-billion-yuan revenue mark in a year. The net profit will be 11.81 billion yuan, which is the first year that LI AUTO has achieved profit since delivery. By the end of 2023, the company’s cash reserves reached 103.67 billion yuan. The sufficient cash flow can support its spending on sales and charging. Whether LI AUTO can win this turnaround battle remains to be verified.

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