Significant organizational adjustment of Li Auto!

According to local business media reports, on the afternoon of April 3, Li Auto issued a notice to all employees, announcing an upgrade of the matrix organizational structure, involving the organizational structure adjustment of multiple departments. This is also the substantial progress that Li Auto has ushered in since the founder and CEO of Li Auto, Li Xiang, issued an internal introspection letter admitting mistakes on March 21.

The above report pointed out that the organizational change mainly focuses on the CEO’s office department of Li Auto. The original department covering the brand department, product department, business department, strategy department, and supply department will be changed to the “Product and Strategy Group.” After this department change, the supply chain and business sales functions will be weakened, and instead, it will focus on products and strategies, and no longer report to Li Xiang. After the adjustment, the Product and Strategy Group will establish a “Product Line” department and a “Quality Operations” department. Among them, the product line will be managed by Liu Jie, the vice president of business of Li Auto, and will be responsible for the entire life cycle operation of Li Auto models; the model PDT team of the product department under the original jurisdiction of Fan Haoyu, the senior vice president of products, will also be moved into this department. In addition, under Zou Liangjun, the senior vice president of sales and services, Li Auto has newly established a GTM (Go to Market) team, which is responsible for coordinating the landing of the new product launch plan and being responsible for the market results.

In response to this organizational structure adjustment, Li Auto told Jiemian News that the matrix organizational structure 2.0 upgrade is true. “This adjustment will focus on solving the problem of the long value chain, and avoid reducing the quality and efficiency of decision-making due to overly complex processes. At the same time, this organizational upgrade is the efficient and rapid correction of errors after Li Xiang issued the internal letter on March 21.” On March 21, Li Xiang issued an internal letter to all employees, reflecting on the rhythm and sales volume of Li Auto MEGA, and made targeted adjustments for product management, dealers, charging network layout, and sales volume expectations. In the internal letter, Li Xiang admits that there was a miscalculation in the grasp of the market rhythm, and pointed out: “We mistakenly treated the MEGA from 0 to 1 phase (business validation period) as the from 1 to 10 phase (high-speed development period) for operation, resulting in a significant reduction in the sales team’s energy on the L series, which affected the service and sales of the main model Li Auto L8. To this end, Li Xiang proposed to reduce excessive attention on sales volume, return to healthy growth, and focus on improving user value and operational efficiency.

On the same day, Li Auto issued an announcement that due to the lower-than-expected sales orders, it announced to lower the delivery expectations for the first quarter of 2024, from 100,000-103,000 vehicles to 76,000-78,000 vehicles, with a total reduction of 24,000-22,000 vehicles. On March 26, Li Auto stopped the practice of regularly releasing weekly sales data on Tuesdays. The market believes that this change in behavior may be influenced by the failure of Li Auto MEGA and the decisions of Li Auto.

MEGA is an important model released by LI Auto on March 1, with a price of 559,800 RMB. As the first pure electric vehicle and the first MPV model under LI Auto, this vehicle is highly anticipated. In Li Xiang’s opinion, MEGA has the characteristics of a blockbuster and is confident to become the best-selling vehicle in all passenger cars above 500,000 RMB, regardless of energy form or body style. However, the reality is that Li Xiang’s expectations for MEGA are too high, and after its launch, it failed to become a new growth point for LI Auto’s sales.

Previously, Zou Liangjun, vice president of sales and service of LI Auto, predicted that in March 2024, the delivery volume of LI Auto would exceed 50,000 vehicles, and in June, the delivery volume would reach 70,000 vehicles, with a monthly delivery volume exceeding 100,000 vehicles by the end of the year. However, the latest sales data shows that in March, the delivery volume of LI Auto was 28,984 vehicles, once again missing the top spot in sales. It was overtaken by AITO with 31,727 vehicles; in the first three months of the year, the delivery volume of LI Auto was 80,400 vehicles, while that of AITO was 85,842 vehicles, and the top spot in sales was also taken away by AITO.

As LI Auto’s first MPV model and first pure electric vehicle, whether MEGA can meet sales expectations is crucial to LI Auto’s development this year. According to the initial plan, LI Auto’s annual sales target for 2024 is 800,000 vehicles, challenging the sales of Mercedes-Benz, BMW, and Audi in China and achieving the top sales of luxury brands in the Chinese market. However, after the failure of Ideal MEGA, LI Auto, which was advancing rapidly, released the “fast-forward button.” According to a circulating minutes of investors, LI Auto has adjusted its annual sales target from 800,000 vehicles to 560,000-640,000 vehicles, and the sales guidance of Ideal MEGA has also been lowered from 8,000 vehicles per month to 2,000 vehicles.

Founded in 2015, the new car-making force has relied on the Ideal ONE model to dominate the market before June 2022. In June 2023, the Ideal ONE was discontinued and retired from the historical stage. Now, LI Auto’s product matrix has reached four models, including the Ideal L9 in the range of 400,000-500,000 RMB, the Ideal L8 and Ideal L7 in the range of 300,000-400,000 RMB, and the Ideal MEGA of 550,000 RMB. However, after saying goodbye to the era of a single model dominating the market, LI Auto’s days are not easy, but instead, it faces more challenges.

After entering 2024, LI Auto began to actively reflect and make innovations. This year will also be a product year for LI Auto, and it will launch 4 extended-range models and 4 pure electric models within the year. Among them, LI Auto’s new medium-sized SUV model, Ideal L6, may be launched after the 2024 Beijing Auto Show, with a monthly sales expectation of more than 20,000 vehicles. In addition, Li Xiang once stated that LI Auto will not release models under 200,000 RMB in the next five years. It is expected that by 2030, in the market of household users above 200,000 RMB, LI Auto only needs to account for one-third to achieve a revenue of more than one trillion RMB.

As for whether the reinvented LI Auto can gain more market share in 2024 under the siege of AITO and BYD, it will have to wait and see. However, without surprises, the products launched within the year may play a key role.

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