Li Auto wants to give MEGA more time

Li Auto's start in the new field of pure electric MPVs is not going smoothly.

On March 21st, Li Auto admitted in an internal memo to all employees that there was a misjudgment in the pace of their pure electric strategy. They revised down the estimated delivery volume for the first quarter of this year from the previous 100,000-103,000 vehicles to 76,000-78,000 vehicles, a decrease of nearly 25%.

Previously, Li Auto stood out from the fierce competition among many domestic new carmakers with precise market positioning.

Now, Li Auto has chosen to break away from its "comfort zone," expand into the pure electric MPV market, and hopes to quickly increase sales to continue the success of the extended-range L series. They aim to rapidly break through to a delivery volume of 70,000-80,000 vehicles. However, Li Auto clearly underestimated the difficulty of entering the market from scratch.

1. Li Auto's Rocky Road in Pure Electric Vehicles

Unlike sedans and SUVs, the domestic new energy MPV market is still in its infancy. Although the competition is in a blue ocean, the user base is relatively weak.

In 2023, the sales of plug-in hybrid MPVs in China reached 164,000 units, a year-on-year increase of 430%, while the sales of pure electric MPVs were only 81,000 units, with a growth rate of only 40.9%, far lower than plug-in hybrid models. Taking the popular model TANK D9 as an example, the sales of the pure electric version of TANK D9 only accounted for 10% of the total sales.

In the top 10 sales ranking of MPVs in China in 2023, only the new energy MPV model TANK D9 entered the list, with the overall sales of new energy MPVs accounting for only about 11%. Therefore, the domestic new energy MPV market is still in the blue ocean stage.

As Li Auto's first pure electric model, MEGA continues Li Auto's family car style but avoids internal competition with the L series SUVs and targets different consumers. This has raised high expectations for Li Auto for this new model.

However, MEGA's performance did not meet expectations. Based on the internal estimate of MEGA's annual sales of 70,000 to 80,000 units, monthly sales should reach 7,000 to 8,000 units. However, since its launch on March 1st, MEGA has only received 4,000 orders in half a month, while the monthly production capacity is 5,000 units.

Wall Street News·Jianzhi Research pointed out that besides the controversial exterior design of the model, the reasons why MEGA did not meet expectations include:

(1) Li Auto tried to leverage the success of the L series to boost MEGA sales, but the overall effect was not good. Li Auto's advantages in extended-range technology did not translate into success in the pure electric field. After all, Li Auto still lags behind in aspects such as charging network, fast charging technology, and intelligent driving that are important in the pure electric field compared to new energy companies that focus on pure electric models.

(2) As Li Auto's first pure electric model, MEGA is priced much higher than the XPeng X9 and the previously popular TANK D9, causing consumers to adopt a wait-and-see attitude. Moreover, the acceptance of pure electric MPV models in the market is currently much lower than that of plug-in hybrid MPVs, SUVs, and sedans, which are mature markets The pure electric MPV market still needs a long period of cultivation.

2. Li Auto faces some difficulties in achieving the target of 800,000 vehicles per year

Li Auto has set an aggressive sales target of 800,000 vehicles in 2024, with a year-on-year growth rate of 112.7%, in stark contrast to Nio and XPeng's more conservative targets of 230,000 and 280,000 vehicles respectively.

However, it seems challenging for Li Auto to achieve the target of 800,000 vehicles per year.

Firstly, after the launch of the MEGA model, the first week's sales were only 1058 units, ranking sixth in the MPV market and failing to become a new sales growth engine for Li Auto. Li Auto has revised its delivery forecast for the first quarter of this year from 100,000 - 103,000 units to 76,000 - 78,000 units. The sales forecast for March this year is expected to remain at 25,000 units, making it difficult to return to the peak efficiency level of 50,000 units as expected in previous years, with a noticeable slowdown in growth. The sales target completion rate for the first quarter of this year is less than 10%, compared to 17.5% in the same period last year.

Secondly, the Li Auto L series faces a challenge from Aito, which is gradually eroding Li Auto's market share with models such as M7, M9, and M5. With Aito's production capacity gradually increasing, a large number of orders accumulated in the early stage are being converted into later sales, causing an impact on Li Auto. In January, February, and the first half of March this year, Aito has already achieved sales leadership.

In response, Li Auto has taken measures to adjust the prices and structures of the L series models in mid-March this year, lowering the threshold and prices, hoping to see a rebound in sales in the second quarter.

However, there is no need to be overly pessimistic. Even if the sales of MEGA do not meet expectations and only reach a conservative 50,000 units for the whole year, as long as the sales of Li Auto's L series models can grow at a normal quarterly rate, the estimated sales of Li Auto's L series models can still reach 560,000 units. This will enable Li Auto's total sales this year to reach 610,000 units, a 63% increase compared to last year, significantly ahead of other new forces in the automotive industry.

Currently, Li Xiang has admitted to the strategic mistake of pure electric vehicles and has promised to make immediate adjustments, refocusing on user value and efficiency. The future of Li Auto's pure electric vehicles will enter a new stage.

Whether Li Auto can replicate the success of extended-range vehicles in the pure electric vehicle market depends on whether it can maintain a synergistic effect with extended-range vehicles while expanding its product range and enriching its product structure. This will be the key for Li Auto to maintain its competitive advantage.

Of course, the market should also give Li Auto some time