A detailed explanation of the ideal prospectus: revealing its armor and weakness


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By Li Tingting
Source: capital detective (ID: capital detective)
It has been established for five years and has been listed in the United States. Ideal car with a prospectus, once again confirmed the speed and passion of the new car market.
Starting with dreams and fanaticism, the new forces of car making, once popular, once questioned and criticized, have recently returned to the center of public opinion in a completely different attitude.
Most of the new car making forces, represented by byton, sailin and Bojun, failed to complete the breakthrough from “ppt car making” to mass production of high-quality models. They either suspended operation or gave up car building, and were basically ruled out.
Weilai, Xiaopeng, ideality and Weima have been out of the tight encirclement and entered the elimination competition. Recently, good news has been heard from the capital level. For example, after receiving 7 billion financing from Hefei Construction Investment and other investors in April this year, Weilai has recently obtained 10.4 billion yuan of comprehensive credit from six banks, including Anhui Branch of China Construction Bank. In addition, Xiaopeng was also reported to the United States, IPO has entered the countdown.
In the early morning of July 11, Beijing time, before Xiaopeng, ideal automobile submitted its prospectus to the SEC and planned to raise up to $100 million through its initial public offering on the Nasdaq market.
According to the prospectus, its $550 million round D financing was completed on June 1.
The only ideal one released by ideal automobile at this stage starts mass production in November 2019, and the delivery quantity is 10400 units by June 30, 2020. Thanks to the mass production of ideal one, ideal automobile began to realize large-scale revenue. Disclosure of prospectus:
In the whole year of 2019, the ideal car will achieve revenue of RMB 280 million, gross profit of RMB – 95000 and gross profit rate of – 0.03%.
In the first quarter of 2020, ideal automobile will achieve revenue of 840 million yuan and gross profit of 68.288 million yuan, with a gross profit rate of 8.02%.
Before the ideal, only the new force of domestic car making successfully IPO in September 2018, but after listing, the share price of Weilai continued to decline, falling below US $1.5 in the second half of 2019, far from the issue price of $6.26. It was not until this year that Weilai successively implemented two large-scale financing projects that the stock price rose by more than 300% in the past month, breaking through $14, reaching a historical high.
The market seems to have rekindled the expectation of new forces of car making. Can the ideal of listing at this time bring surprise?
Volume production for half a year, gross profit turned positive
Among the new forces of Weilai, Xiaopeng, ideality and Weima, the ideal speed of car making is slightly behind
Weilai es8 was officially launched in December 2017, and began to deliver it to ordinary users in June 2018. At the end of the same year, welai ES6 was released and started to be delivered half a year later;
Wima Ex5 was delivered in September 2018 and EX6 plus was launched in November 2019;
Xiaopeng G3 was officially listed at the end of 2018, and the delivery was launched in the same period, and Xiaopeng P7 was launched in April this year.
The ideal one will not be delivered until the end of 2019. Although it is slow, the report card of ideal one after mass production is still good: as of June 30, 2020, the number of ideal one delivered has reached 10400, which is a record of the fastest delivery of 10000 new models by the new force of vehicle manufacturing.
What’s more, after the delivery of ideal one, the ideal has finally ended its long time of burning money, and it has earned money
In the whole year of 2019, the ideal revenue is 284 million yuan, of which the vehicle sales revenue is 281 million yuan, accounting for 98.8%, and other sales and service income is 3.4 million yuan, accounting for 1.2%. (in fact, the ideal annual revenue in 2019 is basically the revenue generated after the delivery of ideal one in November.)
In Q1 2020, the ideal revenue is 850 million yuan, of which the vehicle sales revenue is 840 million yuan, accounting for 98.8%, and other sales and service revenue is 10.617 million yuan, accounting for 1.2%.
In terms of delivery and revenue, there is still a certain gap between ideal and Weilai: in Q1 2020, the revenue of Weilai is 1.37 billion yuan. In addition, in the second quarter, Weilai delivered 10331 vehicles, up 190.8% year-on-year and 169.2% month on month.
But from the perspective of enterprise hematopoietic capacity, the ideal is better than Weilai.
When Weilai was seeking IPO in 2018, it was controversial because of the huge loss amount, which also became one of the reasons for the capital cooling of the new automobile manufacturing forces in 2019. Huge losses combined with the wait-and-see sentiment of the capital market once led to the tight capital chain of Weilai, and even faced a life and death crisis at the end of 2019.
In Q1 this year, Weilai’s loss narrowed, but the gross profit margin was still negative, with the comprehensive gross profit margin of – 12.9% and the gross profit margin of vehicle sales of – 7.4%. But in the first quarter financial report telephone conference, Weilai founder Li Bin disclosed the signal that the second quarter Weilai gross profit will change from negative to positive, and said that the gross profit rate will exceed 5%, and the gross profit rate of the whole vehicle will exceed 3%. It is expected that the gross profit rate of the whole vehicle will reach double digits by the end of 2020.
The report card of Weilai in the second quarter has not been released, but the ideal has taken the lead in realizing the gross profit rate in the first quarter of this year: in Q1 2020, the ideal gross profit margin is 68.288 million yuan, the gross profit rate is 8.02%, the gross profit rate of vehicle sales is 8.45%, the net profit is – 77.113 million yuan, and the net profit rate is – 9.1%.
On the whole, the ideal is still losing money, but the turning of gross profit is a big breakthrough for the new car manufacturing force, and this is the achievement of ideal one in the early stage of mass production. To some extent, it proves that ideal has the potential to realize self blood production, which is a big surprise to the market.

Compared with Weilai, the main reason for the better performance of ideal gross profit is related to the technical solutions adopted by the two companies. Ideal is the only new vehicle manufacturing force that uses the extended range technical framework, and the manufacturing cost of the extended range electric vehicle is lower than that of the pure electric vehicle.
The power system of traditional new energy vehicles consists of electric drive, electronic control and battery, while the extended range electric vehicle also has a built-in mileage expansion system, including engine, generator and fuel tank. In other words, when the battery power is exhausted, the extended range electric vehicle can generate electricity through fuel to drive the car to run.
The high cost of pure electric vehicles is limited by battery technology at this stage, according to the ideal prospectus. Lithium batteries, which are widely used in pure electric vehicles, will cost about $166 per kilowatt hour in 2019. Compared with large-scale internal combustion engine SUVs, the battery, electric motor and electric controller of pure electric vehicles may increase the material cost by 30% to 35%. In addition, pure electric vehicles will use a higher proportion of lightweight materials such as aluminum to balance the weight of the battery and the body.
The ideal one with extended range technology can reduce the battery cost by using smaller capacity batteries, and the proportion of light materials in the body can also be reduced. Therefore, the manufacturing cost of one is far lower than that of pure electric vehicles of the same level, and close to that of internal combustion engine vehicles.
Thanks to the cost advantage of the extended range electric vehicle, it breaks the operating dilemma of high investment, high loss and difficult profit of the new car making forces to a certain extent.
However, in addition to technology, ideal’s strict control of rates is also an important reason why it can maintain its current gross profit performance.
Specifically, according to the prospectus, after the ideal one started mass production, the ideal operating costs decreased. In the whole year of 2019, the ideal total operating expenses will be 1.86 billion yuan, including 1.17 billion yuan for research and development, and 300 million yuan for Q1 in 2020, with an operating expense rate of 35.5%, of which the R & D rate is 22%. The main reason is that a large amount of approval confirmation and testing costs will be incurred before the ideal one mass production in 2019.
From the perspective of R & D rate in 2019, the ideal investment in R & D level is far lower than that of Weilai: according to the financial report of Weilai, its operating expenses are 9.88 billion yuan, the operating expense rate is 126%, and the R & D rate is 60.8%.
According to the information disclosed by Li Xiang on social media before, it is expected to spend one billion US dollars in five years, of which more than 2 billion yuan will be invested in research and development, and more than 2 billion yuan will be used to purchase factories and production qualifications. From this information, we can see that the proportion of investment in ideal R & D is not small. The absolute value of Weilai’s investment in technology research and development is higher than ideal, or it is related to the different technical solutions adopted by the two.
Combined with the rate composition of ideal and Weilai, we can see different business styles.
Since its birth, Weilai has been focusing on user service. Its financial report in 2019 shows that the cost of sales and management of Weilai is even higher than that of R & D. In contrast, the ideal of sales and administrative investment in a lot of restraint.
Just a few days before submitting the prospectus, Li Xiang revealed in his circle of friends that the ideal as a whole is extremely strict in cost control.
Li Xiang’s comments on Byron’s defeat
However, even if you tighten your belt, making cars still makes your ideal capital reserve seem a little strained.
As of the end of 2019, the total value of cash, cash equivalents and restricted cash held is RMB 1.43 billion, which is RMB 1.06 billion by the end of Q1 in 2020. This figure is not much compared with the huge cost of car building. The ideal cash flow in the reporting period is not abundant, which may be one of the reasons why it is ideal to refinance in June and start the listing process at this time.
On the whole, the answer sheet delivered by ideal five years after its establishment is still commendable. With the further expansion of the delivery scale of ideal one, the ideal profit model will have further optimization space.
Can all the hardships be sweet
It is not difficult to understand the intention of ideal choosing to land on the open capital market at this time. On the one hand, new car manufacturing needs capital leverage to leverage development. After the delivery of ideal one in mass production, the company needs to reserve more funds to improve the safety of enterprise survival and development. This can be seen from the total cash value disclosed in the ideal prospectus.
On the other hand, IPO is also good for enterprises in brand promotion. The identity endorsement of listed companies has a great influence on persuading potential consumers to make consumption decisions. This is also very important for promoting the ideal one ideal.
In fact, Weilai also started the IPO process after the delivery of es8 to ordinary users. However, IPO is not a panacea. The success of IPO depends on the ability of new car makers in technology, products, brands, channels and cost control.
The ideal profit situation has actually exceeded the market expectation, but only turning the gross profit into a positive one can not solve many problems faced by the new automobile manufacturing forces in the growth process.
In the current top echelon of new car building forces, ideal is the only enterprise that makes extended range electric vehicles. Its advantage is not only lower manufacturing cost, but also solves the mileage anxiety of new energy vehicles to a certain extent.
According to the ideal prospectus, by the end of 2019, less than 25% of the households in China’s first tier cities have parking space suitable for charging piles, and the proportion of pure electric vehicles to public fast charging piles is 17.7:1. Limited by the popularity rate of charging piles, Chinese electric vehicle owners suffer from the problem of “charging difficulty”, while extended range electric vehicles are not subject to this restriction, after all, domestic refueling The number and density of stations have fully met the needs of car owners.
But there are also disadvantages in the program adding technology. New energy vehicles are still in the early stage of development, and the extended range technology is a new product with a higher threshold for understanding. Many consumers and investors lack awareness of this technology. There are different views on the practical value of the extended range technology. This may be one of the reasons for the slow development of ideal cars.

However, Wang Xing, founder of meituan, has always been a firm supporter of ideal automobile. He has personally invested 285 million US dollars in the ideal round C financing, and led the investment of 500 million yuan in the recent ideal round D financing. Wang Xing also made a bet with Shen Hui, the founder of Weima, on who is the new car making force top3 with Weima, and repeatedly made it an ideal public platform on the social platform.
According to the ideal prospectus, Li Xiang is the largest shareholder of ideal automobile, with a shareholding ratio of 25.1% and a voting right of 70.3%. Wang Xing’s inspired elite Investments Limited and Zijin global Inc. are the second and third largest shareholders of ideal automobile, with shareholding ratios of 14.5% and 8.9% respectively, and voting rights of 5.8% and 3.5% respectively.
In addition, the definition of whether the extended range electric vehicles belong to new energy vehicles is still vague.
For example, in Beijing, the government only considers pure electric vehicles as new energy vehicles and can apply for new energy license plates, while the ideal one for extended range electric vehicles can only use fuel vehicle license plates. This means that ideal car owners can not enjoy the preferential policies provided by Beijing government to encourage the development of new energy vehicles, which will affect the purchase intention of car owners to a certain extent.
Secondly, after the national development and Reform Commission clearly designated the new energy vehicle charging pile as “new infrastructure” in April this year, the construction of domestic charging pile has been accelerated. It can be predicted that the domestic new energy vehicle pile ratio will be significantly improved in the next few years. With the gradual popularization of charging piles and the alleviation of mileage anxiety, the advantages of extended range electric vehicles like ideal one will be reduced.
Five years after its establishment, only one mass production model has been launched at this stage. Promoting product diversification will still be the main task of the ideal in the next few years. According to the prospectus, the ideal plan is to launch a high-end SUV with a next-generation extended range power system in 2022, and in the future, it will expand the product line by producing medium and small SUVs.
At the same time, it also means that the ideal needs to continue to invest in vehicle R & D. whether it can maintain and further realize the growth of gross profit rate while investing in new car research and development will be the key to whether ideal can gain a dominant position in the new forces of domestic car making.
How to balance the R & D investment and enterprise revenue is a difficult problem for all the new forces of car manufacturing to get rid of the internal competition among domestic new forces. The core of the problem is that the “congenital defects” of the business model of new energy vehicles have not been changed
On the one hand, domestic automobile consumers have a high demand for brand power, which leads to the long-term leapfrog competition of domestic brand cars in the process of competition with foreign-funded and joint-venture brand cars, which also results in the profit space of domestic cars being greatly squeezed, and even the gross profit of domestic new energy vehicles is difficult to even.
On the other hand, different from the traditional fuel vehicles, which are already very mature in technology, electric vehicles are still in the early stage at the technical level, which means that new car manufacturers will continue to make huge technology investment for a long time. At the same time, due to the immature technology, it is difficult to reduce the cost of electric vehicles.
Internal problems remain unsolved, and there are foreign troubles. The new forces, which are still in the growth stage, are born after Tesla. After completing the internal training of financing, R & D and mass production, they have entered the stage of direct competition with Tesla.
In the first half of this year, the introduction of a new subsidy policy has intensified the competition between domestic new forces and Tesla. As the new subsidy policy sets the price limit of less than 300000 yuan, Tesla Model 3 standard endurance version chooses to reduce the price. After the subsidy, the price is only 270000 yuan, which is lower than that of Weilai and ideal models. It is in the same range with the prices of Xiaopeng P7, Weima Ex5 commemorative edition and Weima EX6 plus polar version, and Tesla’s competitiveness is further strengthened.
In the second quarter, Tesla delivered more than 90000 vehicles, while the number of Weilai, the highest among the new forces of car making, was only 10000. The future of the new forces of car making is still unclear.
A new Toyota?
It can be said that China’s new car making force was born after Tesla. The reason may be that they are infatuated with automobile and technology, or they have seen the huge business opportunities hidden in them, or they may be mixed with a trace of worship for Tesla founder and “Silicon Valley Iron Man” musk.
In April 2014, 43 year old musk came to China for the first time. In Beijing Jiuxianqiao Hengtong business park, he delivered the keys to nine of China’s first batch model s owners. Li Xiang was among them.
In 2014, Tesla held the delivery ceremony of the first batch of car owners in China, and musk attended
At the age of 33, Li Xiang had a history of more than ten years. Li Xiang was below average in high school, but he was keen on computers. In his third year in senior high school, he set up a website called “home of video cards” and made the first pot of gold in his life. Then he gave up the college entrance examination to concentrate on entrepreneurship, and launched bubble net based on the prototype of video card home. By 2003, the annual revenue of bubble net has been nearly one million, and it has grown into one of the most authoritative and influential it vertical portals.
Li Xiang began to contact the automobile industry in 2005. At that time, Li Xiang led the team to expand from it products to automobile business, and officially launched automobile home, providing one-stop service such as car selection and car purchase for automobile consumers. After eight years of development, autohome was listed on the NYSE at the end of 2013.
Li Xiang is a famous car enthusiast in the circle. Liu Jie, who is now vice president of marketing of automobile home, was responsible for training business in BMW after graduating from university. In 2008, he often went to do knowledge training for editors of automobile home, and Li Xiang was never absent from each training meeting.
In 2014, Li Xiang took the key to Tesla Model s from musk, and later bought a model x himself. Li Xiang’s choice to build a car is reasonable.
Li Xiang

In July 2015, chehejia was founded and renamed as ideal automobile. At the same time, Li wants to quit his car home, which is now worth 10 billion dollars. Most people are puzzled by his exit from the car home. Li Xiang replied, “I may rebuild a Toyota in my lifetime. What can be more exciting than this?”
When Li Xiang was officially engaged in car making, the whirlwind caused by Tesla has swept China, and new forces of car making have sprung up
In the middle of 2014, Xiaopeng automobile was established; in November, Weilai was established; in December of the same year, Jia Yueting announced the concept map of LETV automobile through microblog, officially stepping into the ranks of car manufacturing; a month later, Weima automobile was established.
Car building requires high technology, capital, team, production capacity and other multi-dimensional capabilities. It is for this reason that the players who enter the stadium have luxurious backgrounds, which means that this is an expensive competition.
Li Bin, the founder of Weilai, once founded the auto Internet platform e-Car. At the beginning of its establishment, Weilai attracted much attention because of its gorgeous list of investors. Lei Jun, founder of Xiaomi, Ma Huateng, founder of Tencent, Liu qiangdong, founder of Jingdong, Li Xiang, founder of automobile house, and Zhang Lei, founder of highland capital, were among them.
The founder of Xiaopeng automobile is he Xiaopeng, the founder of UC. The co founders include YY founder Li Xueling and Cheetah mobile CEO Fu Sheng. Alibaba is one of its main investors.
Shen Hui, the founder of Weima, was born in a traditional automobile enterprise. He was once a director and vice president of Geely Holding Group. Baidu once led the investment in Weima round B and round C financing.
At that time, the new car making track was very popular. According to the Wall Street Journal in 2018, there were 487 registered electric vehicle manufacturers in China. According to incomplete statistics of the media, the overall financing scale of the new car making forces had exceeded RMB 100 billion by the end of 2018.
Logo of some new forces of car making and source network
However, chaos will inevitably arise in the hot spots of capital. In the process of the development of new forces of car making, the ridicule of “ppt car making” has never been stopped. The fact is true, such as “ppt car” ancestor Ranger car, this year’s thundering sailin car, etc., hold large amounts of financing, but have not yet produced qualified new energy vehicles.
So far, there are only four new forces that have successfully achieved mass production and a certain amount of trading volume, namely, Weilai, Xiaopeng, ideality and Weima, which together form the head echelon of the new car making movement.
On June 6, he Xiaopeng sent a group photo on his microblog. In the photo, he Xiaopeng, Li Bin, and Li wanted to sit together, and Li Bin’s hands were close to each other’s shoulders. On the same day, Li Xiang showed the same photo in his circle of friends. He said with emotion: “the three hard forces are faster than who is older.”
A month later, Weilai got another 10 billion yuan of financing, and began to rush for IPO. According to public reports, Xiaopeng has also submitted its IPO documents to the US stock market in secret. On the surface, the three “complaining” people seem to be living fairly well.
However, if the new forces want to get rid of the influence of policies and capital, they must realize self blood production. At this stage, when the R & D cost is difficult to be compressed, the new forces can only compete for delivery and seize the market if they want to improve their survival competitiveness.
This also means that the new force of car making will face the test from the market with the delivery volume as the measurement index. Since the beginning of this year, the new forces of car manufacturing have also significantly accelerated the growth rate.
The pressure is obviously enormous.
Entering the first echelon of the knockout competition, Li Xiang is about to usher in the harvest period as the ideal car submits its prospectus. So, compared with the obvious excellent financial performance of Weilai at the initial stage of listing, can the ideal future be guaranteed? The answer still needs time to verify.
(statement: This article only represents the author’s point of view, not Sina’s position.)