Author | Chai Xuchen

Editor | Wang Xiaojun

After nine months of being "offline" due to the MEGA storm, Li Xiang made a "comeback" with a new story on Christmas Eve.

On the evening of December 25, Li Xiang, Chairman of Ideal, appeared at the Technology Day AI talk, where he discussed AI trends in detail and positioned Ideal as an AI company, stating that he wants to make AI accessible to every household in the future. He himself will transition from being known as the "Director Li" in the automotive circle to becoming the CEO of an AI company.

In no time, the topic of "Li Xiang does not want to build cars" trended on social media. Some questioned whether Li Xiang, having become the "leader of new forces," had become aloof. Although it seems he is "neglecting his duties," this is actually the first time he has clearly presented an overall vision for Ideal, revealing the ambition behind the company—it aims to grow into an AI technology giant.

Behind Li Xiang's grand vision lies a touch of helplessness.

Currently, Li Auto seems to have entered a bottleneck period, as it faces attacks from direct competitors like Wenjie, as well as from latecomers such as Avita, Zhiji, Deep Blue, Xpeng, and Leap Motor. The previously exclusive range extender + family segment has now become a red ocean. The significant shrinkage in Market Cap has become a pressure point for Li Auto, forcing it to implement a promotion + overseas expansion growth strategy to temporarily stabilize the situation.

However, this is not a long-term solution. Li Xiang determines that the domestic New energy Fund Industry Chain is becoming increasingly complete, which means that the barriers between automakers are being eroded. While most automotive players still find it difficult to tackle the upcoming trillion-level AI new blue ocean, Li Auto has already entered the 'new dimension' in advance, taking the lead in large model technology.

Next, Li Xiang aims to lead Li Auto away from the automotive market's 'crazy narrative' and venture into the AI sector to create a bigger opportunity.

New Story

"AI means everything to Li Auto."

At the outset, Li Xiang articulated the company's commitment to investing in AI, stating that half of the annual 10 billion yuan R&D investment is focused on AI. However, Li Xiang does not view this as 'going off track'; 'Building cars is definitely necessary, but I believe that what is discussed in the era of technology is true AI. Vehicles will evolve from mere transport tools of the industrial age into spatial robots of the AI era.'

In other words, Li Xiang regards Smart Automobile as merely one of the vessels to realize his AI vision.

He revealed that 'Li Auto Classmate' will be launched on December 27, transitioning from an intelligent cockpit assistant to a general AI application similar to ChatGPT, Doubao, and Kimi. In Li Xiang's view, a true AI super application must autonomously control all devices and possess all services.

Li Xiang said, "Ideal Classmate" will not only appear in cars in the future, but also on smartphones, computers, and even smart glasses. The original more than 1 million car owner users will be expanded by their families to a scale of three to five million.

"Ideal Classmate" demonstrates the "amplification" effect of AI, and its cross-end and independence make sense.

Li Xiang admitted that his previous two Internet startups did well, but due to the overly vertical track, he missed too much and felt regretful. This time he wants a forest and aims to create the largest one, which is also the original intention of founding Ideal.

Two years ago, Li Xiang had already identified AI as an important direction for future competition. Last year's craze for ChatGPT made him believe that the emergence of large models will lead to fundamental changes for humanity. The "secret strategy" of Ideal's AI thus became a "conscious strategy"; he wants to quickly recruit talented individuals to accelerate the wave.

As Ideal gradually aligns itself with the AI Technology Industry, Li Xiang, who has transformed into the "AI director", proposed a "three-step" evolution for artificial intelligence.

The first stage is "enhancing my capabilities"; for instance, L3-level intelligent driving, which will lead to improved efficiency, is supervised autonomous driving but requires human backups. The second stage is "my assistant," where users assign continuous tasks to AI, and the AI can complete them independently and take responsibility for the results. Li Xiang believes that in the automobile Industry, achieving L4 is the true "iPhone 4 moment."

In the final ultimate stage, Li Xiang calls it "silicon-based family members"; in this stage, AI does not need human instructions or task assignments; it will become a family member, even an important organizer of the household, proactively handling many things and autonomously assessing and managing the home. Li Xiang even believes that "in the future, my physical body may not exist, but my memories will become a part of it."

"What excites me the most is that my team and I can achieve the third stage in our lifetime." Finally, Li Xiang expressed his and the whole company's ideals. Under such a vision, Li Xiang mentioned that they will certainly work on humanoid robots in the future, but for now, they will solidly improve intelligent driving to truly make cars a mobile home.

From intensifying smart driving, splitting the AI assistant, to finally developing the "Silicon-based Family". Currently, Ideal is firmly developing the "Base Model". Li Xiang believes that this will be the operating system + programming language of the AI era, emphasizing its importance. He has required the team to ensure that in the coming years, the Ideal Base Model ranks among the top three in the industry.

Clearly, the story of autos is far from satisfying for Li Xiang, but this might be something he has to do.

Change the track.

Looking at the entire auto market in China, the fierce competitive environment has left players lamenting, while Ideal is a rare outsider benefiting from both quantity and quality—starting in the second half of this year, monthly sales have maintained around 0.05 million units, and the gross margin can also sustain at a high level of approximately 20%.

However, contrasting with the impressive performance is Ideal's "Waterloo" in the secondary market.

Since the beginning of this year, Ideal's stock prices in Hong Kong and the US have dropped by 36% and 32%, respectively. The reaction from investors is not surprising, as Ideal Auto has now hit the ceiling of development, and the data from the third quarterly report has already hinted at this.

During the Earnings Conference, Ideal provided a delivery guidance of 0.16 million - 0.17 million units for the fourth quarter, a slight increase of 0.007 million - 0.017 million units quarter-on-quarter, and the main contributor to this growth will still be the L6. Meanwhile, due to the increase in mid-range models, Ideal’s revenue potential is also quite limited, with a fourth-quarter revenue guidance of 43.2 billion - 45.9 billion yuan, showing a year-on-year growth rate of only 3.5-10%, indicating that cost control pressures have intensified.

This means that Ideal's product sales structure is shifting towards the low-end, and there is a significant marginal diminishing effect on revenue and profit, while to maintain sales, Ideal's reliance on promotions is growing increasingly.

At the end of November, Li Auto unexpectedly announced a three-year interest-free policy across its entire lineup to stimulate sales; at the same time, the previously ambiguous overseas expansion plan finally gained attention, with an overseas primary department established internally at the end of October this year, currently targeting the Middle East and Latin American markets.

Promotions and external expansion reveal Li Auto's desire for growth. Industry insiders believe that with more competing products emerging, the extended-range SUV market that Li Auto previously dominated is gradually being shared, and it is inevitably drawn into a price war.

More importantly, the story of Li Auto consistently surpassing BBA is now facing more scrutiny due to the down-market shift of its products.

Those who have long tracked luxury cars point out that the most popular models from BBA are not the entry-level products, but the mid-range models like the Mercedes E-Class and C-Class; Audi A6L and Q5L, which are the profit bastions and brand moats of BBA, significantly differ from the current situation of Li Auto's L6.

In other words, the explosive popularity of entry-level models is quietly diluting Li Auto's "gold content" in the luxury segment. To regain market cap and morale, Li Auto must tell a more compelling story. At this time, enhancing AI has become an opportunity for it to extricate itself from internal competition.

"China has a very complete supply chain, but among these hundreds of companies, which ones will be able to create foundational models in the future?" Li Xiang pointed out his advantages. Sources close to Li Auto told Wall Street News that "light assets are ultimately Li Auto's trend. One day in the future, if a Foxconn emerges like in Consumer Electronics, we can delegate to them and focus on technology research and development ourselves."

It is worth mentioning that when Apple announced in February this year that it would abandon car manufacturing to focus on AI, Li Xiang deemed it a wise decision. He stated that even if Apple achieved great success in car manufacturing, it would only add 2 trillion dollars to its market cap; conversely, if it successfully developed consumer-facing AI products, it could potentially grow into a company with a market cap of 10 trillion dollars.

Li Xiang emphasized that AI will become the core gateway for all devices, services, applications, and trades. For Apple, this is a battle it cannot afford to lose. Such a judgment has now also become a turning point in Li Auto's fate.

Li Xiang has never concealed his pursuit of Apple's product line. Apple's product planning, cost control, and market share are seen by Li Xiang as the most perfect ecological closed loop.

At this moment, looking to the future, with the ideal of a trillion Market Cap, once again joining forces with this technology giant.