Author | Chai Xuchen

Editor | Wang Xiaojun

After nine months of silence following 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 throughout the event and affirmed that Ideal is an AI company. In the future, he aims to make AI accessible to every household. He will also transform from being known in the auto industry as 'Factory Manager Li' to the CEO of an AI company.

In no time, the topic 'Li Xiang does not want to make cars' trended on social media. Some questioned whether Li Xiang, now the 'big brother of the new forces,' was getting carried away. What seems like 'not sticking to the business' is, in fact, his first clear presentation of Ideal's grand vision, revealing Ideal's ambition to grow into an AI technology giant.

Behind Li Xiang's grand vision, there are actually some feelings of helplessness.

Currently, Li Auto seems to be facing a bottleneck, as direct competitors like Wenjie and latecomers like Avita, Zhiji, Deep Blue, Xiaopeng, and Leap come under attack, turning the once-exclusive range extender + family track into a red ocean. The significant market cap shrinkage becomes a reflection of the pressure on Li Auto, which has been forced to implement promotional and overseas expansion strategies to stabilize the situation temporarily.

However, this is not a long-term solution. Li Xiang determines that the domestic New Energy Fund Industry Chain is becoming increasingly完善, meaning that the barriers between car manufacturers are being dissolved. Faced with a future AI new blue ocean worth trillions of yuan, most auto players still find it difficult to respond, but Li Auto has already stepped into a 'new dimension' and taken the lead in large models.

Next, Li Xiang aims to lead Li Auto away from the 'crazy narrative' of the auto market and venture into the AI track to create a larger space.

New story

"AI means everything to Li Auto."

At the beginning, Li Xiang expressed the determination to bet on AI, stating that half of the company's annual R&D investment of tens of billions is allocated to AI. However, in Li Xiang's view, Li Auto is not 'losing the plot', 'we will definitely continue to produce cars, but I believe that the intelligent era is about real AI, and cars will evolve from transportation tools in the industrial era into spatial robots of the AI era.'

In other words, Li Xiang sees smart automobiles as just one of the vehicles to realize his AI vision.

He revealed that 'Li Xiang Xuezhang' will go live on December 27, transitioning from an auto assistant to a general AI application similar to ChatGPT, Doubao, and Kimi. In Li Xiang's view, a truly AI super application must autonomously utilize all devices and possess all services.

Li Xiang said, 'Ideal classmates' will not only be available in cars in the future, but also on mobile phones, computers, and even smart glasses. The original 1 million car owner users will be expanded to three to five million because of their families.

'Ideal classmates' demonstrate the 'amplifying' effect of AI, and its cross-end, independence is therefore logical.

Li Xiang admitted that he had done well in his two previous internet startups, but missed out on too much due to the very vertical track, leaving him with regrets. This time he wants a forest and aims to make it the largest one, which is also the original intention of founding Ideal.

Two years ago, Li Xiang identified AI as an important direction for future competition. Last year's surge of ChatGPT convinced him that the emergence of large models would lead to fundamental changes for humanity. Ideal's AI 'secret strategy' thus publicly became 'overt strategy', and he wants to quickly recruit talented people to accelerate the wave.

As Ideal steps closer to becoming an AI technology company, Li Xiang, who has transformed into the 'AI factory director', proposed a 'three-step' evolution for artificial intelligence.

The first stage is 'enhancing my capabilities', such as L3-level intelligent driving, which will bring efficiency improvements, being supervised autonomous driving, but requiring human backing; the second stage is 'my assistant', where users assign continuous tasks to AI, which can complete independently and take responsibility for the results. Li Xiang believes that in the auto industry, only achieving L4 represents a true 'iPhone 4 moment.'

In the final ultimate stage, Li Xiang calls it 'silicon-based family', where AI will not need human instructions or task assignments, becoming a family member and even an important organizer in the family, actively doing many things, autonomously assessing and helping users manage their homes. 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 within our lifetime.' Finally, Li Xiang revealed his and the entire company's ideal. Under this vision, Li Xiang stated that humanoid robots would surely be developed later, but for now, the focus will be on solidly improving intelligent driving to make cars a true moving home.

From increasing investment in Smart Driving, splitting the AI Assistant, to finally developing the 'Silicon-based Family'. Currently, Li Xiang is firmly developing the 'Base Model', which he believes will be the operating system + programming language of the AI era, indicating its significant importance. He requires 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 alone cannot satisfy Li Xiang's appetite, but this may also be something he has to do reluctantly.

Switching Tracks.

Looking at the entire China automotive market, the fierce competitive environment has left players in dire straits, while Li Xiang stands as a 'dark horse' benefiting with fewer competitors—starting in the second half of this year, monthly sales have maintained at around 0.05 million units, and the gross margin can also be sustained at about 20% high-level.

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 U.S. have shrunk by 36% and 32% respectively. Investors' reactions are not surprising, because currently, Ideal Autos has 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, with L6 still being the main contributor. Limited by the ramp-up of mid-range models, Ideal's revenue imagination space is also quite limited, with a fourth-quarter revenue guidance of 43.2 billion-45.9 billion yuan, representing a year-on-year growth rate of only 3.5-10%, indicating pressure on cost control is increasing.

This means that Ideal's product sales structure is shifting towards the lower end, and both revenue and profit are showing a clear marginal diminishing effect, while to maintain sales, Ideal is increasingly reliant on promotions.

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

Promotion + external expansion, the market can see Li Auto's desire for growth. Industry insiders believe that with more and more competing products emerging, the incrementally enjoyed extended-range family SUV market that Li Auto once monopolized is being gradually shared, and it inevitably gets dragged into a price war.

More importantly, the story of Li Auto consistently surpassing BBA now faces more skepticism due to the product downturn.

Long-term followers of luxury cars point out that the best-selling models from BBA are not entry-level products, but rather the Mercedes-Benz E-Class and C-Class; Audi A6L, Q5L and other mid-range models, which serve as BBA's profit fortress and brand moat, significantly differing from Li Auto's L6 dominance.

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 attractive story. At this time, betting on AI has become an opportunity to escape from internal competition.

"China has a very comprehensive supply chain, but among these hundreds of enterprises, which ones will be able to create foundational models in the future?" Li Xiang pointed out his advantages. Someone close to Li Auto frankly told Wall Street News, "Light assets are the ultimate trend for Li Auto. In the future, if there really comes a day where there is a Fujifilm Holdings Corporation Unsponsored ADR like in consumer electronics, we can hand it over 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 give up car manufacturing to focus on AI, Li Xiang believed it was a wise move. He stated that even if Apple succeeded massively in car manufacturing, it would only increase its market cap by 2 trillion dollars, while successfully developing consumer-facing AI products could potentially grow to a company valued at 10 trillion dollars.

Li Xiang emphasized that AI would become the core entry point for all devices, services, applications, and trades; for Apple, this is a battle they cannot afford to lose. Such a judgment has become a turning point in Li Auto's fate.

Li Xiang has never concealed his pursuit of Apple's product line. In Li Xiang's eyes, Apple's product planning, cost control, and market share form the most perfect ecological closed loop.

At this moment, looking towards the future and with a trillion Market Cap vision, ideals come together again with this technology giant.