China's EV Giant’s Profits Plunge 90%: Poor Quality, “Coffin Cars” Crash Sales, Biggest Layoffs Ever
China's EV Giant’s Profits Plunge 90%: Poor Quality, “Coffin Cars” Crash Sales, Biggest Layoffs Ever
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To align with the sales target of 800,000 vehicles, Li auto proposed at the beginning of this year to add 333 new direct retail centers. Fourth-tier cities and some fifth-tier cities were also included in the deployment scope, a departure from their previous cautious approach to opening stores. In reality contrast, the company only added 179 stores throughout last year, reflecting a deviation from their anticipated growth plan.
MEGA's failure has had a significant impact on Li auto. An internal memo released by Li Autos CEO Li Xiang shows that he has been reflecting on the issues the automaker has faced in the past three weeks. Li Autos mistakenly treated MEGA's "from 0 to 1" phase (the phase of business validation) as if it were the "from 1 to 10" phase (the phase of rapid growth). This is a misjudgment by Li Auto regarding the pace of its pure electric strategy.
However, what's worth noting are the indicators of net profit and cash flow. In the first quarter, Li auto's net profit attributable to shareholders was 593 million yuan, a year-on-year decrease of 36.3% and a sequential drop of nearly 90%. But if we exclude interest and investment income obtained during this period, Li auto actually incurred an operating loss of 584 million yuan in the first quarter. This marks Li auto’s Ideal Motors' return to operating losses after a gap of three quarters.
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