Li Auto Shen Yanan: The supply chain is one of the biggest challenges

According to reports, Li Auto is not the most famous among Chinese electric car start-ups listed in the United States, but the company has a big goal: to obtain the world's largest electric car by 2025. A 20% share of the auto market or about 2 million cars sold a year, is a pretty bold goal, I have to say.

And to get there, the Beijing-based maker of luxury electric SUVs needs to do something no automaker has done, and it's going to be a tough road for a startup.

"We're taking this 20 percent target very seriously, and we're building everything around it," Shen Yanan, president of Li Auto, said in an interview with Bloomberg TV. The company is doing things like strengthening its supply chain, developing a more comprehensive model lineup, increasing manufacturing capacity, and access to more funding.

That seems like a very challenging goal for the seven-year-old start-up, which just last month unveiled its second model, a high-end SUV. The company also delivered about 60,000 vehicles to consumers in the first half of the year.

To achieve its ambitions, Li Auto will need to overtake BYD, China's No. 1 NEV maker, which delivered about 584,000 NEVs last year. Ideal will also have to overtake SAIC-GM-Wuling, whose small electric car costs nearly $5,000 as the most popular electric car on the market, and Elon Musk's Tesla, which The U.S. electric car maker sold about 320,000 vehicles in China last year.

The smaller Ideal is even bigger than Toyota, a Japanese company that is currently the world's top-selling automaker, with 1.94 million deliveries in China last year.

In addition to the president, Shen Yanan, who is also the co-founder of Lili Auto, said: "So it is very important for us to launch more products in the market."

Covers all price ranges

The company's plan is to have at least two models for every 100,000 yuan in the range of 200,000 to 500,000 yuan, a range-extended electric vehicle (using a gasoline-fueled engine to generate electricity to power the battery) and a pure electric vehicle. battery electric vehicles, and put them on the market by 2025.

Shen Yanan said he is spending about a fifth of his time working with suppliers to try to convince them, especially the global chip giant, to trust the company's sales forecast.

Shen Yanan said Li Auto is talking directly with chipmakers including Infineon Technologies, NXP Semiconductors, and STMicroelectronics to ensure chip supply, rather than relying solely on distributors and component makers.

The supply chain, he said, was "at least one of the biggest challenges" for the company to reach its 2 million sales target.

This goal is set around Shen Yanan's forecast that the sales of new energy vehicles will reach 10 million in 2025. Although the goal is very aggressive, Li Auto has a mature record in automobile production, which is similar to China's Evergrande New Energy Automobile Group and others. Unlike other Tesla followers, who have not yet mass-produced cars three years after proclaiming to challenge Musk.

Factory capacity

Shen Yanan's forecast for overall EV sales in China seems reasonable, considering that the China Passenger Car Association estimates that sales will exceed 5.5 million this year, regardless of the impact of the epidemic.

Morningstar, an international rating agency, predicts that Li Auto's sales in 2025 will reach more than 540,000 units, with a share of nearly 7% in China's new energy vehicle passenger vehicle market.

"We like Li Auto's precise product positioning," said one analyst, who also noted that once the company moves into more segments and competition heats up, "other automakers could offer vehicles with similar value propositions. ".

Shen Yanan said that, given that high-tech electric vehicles require more semiconductors, Li Auto is still working hard for the supply of some key chips and will continue to face problems. However, chip prices are coming off their peaks and are no longer "as crazy as they were last year. "

To achieve this goal, Ideal also needs to significantly increase its own production capacity. Li Auto currently has a factory in Changzhou with an annual production capacity of about 100,000 vehicles and is preparing to build a second factory in Beijing and a new factory in Chongqing in southwestern China.

More funding

Shen Yanan said that to support the expansion, Li Auto would continue to raise capital in the market when it was "in good condition". "Economies of scale are very important, and we have to have enough ammunition ready," he said.

The automaker announced last month that it would raise $2 billion through the sale of American depositary receipts after its shares rebounded more than 50 percent in June. The U.S.-listed stock has risen 15% so far this year, outperforming local rivals Xpeng and NIO. Li Auto raised a further $1.5 billion last year through a Hong Kong listing.

The company's other financing options include selling stock or issuing debt. Shen Yanan revealed that Li Auto will also work with suppliers and other partners to maximize cash flow.

Unlike some other domestic rivals who have gained a foothold outside China by exporting cars to Europe, Li Auto has a "slightly different strategy and philosophy," Shen said. "We have to figure out how to win before we go to war, not how to survive after we go to war," he said.

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