Li Xiang sent an internal memo: Ideal MEGA has pacing issues and overly focuses on sales volume, lowering expectations and desires for sales

According to the financial news app Zhitong Finance, Li Auto (02015) Chairman and CEO Li Xiang today released an internal letter to all employees, reflecting on the sales pace issues of its first pure electric vehicle model MEGA, and proposing solutions to the current problems facing Li Auto. Li Xiang stated that the root cause of the issues with Li Auto MEGA is mistakenly treating the phase from 0 to 1 of Li Auto MEGA (business validation period) as the phase from 1 to 10 (rapid growth period) for operation. The solution is to patiently operate Li Auto MEGA according to the pace from 0 to 1, focusing on core user groups and high-end cities with strong consumption power for pure electric vehicles. Additionally, lowering sales expectations and desires, returning to healthy growth, focusing on users rather than competition, focusing on value rather than desires, and returning to improving user value and operational efficiency.

The following is the full text of the internal letter:

Let's review the root causes and solutions to the issues we faced in March.

First, the pace issue of Li Auto MEGA

Root cause: We mistakenly treated the phase from 0 to 1 of Li Auto MEGA (business validation period) as the phase from 1 to 10 (rapid growth period) for operation. Li Auto MEGA and high-pressure pure electric vehicles must go through a phase similar to Li ONE and extended-range electric vehicles from 0 to 1. It cannot have the operational momentum from 1 to 10 as soon as it is launched like the Li series, which is a misjudgment of our pure electric strategy pace. The confusion in the pace of Li Auto MEGA also significantly reduced the time and energy of the sales team to serve Li series users, and the main model Li8 even lost its place in the showroom.

Solution: We will patiently operate Li Auto MEGA according to the pace from 0 to 1, focusing on core user groups and high-end cities with strong consumption power for pure electric vehicles. Abandoning the strategy of comprehensive sales, focusing on product experience and test drives in large retail centers in key cities, and accelerating the construction of supercharging stations in these cities. After effectively completing the phase from 0 to 1, we will then promote to more cities and larger user groups.

Second, the issue of excessive focus on sales volume desires

Root cause: We excessively focus on sales volume and competition from top to bottom, allowing desires to surpass value, significantly reducing our expertise in user value and operational efficiency. The pursuit of desires has turned us into people we dislike.

Solution: Lower sales expectations and desires, return to healthy growth. Focus on users rather than competition, focus on value rather than desires. Return to improving our expertise in user value and operational efficiency.

Strictly adhere to our three major behavioral guidelines:

• User value comes first
• Achieve consensus through co-creation
• Be pragmatic and correct mistakes

The issues in March 2024 are an intensified version of the issues we faced in 2022. Be pragmatic, correct mistakes, we are confident that with our collective efforts, focusing on user value, focusing on operational efficiency, patiently controlling the pace, and solving problems step by step, we will provide long-term quality service to our users Li Xiang

March 21, 2024