36Kr Exclusive | Li Auto Sets Up a First-Class Overseas Department, Targeting Middle East and Latin American Markets

Text | Li Anqi

Editor | Li Qin, Yang Xuan

36Kr exclusively learned that recently, Li Auto has established a first-level overseas department, with Wang Jin as the person in charge, reporting to Zou Liangjun, Senior Vice President of Li Auto's Sales and Service.

It is understood that Wang Jin has been with Li Auto for more than a year. He is Zou Liangjun's former subordinate at Huawei and was responsible for Huawei Terminal's business sales and service in Chile. Currently, the first-level overseas department of Li Auto has a small number of people and has not made significant moves yet.

The main overseas markets that Li Auto initially targeted for expansion are the Middle East and Central Asian countries such as the United Arab Emirates and Saudi Arabia. In February this year, Zou Liangjun, Senior Vice President of Li Auto, stated that the company will adhere to the direct sales model overseas and will establish a dedicated after-sales service network in Central Asia and the Middle East. Overseas deliveries will begin in the fourth quarter, starting with the introduction of the Li Auto L9 and Li Auto L7 models in the local markets.

Before this, Li Auto mainly achieved vehicle sales overseas through the parallel export channel. Public information shows that parallel export vehicles are similar to parallel import vehicles. They are vehicle trades where trading companies purchase vehicles at the market retail price through non-official channels of vehicle manufacturers or authorized dealers, register the vehicles, and then conduct secondary exports or imports.

Switching from parallel export to direct sales is a sign of Li Auto's official overseas expansion.

However, shortly after that, Li Auto put the direct store establishment plan on hold.

Insiders disclosed to 36Kr that one of Li Auto's concerns at that time was that if it rushed into opening stores locally, it would touch the interests of the original channel partners, thereby "pushing them towards competitors."

But obviously, overseas expansion is an unavoidable proposition for Chinese vehicle manufacturers in the context of intense domestic competition. And before this, Li Auto has already established product and brand awareness in the Middle East, Central Asia and other regions through the parallel export channel.

Since the foundation has already been established, Li Auto will naturally choose a more flexible way to expand overseas. 36Kr learned that currently, Li Auto's overseas strategy is to recruit local dealers.

"The challenges of establishing a direct sales system are significant. Li Auto is recruiting dealers and wants to sell cars in places that have already been market-tested," the insider said.

At the same time, Li Auto is also making dedicated designs for overseas models. "At the beginning of the year, the components to be modified for the Middle East market have been sorted out,".

Regarding the target overseas markets, 36Kr Auto learned that in addition to the Middle East, Latin American countries have also become an option for Li Auto's overseas expansion. And the new person in charge of overseas expansion, Wang Jin, is relatively familiar with the business landing in Latin American countries due to his previous experience.

Regarding the above information, 36Kr Auto sought verification from Li Auto, but the official response was no comment.

Overseas expansion has always been an important strategy for Li Auto, but the internal decisions have also been relatively fluctuating.

In 2020, CEO Li Xiang said that the overseas market is a market that Li Auto is bound to enter.

However, in July last year, CEO Li Xiang stated that the company would not enter the overseas market before 2025. At the strategic meeting in October, the internal conclusion of Li Auto was even more pessimistic: "We may seriously consider overseas expansion after 2028. Before that, the focus will be on parallel exports."

This year so far, Li Auto's attitude has changed again.

This is related to Li Auto's development status this year. Especially after the setback in the pure electric product, the sales growth rate of Li Auto has been challenged, and the company has proactively lowered the annual sales target from 800,000 to around 500,000.

36Kr Auto learned that Li Auto has extended the time to achieve the next one million sales to more than one year. In other words, Li Auto has lowered the previously aggressive growth target.

In addition, the competition among domestic vehicle manufacturers is fierce. In the case of AITO, supported by Huawei, the sales competition with Li Auto is evenly matched. And the sales momentum of vehicle manufacturers such as Xiaomi, Leapmotor, and XPeng is rapidly climbing, seizing market share.

For Li Auto, overseas expansion may be another growth curve.

This year, many domestic vehicle manufacturers have accelerated their overseas expansion. NIO, XPeng, Leapmotor, BYD, Chery, SAIC MG, Changan, Geely, VOYAH, etc. have all launched models in Europe.

However, the tariff barriers of the European Union on Chinese vehicles have prompted Chinese vehicle manufacturers to accelerate investment and factory construction in Europe, which incurs huge costs. For example, BYD will build its first passenger vehicle factory in Europe in Szeged, Hungary; Chery will also build its first production base in Europe at the former Nissan factory; in addition, SAIC, Geely, etc. are also planning to build factories in Europe; Leapmotor is expanding its sales through the sales network of European vehicle manufacturer Stellantis.

Li Auto has always been cautious about vehicle exports to Europe. "European and American countries are the internal red line for export business," an insider said.

Li Auto is more inclined to increase sales in markets that have been verified through parallel exports. Last year, through the parallel export method, many of Li Auto's vehicles were sold to the Middle East, Central Asia, Russia and other regions. Even an Li Auto L9 with a price of 450,000 yuan can be sold for 900,000 yuan after being parallel exported to Russia, with the price directly doubling.

At the beginning of this year, CEO Li Xiang stated on a social platform that the volume of parallel exports is increasing, including in Central Asia and the Middle East, and has reached a scale of 3,000 vehicles per month. If this momentum can be maintained, Li Auto's annual parallel export volume can exceed 30,000 units, which will be a good starting point for growth. In contrast, the annual sales of new energy vehicle companies exporting to Europe is only about 3,000 units.

However, the opportunities and risks of parallel exports coexist. This year, Russia has issued a policy requiring that parallel export vehicles transported from China to Russia via Central Asian countries need to complete various taxes and fees. This means that after the official and dealers enter the market, the profit margin may also be limited.

Li Auto is also continuously exploring new markets. The countries in Latin America that it has targeted, such as Mexico, Brazil, and Chile, also have good business potential. Data from the China Association of Automobile Manufacturers shows that in the first half of this year, the top three countries for China's vehicle exports are Russia, Mexico, and Brazil.

A new market means more growth, but it will also pose new capability requirements for Li Auto.