The Zhitong Finance App learned that on May 15, Beijing Hao Junbo Law Firm published an article on the WeChat account “International Lawyer” stating that Ideal Auto (LI.US,02015) was recently class-sued by investors in a securities fraud case. Investors accused Ideal Auto and some executives of making false statements, violating securities laws, and investors were harmed by investors. The investors applied to the court to order the defendant to pay compensation to investors caused by falling stock prices due to their illegal acts. The litigation period for this case was from February 26 to March 20, 2024.

In the current class action lawsuit, investors are alleging that Ideal Auto made false and/or misleading statements and/or failed to disclose throughout the lawsuit: Ideal exaggerated the market demand for vehicles and the effectiveness of its operating strategy when launching the first battery electric vehicle model Li MEGA; therefore, the company is unlikely to meet vehicle delivery expectations for the first quarter of 2024; once the aforementioned matters are disclosed, it is likely that the company's public statements during this lawsuit were materially false and misleading.

Looking back at the beginning and end of the incident, prior to the launch of Ideal MEGA, due to the positioning and unique exterior design of MPV, the flagship MPV of Home Technology, discussions about MEGA were popular on various social platforms, and the news about MEGA was endless. Ideal Internal placed high hopes on MEGA to open up the high-end MPV market, and at the same time raised public expectations for MEGA.

On February 26, Ideal Auto released an impressive financial report. In 2023, Ideal Auto achieved revenue of 123.85 billion yuan, an increase of 173.5% over the previous year. It became the first new force in China to exceed 100 billion yuan in annual revenue. At the same time, it achieved annual profit for the first time, reaching 11.81 billion yuan. At the 2023 performance meeting, Chairman Li Xiang said that 2024 will be an ideal and unprecedented product year, boasting to challenge the annual sales target of 800,000 units delivered in 2024, while also warming up the ideal MEGA for blockbuster new cars.

On February 27, stimulated by good news and optimistic expectations, Ideal Auto's Hong Kong stock price continued to soar, closing up more than 25% to HK$175.5.

On March 1, Ideal MEGA was officially launched, and the unified retail price for the new car was finally set at 559,800 yuan. However, after the launch, MEGA's sales volume did not match its popularity. The estimated figure for 72 hours after launch was 3,218 units, while the number of cancellations reached 10,297 units. The poor record directly caused Ideal Auto to eat up.

Meanwhile, on November 17 of last year, Ideal Auto published an article stating that just one hour after the official launch of the MEGA, the new pure electric MPV model under Ideal, the pre-order quantity for the car had already exceeded 10,000 units. This is in stark contrast to the big fixed data after launch.

On March 2, which is also the second day of Ideal MEGA's release, Ideal Auto's Hong Kong stock plummeted by more than 10%. This is directly related to MEGA's less-than-expected market performance.

On March 21, Ideal Auto ended up “admitting mistakes”. Ideal Auto CEO Li Xiang once issued an internal letter to reflect. Ideal Auto mistakenly treated Ideal MEGA's phase 0 to 1 (commercial verification period) as operating from stage 1 to 10 (rapid development period). Therefore, the next step is to operate the ideal MEGA according to the rhythm from 0 to 1, focusing on core user groups and cities with strong consumption capacity for high-end pure electricity, and then promoting it to more cities and larger user groups.

At the same time, Ideal Auto lowered its annual delivery target and adjusted the annual delivery target of 800,000 vehicles to 560,000 to 640,000 vehicles. On April 1, Ideal Auto announced new car delivery data for March and the first quarter. It delivered 28,984 vehicles in March, and a total of 80,400 vehicles were delivered in the first quarter, which is still quite far from the original plan to deliver 100,000 vehicles.

In terms of stock price performance, from the short-term peak of Ideal Auto's Hong Kong stock price on February 29 to March 21, the company's stock price fell 30%. Since then, the company's stock price has continued to fall. The lowest was HK$91.55, which is close to the lower than the previous high of HK$182.9. This is also the main reason why Ideal Auto has fallen into a quagmire of lawsuits.