LI Auto Glasses: A More Ambitious Endeavor Than NIO Phone

Author | Gu Nian

Editor | Wen Changlong

Among the side businesses of NIO, XPENG, and LI Auto, only XPENG's robots have received widespread applause and recognition.

The products from the other two companies may lack a striking futuristic appeal, resulting in similar market evaluations after their launches.

For example, when NIO Phone was introduced, some media outlets described it as: "The app acts as the car key within the phone, and the phone serves as the car key to NIO's logistics ecosystem." For LI Auto's glasses, this concept evolved into: "The app hosts LI Fellow in the phone, while the AI glasses embody LI Fellow in the physical realm."

The sentence structure is identical, and the logic is similar. The only variation is the shift from a car key to LI Fellow.

Behind these changes lies the hope embedded in the products: NIO aims for vehicle-driver interconnection, whereas LI Auto focuses on AI as its core carrier.

Long before the glasses' launch, Li Xiang outlined the product direction for the next decade at a quarterly meeting. LI Auto aims to transform "cars" from passive machines to autonomous entities and eventually to "embodied intelligent robots" that proactively serve.

He explained this choice, stating:

"Choosing electric vehicles is a good start, but it's not enough. Opting for intelligent terminals is also a valid path, but it's insufficient. Only by pursuing the most challenging route of embodied intelligence can we truly revolutionize users' lives. This represents car-shaped robots from 'Transformers,' 'Cars,' and 'Knight Rider.'"

According to this vision, LI Auto has a long journey ahead in terms of embodied intelligence. Li Xiang also acknowledged that car-shaped embodied intelligent robots represent "the greatest opportunity and the most formidable challenge presented by the new era to automotive companies and entrepreneurs."

By launching AI glasses, LI Auto is taking its first step toward becoming a Transformers-like enterprise. This implies that to evolve into an embodied intelligent enterprise, LI Auto must first navigate the challenges encountered by NIO Phone.

01 Learning from NIO Phone to Guide the Development of Glasses

Regarding NIO's foray into smartphone manufacturing, Li Bin's original statement in a public dialogue was: "Our goal is to provide NIO car owners with a phone that enhances or further improves their driving experience. Simply put, even a superbly functional car key is worth creating; it's not overly complex."

This statement, when simplified and disseminated, became that Li Bin manufactured phones to create a functional car key. This "car key logic" almost from the outset limited NIO Phone's user base. It's not a smart terminal for all consumers but an enhanced accessory exclusively for NIO car owners.

Given its accessory positioning, the phone is theoretically an internal product within the NIO ecosystem.

NIO's launch strategy for its first smartphone confirmed this: it debuted at "NIO Tech Day," alongside in-house developed large cylindrical battery cells, LiDAR control chips, and an intelligent driving roadmap, as part of a series of automotive support capabilities rather than an independent new product line for the market.

This accessory attribute was further emphasized in its pricing strategy. The initial NIO Phone was priced at 6,499 yuan, over 2,000 yuan more than the similarly configured Xiaomi 13 from the same period. NIO justified this with design and in-car control experience, but it also made the phone uncompetitive in the mainstream consumer electronics market.

Having possibly reviewed NIO Phone's shortcomings, LI Auto approached this cautiously and pragmatically.

Regarding product pricing, LI Auto's first AI glasses, Livis, start at 1,999 yuan, or 1,699 yuan after government subsidies. In terms of overall configuration, balancing battery life, performance, and other experiences, LI Auto achieved a device weight of 36 grams. For comparison, the highly acclaimed overseas Ray-Ban Meta weighs over 49g, and Xiaomi's similar product is around 40g.

LI Auto's overall pricing strategy aligns with market peers, not deviating from market logic to target only LI Auto car owners.

Regarding the initial target audience, LI Auto proceeded cautiously. When discussing sales expectations, Fan Haoyu, the head of LI Auto Glasses, stated that the first-generation product's goal is not massive sales but reasonable conversion within the base of 1.5 million LI Auto car owners, while also appealing to a broader tech enthusiast market.

When asked why the focus was initially on serving LI Auto car owners rather than immediately expanding, he promptly denied such a sequential logic, stating: "We strive to create an excellent product that both LI Auto car owners and tech enthusiasts outside can purchase. There's no 'first serving LI Auto car owners, then others' logic."

Behind these words lies the product positioning difference that prevents LI Auto Glasses from repeating NIO Phone's mistakes: not creating an accessory to supplement the automotive experience but developing a self-contained, universally valuable intelligent hardware.

02 AI Defying Market Conditions

Although LI Auto Glasses attempt to break free from the automotive accessory market perception, their deep integration with the vehicle system remains the most compelling differentiator at this stage.

Users who have experienced multiple smart glasses told "Shixiang" that whether it's domestic Lei Bird V3 or overseas Meta Ray-Ban, LI Auto Glasses' most significant differentiation lies in their interaction with LI Auto vehicles, such as remote control of in-car functions like heating and air conditioning, which is more convenient than using a phone.

Indeed, vehicle interaction is a unique advantage of LI Auto's AI glasses, Livis. According to reports, LI Auto car owners can voice-control windows, sliding doors, air conditioning, refrigerators, etc., with an end-to-end response time of 800 milliseconds, nearly ten times faster than using a phone.

Therefore, LI Auto anticipates high conversion within its existing base of 1.5 million car owners for the first-generation product while striving to reach all tech and innovation enthusiasts.

Expanding to a broader audience means facing a market environment of intense competition among numerous smart glasses brands. Regarding this, Fan Haoyu remarked: "I don't focus on the competition among numerous brands; it's irrelevant. Many will introduce various niche features and make promises to investors, but they'll lose their way and clutter their products with low-frequency functions."

In his view, LI Auto Glasses' product philosophy centers on fundamental features like weight, battery life, response speed, and intelligence, aiming for simplicity and elegance. He believes excelling in these areas is sufficient to lead the industry.

Similarly indifferent to market conditions is the LI Fellow App, which ventured out of the in-car system into the broader market during the era of intense competition among numerous AI models.

Before Livis' launch, LI Auto had already released the LI Fellow App last year, attempting to extend the AI assistant capabilities originally designed for car owners to a wider user base beyond car owner families. Li Xiang's initial assessment was that LI Fellow should serve 3-5 million people, not just car owners.

However, after a year, the app has not seen widespread adoption and remains in a cold start phase.

In terms of experience, LI Fellow still lags significantly behind professional AI players like Kimi, Doubao, and ChatGPT. The market perceives that Mind GPT primarily focuses on "task-oriented AI," where users provide clear instructions, and LI Fellow executes them.

However, to gain consumer recognition as an AI enterprise, LI Auto may need to accelerate LI Fellow's upgrades to keep pace with mainstream general-purpose AI applications.

Baofan, Chairman of China Renaissance Capital, once evaluated Li Xiang, stating: "He believes that the essence of all corporate competition is efficiency competition. Any innovation you undertake today ultimately boils down to being more efficient than others."

According to this perspective, Li Xiang's decision to invest resources in smart glasses, a category seemingly out of sync with the industry consensus that automakers should focus on car manufacturing, appears somewhat ill-timed. However, before results materialize, the competition often hinges not on market outcomes but on the founder's willpower itself.

At one point, Li Bin placed high hopes on in-house developed smartphones, believing that vehicle-phone interconnection would be the decisive factor in future intelligent ecosystem experiences.

However, with NIO's cost control efforts, during an internal presentation on the CBU mechanism, Li Bin stated: "Jobs and projects that do not create user value should be halted. Either someone external pays for them, or someone internal does. Don't pursue things that don't make financial sense." Subsequently, NIO adjusted and downsized its smartphone business.

Compared to NIO, LI Auto is even more frugal. For instance, on the night of LI Auto's IPO celebration, the original plan was just to go for skewers. Considering potential investor participation, they temporarily added a 30,000 yuan budget, relocating the celebration from a roadside stall to a Western restaurant.

Frugality also enabled LI Auto to establish a financially robust structure early on. When delivering over 10,000 vehicles, LI Auto already achieved a 13% gross margin and positive operating cash flow. In contrast, NIO invested over 30 billion yuan before achieving an 8.4% comprehensive gross margin for the first time in the second quarter of 2023.

When the frugal Li Xiang embarks on an AI entrepreneurship journey that may not be understood, perhaps beneath the apparent capriciousness lies the founder's unwavering AI will, undeterred by market conditions.