NIO finally released its third-quarter financial report, which was nearly a month later than before. Contrary to outside expectations, NIO's performance in this quarter achieved "multiple increases." In the third quarter of this year, Weilai sold 55,400 vehicles, setting a new quarterly delivery volume this year; revenue increased by 46.6% year-on-year, reaching 19.07 billion yuan, and vehicle gross profit margin returned to double-digit levels this year, reaching 11%.
However, Weilai continued its loss trend, with a net loss of 4.557 billion yuan in Q3 this year, a year-on-year increase of 10.8%. In the first three quarters of 2023, NIO’s total losses reached 16 billion yuan.
After the financial report was released, NIO's US stocks rose nearly 6% for two days in a row, and Hong Kong stocks rose 5% the next day after the financial report.
This financial report was released a month late. During this period, NIO first confirmed its power exchange cooperation with Changan and Geely. The day before the financial report was released, it was revealed that it had obtained independent production qualifications. NIO officials have not responded to qualification questions.However, an insider told Ifeng Technology's "Future Vehicle Research Institute", "The official announcement needs to be further communicated with the Ministry of Industry and Information Technology. Currently, it has passed the National Development and Reform Commission."
NIO was once one of the new car-making forces, but this year it has experienced declining sales and increased financial losses. Faced with fierce competition and huge uncertainty, NIO is also trying to correct its mistakes. It has begun to focus on its main business, reduce layoffs, and sell cars at lower prices.
01.Li Bin made the stall too big
Four years have passed, and Weilai has not yet found a stable path. The most obvious manifestation is sales.
NIO experienced a sales trough at the beginning of 2023. Sales in January were 8,506 vehicles, and fell to 6,155 vehicles in June. For three months this year, Weilai's sales have not crossed the basic line of 10,000 units, but its ideal sales in the same echelon have been rising steadily, from monthly sales exceeding 20,000 to exceeding 30,000 and 40,000.
Sales fell, resulting in serious losses. In the second quarter of this year, NIO’s net loss exceeded 6 billion yuan, a year-on-year increase of 119.6%. In the third quarter, NIO's losses narrowed to 4.557 billion quarter-on-quarter, but were still high.Among them, the 400 million service fee generated by user operations only ate up a small part of the 1.9 billion profit brought by selling cars. The gross profit of 1.5 billion was compared with the R&D and sales expenses of more than 6.6 billion, which resulted in a net loss of 4.5 billion.
It is worth noting that the overall gross profit margin of Lideal and Xpeng is higher than the gross profit margin of vehicles, while the overall gross profit margin of NIO Q3 of 8% is lower than the vehicle profit margin (11%) in the same period, which means that the gross profit margin of other sales revenue such as services is negative.
Figure | Overview of Weilai’s financial report data over the years, charting: Ifeng.com Technology’s “Future Vehicle Research Institute”
"NIO has a good brand tone, but it still doesn't have the ability to command a brand premium. This is a very scary thing."A primary investor close to NIO commented on its market performance, "NIO's biggest advantage should be its brand, but since Ideal, Dengshi, Yangwang, and Ji Krypton have all been launched, it has been proven that the brand is of little help to NIO at this business stage."
As of September 30, 2023, NIO's cash reserves were 45.2 billion yuan, an increase of 13.7 billion yuan from the previous quarter. However, based on a single-quarter loss of 4.5 billion, NIO is under considerable pressure.
In September this year, rumors circulated that Mercedes-Benz invested 3 billion in NIO, but NIO did not respond to the matter. Xiao Yong, an investor close to NIO, told Phoenix.com's "Future Vehicle Research Institute": "Without this US$3 billion, NIO's net cash may be negative in the middle of next year."Many investors speculate that in addition to receiving financing from Abu Dhabi, NIO must also be negotiating financing with other investors.
NIO has increased revenue but not profit, mainly because Li Bin’s stall is too big. Sales growth in the third quarter of this year was still driven by price cuts. The growth rate of car sales is far lower than the rate of new business expansion, causing NIO to frequently find itself in trouble.
NIO was the first car company to learn the integrated die-casting technology from Tesla, and it was also the first new car-making force in China to release mobile phones. Its online community NIO App has 5 million people and has sold more than 3 million peripherals. It also sells cars overseas, going to 4 European countries a year.
It is also the first car company in China to develop battery swapping stations, and it is also the car company with the most charging and swapping stations in China. NIO President Qin Lihong previously publicly revealed that the cost of building a power swap station is about 3 million yuan. As of December 5, NIO has launched 2,196 power swap stations, with a cumulative cost of about 6.6 billion yuan.
In addition, NIO is developing everything in-house, including self-developed batteries, self-developed chips, and self-developed assisted driving. It was the first to announce that it would develop its own 150-degree large battery, and the first to release the results of its self-developed chips and operating system.
A huge system requires more people to support it. In 2022, Weilai has the largest number of employees among the three Weilai companies, with a total of 26,800 people. During the same period, Xiaopeng and Ideal had 15,800 and 19,300 employees respectively. This year, Weilai paid more than 11.2 billion yuan in employee salaries, with an average salary of 370,000 yuan.
However, the effect is average.NIO's self-developed first chip "Yang Jian" has not yet been mass-produced and is in the PPT stage considered by the industry. Ifeng.com Technology exclusively learned that the ideal self-developed chip will be available as soon as it is released and will enter the SOP next year.
Many people in the industry criticized Li Bin for making mobile phones, replacing batteries, and researching everything by himself. During the most difficult period for Weilai, a saying has been circulating on social platforms - "Li Xiang is teaching everyone how to be a CEO, and everyone is teaching Li Bin how to be a CEO."
02.NIO begins to correct its mistakes
The automotive industry always teases NIO, "This company is always amazing. Just when everyone thinks it is dying, good news suddenly comes."
In December, "NIO Automotive Technology (Anhui) Co., Ltd." was added to the list of vehicle manufacturers of the Ministry of Industry and Information Technology, and NIO officially obtained production qualifications. Previously, NIO's cars have been OEMed by JAC. The qualifications of the F1 and F2 production bases jointly built by NIO and JAC are also affiliated with JAC, and they need to pay JAC's OEM fees.
When it comes to independent production qualifications, Li Bin said, "Nio will produce all its new cars by itself, and the cost of the entire vehicle can be reduced by 10% compared to cooperation with JAC." An industry insider commented, "With its own production license, NIO can obtain government subsidies, carbon credits, and most importantly, qualifications from the state. This is recognition of the long-term achievements of NIO's overall development."
Prior to this, NIO, which had tasted the bitter consequences of radical development, had implemented a series of cost reduction and efficiency improvement measures.
First, reduce the burden on the organization. In November this year, Weilai, which has never laid off employees, laid off 10% of its employees and cut projects that cannot increase gross profit within three years.
At the same time, Weilai has worked hard on sales, and selling cars has become its main task.
In the past, Li Bin was very "Buddhist" in selling cars and insisted on not lowering prices. In June this year, faced with the practical problem of a 30 billion yuan funding gap, Weilai had to choose to "guarantee quantity with price". In the end, the prices of all models were reduced by 30,000 yuan.
NIO's main products are priced at more than 300,000 yuan. In the past, it would choose to open stores in the center of the city's core business districts. It did not force sales quotas for sales employees and required them to be friends with users. Now, Weilai is carrying out lightweight expansion in sales channels, such as opening stores in traditional automobile trading centers where rents are cheaper and the sales atmosphere is stronger.
Ifeng.com Technology learned that in order to maintain sales, NIO is also actively recruiting sales personnel. The current sales team number reaches about 5,700, andAmong them, more than 3,000 people have joined the company recently. A NIO salesperson told Ifeng.com that the company now requires sales of 30,000 vehicles with monthly lock-in orders, and each person needs to attract nine to ten test drive requests per month. The company has also initiated an elimination mechanism at the end to eliminate salespeople who are at the bottom of the list.
Cost reduction and efficiency improvement are reflected in all aspects. NIO executives began to reflect on marketing strategies. The original plan to complete 25 overseas countries by 2025 was also shelved. In addition, it was mentioned in the earnings call of the third quarter report that NIO will no longer manufacture its own batteries, and will only develop its own cells, materials and battery packs next.
At NIODAY in 2022, Li Bin said that NIO would develop a mobile phone every year like Apple. However, at this year’s NIO Technology Day, Li Bin said that NIO only produces one NIOPhone, and “it will be updated every year.”
03. Can you catch up?
Looking at the entire industry, Weilai has clearly fallen behind.
When Weilai began to learn how to save money, Ideal, who had always been stingy, was studying how to spend money. Before the National Day, Ideal held an internal autumn strategy meeting. The core purpose was to "spend money." Because in the second quarter, Ideal had a cash flow of 73.7 billion, and the company wanted to turn this cash into continuous sales growth.
It is a good thing that Nio corrects its mistakes, but the time is too late and the rhythm is wrong.For example, in terms of production qualifications, Weilai could have completed it during a period when its own cash flow was abundant and control was lax, but it has been delayed until now. While Weilai and JAC are running into new foundry models, their friends have already solved this problem.
The ideal approach is to purchase the qualifications of Chongqing Lifan at the beginning, and start building the factory in Changzhou in August 2016, in one step. Xiaopeng is taking a two-pronged approach. It will first find Haima to manufacture its first car, and at the same time build a factory in Zhaoqing, Guangdong. In March 2020, it acquired the production qualifications of Foday Automobile. Later, Ideal took over the Beijing Hyundai factory, and Xiaopeng built new factories in Guangzhou and Wuhan. Because I had my first qualification, everything went smoothly.
Because the production qualifications were not implemented, in 2019, the most difficult year for NIO, there were no fixed assets to mortgage for bank loans.
In terms of the pace of product release, NIO’s approach to branding is also very “strange”. In the past, it only released one car in three years, but in the past three years, NIO has released 8 cars in a row on the second-generation platform. Li Bin revealed in the second quarter earnings call that NIO's main brand will no longer release new products next year and will only improve existing models.
At this year's crowded Guangzhou Auto Show, NIO's booth was deserted. Faced with this problem, NIO plans to release a new flagship model on NIO Day 2023 (December 23). In comparison, the ideal product rhythm is basically to launch a new car every half a year and deliver it as soon as it is launched. There will be no product outages or competition for the market.
Picture | NIO booth at the 2023 Guangzhou Auto Show
Xiao Yong told Ifeng Technology, "The ideal is to start from high to low, and consumers who buy new or old cars will not feel a loss. Weilai gives people the feeling that the next car will always be better than the current one, so everyone is waiting."
Ifeng.com Technology learned that,Li Bin told suppliers at the end of last year that NIO would build a car fleet in 2023. This car group is also different from the car group that traditional car companies focus on. The car group of traditional car companies is differentiated between each car and targets different market groups. NIO's car group focuses on the same car with different subdivided styles (maybe this one has a slightly raised tail, and that one has a fastback shape). These different subdivided styles are also different cars in NIO's view.
From the perspective of investor Xiao Yong, he has never seen Weilai’s clear customer portrait and the group of people he really wants to serve.Xiao Yong once asked the NIO IR team. At that time, the other party's caliber was that the logic of NIO's eight products was similar to the logic of the BMW 3, 5, and 7 series. According to Weilai, the needs of the rich are diverse and luxury is personalized. This diversification made Xiao Yong feel that NIO's products had lost focus.
In terms of new models, Li Bin said in the third quarter financial report conference call that Alpine's first new car has completed the VB car (development verification trial prototype car) trial production stage, and bluntly said, "This is the best car in the VB stage of new models in the history of NIO."
Xiao Yong feels that NIO did not continue to maintain its advantages in the high-end market and began to sink the market. This approach is very stressful. "With the loss of brand premium, it will be very harmful to forcefully promote cheaper models. It is difficult to adapt the battery swap system to cars costing more than 200,000 yuan and cars costing more than 400,000 yuan. If the adaptation is forced, it will have a great impact on the model design."
At the same time, the track that Alpine focuses on is already very crowded. For example, the new car Xiaomi will launch next year will cost about 200,000-300,000 yuan, which completely coincides with the price of Alpine next year.
A NIO executive once expressed concern about Phoenix Technology, "For a car to be successful, the price of the product must reach a certain level, and secondly, you must bring its own traffic. Although Alpine is cheap, it cannot compete with BYD at the same price, and it is a new brand after all, so it has no advantage in traffic, unlike Xiaomi, which has the IP of Lei Jun and brings its own traffic."
Judging from the third quarter financial report, NIO has focused on its main business and achieved certain results by implementing refined management of sales strategies and price reductions. Data such as delivery volume, gross profit margin, and cash flow reserves are all improving. However, the domestic new energy vehicle elimination competition is currently intensifying. Whether NIO can stabilize its path remains to be witnessed by the market.
(Xiao Yong is a pseudonym at the request of the interviewee)