Zhou Hongyi, who is addicted to large models, returns to the automotive industry. Not long ago, Huawei and Xiaopeng were engaged in a heated war of words over the AEB dispute. Zhang Yong, CEO of Nezha Auto, who was watching from the sidelines, and Zhou Hongyi, his investor and chairman of 360, held a live broadcast to talk about "Nezha Auto in the face of AI."
Picture | 360 Chairman Zhou Hongyi (left) and Nezha Auto CEO Zhang Yong
When discussing the topic of AEB and car safety, Zhou Hongyi, who has always been known for his clear views, seemed very arbitrary.
During the live broadcast, Zhou Hongyi supported his old friend Yu Chengdong, saying that he would firmly support Huawei as a company no matter what the circumstances. Regarding the AEB technology, he said that he did not understand it very well, but what Yu Chengdong said was definitely correct.
When Zhang Yong mentioned "the Nezha car with AEB function two years ago...", Zhou Hongyi immediately interrupted Zhang Yong and asked: "If Huawei can do it, can you do it too?" Zhang Yong replied: "We can too." Zhou Hongyi took advantage of the opportunity to please Huawei's car-making camp: "Then we are in the same group as Huawei."
Zhou Hongyi seemed to have little interest in automotive technology, so he turned the topic to the field of AI large models that he was familiar with. Zhou Hongyi believes that the first step for Nezha Auto is to implement the application of the AI cloud model and develop a cloud model exclusive to Nezha owners. The second step is to implement the on-board model.
As for car safety, Zhou Hongyi was more concerned about the details of how the driver escaped after the car accident, as if to imply that he had to escape from Nezha's precarious car in time.
01. Nezha locked up shareholder Zhou Hongyi
Among the luxurious shareholder group of Nezha Automobile, Zhou Hongyi should be the one who wants to "jump out of the car" the most.
From January to November this year, Nezha Automobile delivered a total of 122,400 new cars, down 15.19% year-on-year. The annual target of 250,000 vehicles was less than half achieved. Among them, sales in November were only 12,506 units, down more than 17%.
It only took Nezha less than a year to fall from the "annual sales champion" to the "deputy squad leader" of the new force. Dismal sales forced Nezha Auto CEO Zhang Yong to ask netizens for "advice" on Weibo, saying bluntly that "the marketing system is sorry for the efforts of the R&D team."
Nezha Automobile cannot see the possibility of making a profit in the short term, so it can only drag more shareholders into the water by constantly raising funds. Zhou Hongyi stumbled. You must know that in the Internet circle, there are not many people who can make Zhou Hongyi suffer.
Looking at the timeline, we can see that the honeymoon period for the cooperation between Nezha Automobile and 360 is only one year. For the whole year of 2022, 360 Group achieved revenue of 9.521 billion yuan, a year-on-year decrease of 12.54%. This was its first loss since 2014.
360 bluntly pointed out in its financial report that the losses caused by Nezha Automobile were the main reason for the group's overall losses. Among the investment losses of 1.293 billion yuan, Nezha Automobile brought in 593 million yuan.
According to 360 Financial Report, from 2020 to 2022, Nezha Automobile suffered a cumulative loss of 11.148 billion yuan. In 2022, Nezha Auto's revenue was 13.329 billion yuan and its net loss was 6.919 billion yuan. Based on this rough estimate, Nezha Bicycle's loss in 2022 is about 45,000 yuan.
This means that, regardless of external financing, Nezha Automobile lacks the ability to self-generate. In contrast, Weilai, which has always been criticized by the media for lacking the ability to make its own blood, has a revenue of 19 billion yuan in Q3 of 2023 alone, not to mention the blood transfusion from Abu Dhabi's "oil tycoon".
Picture | Nezha UPro (left) Weilai eT9 (right)
Perhaps because he had foreseen the slide of Nezha's car, Zhou Hongyi stopped investing in "getting on the car" in advance. After investing 1.9 billion yuan in two installments, in June 2022, it announced that it would give up the capital increase in Nezha Automobile and transfer 3.53% of Nezha Automobile's equity at a price of 0 yuan. The transferee is obliged to pay 1 billion yuan of investment to Nezha Automobile.
Although Zhou Hongyi explained afterwards that this move was "to support Nezha Automobile's shareholding reform and other work, so that the entrepreneurial team can gain leadership of the company." However, combined with Nezha's losses and the subsequent decline in sales, the outside world believes that this is because Zhou Hongyi 360 is not optimistic about the development of Nezha Automobile and "get off the car and run away" in advance.
02. The low-price strategy failed, and Zhang Yong once again "opened high and moved low"
Frankly speaking, Zhang Yong is not a dull CEO, but an experience replicator.
From 2012 to 2019, BAIC New Energy won seven consecutive sales titles in China's new energy vehicle market. Among them, 4 sales results were achieved by Zhang Yong, the then head of BAIC New Energy Marketing. After arriving at Nezha Automobile, Zhang Yong led Nezha Automobile to win the new sales title in 2022.
At that time, BAIC New Energy mainly relied on online ride-hailing and taxi B-side markets to gain sales. However, changes in subsidy policies and the epidemic interrupted BAIC New Energy's good days in the B-end market.
The development trajectory of Nezha Auto is very similar to that of BAIC New Energy, with both driving high and moving low.
In 2022, the new car-making force "Wei Xiaoli" has its own problems: Weilai's production capacity has declined, its ideal model has been replaced, and the reputation of the G9, which Xiaopeng has placed high hopes on, has collapsed. At this level, Nezha Automobile made a U-turn from the B-end market and began to “build cars for the people.”
With two models under 150,000 yuan - Nezha V and Nezha U, Nezha Automobile has entered the A-class pure electric car market in advance, and its sales have increased from 15,000 vehicles in 2020 to 152,000 vehicles in 2022, becoming the first new power car company with sales exceeding 150,000.
Picture | Nezha U (left), Nezha V (right)
Unfortunately, the good times did not last long. In 2023, Nezha Auto hit the brakes. Nezha V, which once sold nearly 12,000 units in a single month, now only sells around 2,000 units per month.
The highly involuted A-class car market collapsed Nezha Automobile. Just look at the performance of domestic new energy vehicles in the A-class car market. The Wuling Bingo, priced from RMB 59,800 to RMB 83,800, sold 24,024 units in November, twice that of all Nezha models. Hongguang MINI has sold nearly 230 million units, and Seagull's monthly sales have exceeded 44,000 units. The price killer "BYD Qin PlusDM-i" has set the price to 89,900 yuan.
Some people in the car circle believe that these “four major pieces” are backed byWell-known manufacturers, from product capabilities to brand awareness, can capture the minds of users better than Nezha.
The ultra-low gross profit margin has overdrawn Nezha's room for price cuts in advance, making it unable to participate in the price war among car companies. Ifeng.com's "Eye of the Storm" previously reported that Nezha Auto's vehicle gross profit margin is only about 5%. The gross profit margin of Weilai's complete vehicles is 11%, and the gross profit margin of BYD's complete vehicles is 20%.
According to Autohome data, the average price of NIO cars in June this year was 372,600 yuan, which was about 100,000 yuan higher than Tesla and the same as the ideal price. NIO's pricing is high and there is room for profit, but its current losses are due to high R&D and sales costs. In comparison, the average price of Nezha models is 134,900 yuan.
The lack of price reduction makes Nezha Auto’s “price-for-volume” strategy almost ineffective. CEO Zhang Yong, who has always been tough-talking, had to bow his head at Nezha
It’s not like Zhang Yong didn’t adjust his strategy. In the second half of 2022, Nezha Automobile released the Nezha S with a price of about 300,000 yuan. In April this year, it released the "Nezha GT", which is known as "the best sports car within 2 million yuan." However, under the squeeze of brands such as Huawei, Ideal and NIO, Nezha Auto’s upward path has not yet been completed.
Picture | Nezha GT
03. If the IPO is stranded, how long can Nezha Auto last?
The sales decline is difficult to reverse, which means that Nezha Auto's cash reserves are continuing to be consumed.
Whether it is an established car company or a new car-making force, capital reserves are the lifeblood to support its survival and development. A timely IPO is a quick way for car companies to obtain long-term capital inflows. However, in the face of an increasingly crowded market, Nezha Auto’s IPO is far away.
Nezha Automobile once had a scandal with the Science and Technology Innovation Board, but it ended without any problems. In June 2022, Bloomberg broke the news that Nezha Automobile plans to submit a US$1 billion Hong Kong IPO application within the month. Since then, progress on Nezha's IPO seems to have stalled.
CEO Zhang Yong’s explanation for this is, “We raised 10 billion yuan last year and several billion yuan this year. The company now has enough funds to advance various businesses step by step, and (we) are not in a hurry to IPO.”
In July and August this year, Nezha Automobile announced the completion of the D3 round of financing and the pre-IPO crossover round of financing, with a total of nearly 10 billion yuan. Since 2017, Nezha has completed 12 rounds of financing. In addition to 360, its shareholders include CATL, Hongtai Fund, Ruifeng Capital, Huading Capital and Shenzhen Venture Capital.
During this period, Nezha Auto’s valuation has shrunk by nearly 14 billion yuan. According to data disclosed by 360, as of the end of 2022, the company holds 10.7161% of Nezha's equity, corresponding to a book value of 1.153 billion yuan. Based on this calculation, Nezha is valued at approximately 10.757 billion yuan. According to LatePost reports, Nezha Auto raised nearly 10 billion yuan in Series D financing in July last year, with a valuation of about 25 billion yuan.
Picture｜From the Internet
Judging from the current market environment Nezha is facing, not rushing for an IPO may just be Zhang Yong's wishful thinking. Let’s compare the product matrix with Leapmotor, which is similar to Nezha. In the third quarter that just passed, Leapmotor lost 986 million yuan, of which Leapao’s sales expenses were 441 million yuan and R&D investment was 474 million yuan.
Judging from Nezha's past performance, its investment in sales and R&D is only much more than that of Leapmotor. Judging from the scale of losses in 2022, 10 billion in cash is only enough to support Nezha for one and a half years. In 2023, Nezha's car sales will be cold, the scale of losses will still expand, and the support time will only become shorter and shorter.
If there is no new round of financing or successful entry into the capital market, Nezha will still face greater pressure to survive.
Produced by Phoenix Technology Future Vehicle Research Institute
Author｜Li Meng
Editor｜Jiang Shu