The combination of cost reduction and efficiency enhancement by NIO has hit the organizational structure.
On the afternoon of November 3rd, Li Bin, founder, chairman, and CEO of NIO, released an internal letter announcing that NIO had entered the stage of organizational and business optimization.
In response to this spontaneous "weight loss" action, the capital market has given a very positive response, and NIO US Hong Kong stocks have achieved two consecutive gains. On November 6th, NIO Hong Kong shares closed up 7.17% at HKD 65.80, with an intraday gain of over 8% and a cumulative increase of 13.3% over the past two days; NIO US stocks closed up 5.65% on November 3rd at $8.23, with a cumulative gain of 10.5% over the past two days. As of November 6th, NIO's stock market rose by over 3.5% before trading.
The next two years will be the most intense stage of competition in the automotive industry's transformation period, and the external environment is full of enormous uncertainty. This year, we delivered five new products and gained over 40% of the market share in the pure electric market with a transaction price of over 300000 yuan. However, our overall performance still falls short of the expected target
In his internal letter, Li Bin stated that in order to win the qualification to participate in the finals, it is necessary to further improve execution efficiency and ensure sufficient resources are invested in key businesses. The specific adjustments will be completed in November.
In the eyes of the outside world, NIO's adjustment has come at the right time. Although the head of NIO, Li Bin, has always been sensitive and gentle, and his management style is full of humanistic care, in the fiercely competitive industry environment, optimizing the organization and business is an effective means to reduce costs and increase efficiency, and Li Bin needs to do so.
At a communication meeting in November last year, Li Bin stated that he wanted to improve systematic efficiency, even requiring 100% of employees to complete 150% of the work.
In March of this year, during the 2022 financial year performance conference call, Li Bin once again pointed out that improving efficiency is one of NIO's work priorities this year. Last year, the team expanded rapidly and added new projects. This year's focus is on improving human efficiency, rather than reducing staff or shutting down projects, and pursuing the same level of manpower to bring more output
In an event held in April this year, he once again emphasized this point: "We hope that the existing team can have more output, some of which can be seen this year and some of which can be seen next year
Nowadays, NIO has begun to optimize its organization, which is expected by the industry. However, behind this decision, there is a feeling of deliberate and painful abandonment, I'm sorry that this adjustment will affect some colleagues, but please understand that this is a difficult decision that the company has to make in the face of fierce market competition. Our journey is a marathon on a muddy road, so please focus on efficient execution and improving system capabilities, "Li Bin said at the end of his internal letter.
In the past period, NIO has been trying to adjust internal efficiency in a gentle way, especially in terms of improving human efficiency. However, now it has to make the decision of "long pain is better than short pain" to quickly adapt to market competition and better face the uncertain factors of the future.
Wei Lai finally put on a "light" outfit.
Optimize what? Organizational efficiency+resource efficiency
Remembering pain through hard work.
According to NIO's performance report for the 2022 fiscal year, NIO has a total of 26763 employees; The expenses paid to employees during the same period exceeded 11.2 billion. Compared to the same period, Ideal, Xiaopeng, and NIO have more personnel, especially technical personnel, with 19396 and 15829 employees respectively.
In mid September, NIO first publicly released the framework and achievements of the entire stack self-developed, and also released NIO phones that accompanied the "group mockery" from scratch. This business segment, which is considered "unorthodox", is actually NIO's interpretation of the panoramic internet scene and NIO's insistence on improving user car experience. In addition, NIO also needs to make its own batteries, chips, three electrical systems, and so on.
However, perhaps due to the rapid expansion of team size, the efficiency improvement did not meet expectations. At the beginning of this year, Li Bin issued a sincere but heavy internal letter to all employees, pointing out 8 issues that NIO is currently not doing enough. Among them, "the organization and team have expanded too quickly in the past year, and internal communication efficiency urgently needs to be improved" is the root cause of this "weight loss".
Specifically, in 2022, the team continued to expand, but there were numerous instances of unclear responsibilities, inconsistent goals, incomplete processes, and repetitive construction. There is still great room for efficiency improvement. To this end, Li Bin also issued a "beating" urging in the letter: "The work tasks in 2023 will increase significantly, but the company's resource investment will only slightly increase. We must tap into potential internally, especially for inefficient organizations, teams, processes, and projects, which need to be comprehensively sorted and optimized
Li Bin, who realized the problem, left ample time for internal self adjustment. However, with the increasingly fierce competition in the Chinese new energy vehicle market and the acceleration of the elimination race, major car companies have already carried out drastic reforms to reduce costs and increase efficiency in order to advance to the finals.
Since last year, Xiaopeng Automobile has announced the adjustment of its supply chain business department, merging the original supply chain service department, marketing service procurement department, and parts procurement department into a procurement department, aiming to improve the refinement level of cost control and the compliance ability of the financial system, and achieve cost reduction and efficiency increase.
Some joint ventures have already started personnel optimization. In May of this year, Yueda Kia issued an internal notice regarding the rotation of KCN management positions, stating that according to the company's strategic transformation and development needs, internal business and personnel structure need to be re integrated. In order to successfully achieve strategic transformation and reshape the business system, management staff will be given rotation breaks in batches.
The sense of crisis is transmitted in the automotive industry. In order to survive better and enter the finals, reducing costs and increasing efficiency are the core issues that every car company is facing, and organizational optimization is also becoming the norm.
In the past two months, the company has conducted more than thirty two-year business plan analysis and discussion meetings to determine the goals, key success factors and priorities, action plans, required resources for each business in the next two years, and identify opportunities for organizational optimization, cost reduction, and efficiency improvement. In a recently issued internal letter, Li Bin stated that the company has determined business priorities and developed specific plans for organizational and business optimization, Including "two improvements":
1. Improve organizational efficiency, merge duplicate departments and positions, change inefficient internal workflow and division of labor, and eliminate inefficient positions.
2. Resource efficiency improvement, delaying and reducing project investments that cannot improve the company's financial performance within 3 years.
Among them, organizational efficiency improvement will address the current issues of redundant personnel structure, unclear responsibilities, inconsistent goals, incomplete processes, and repetitive construction in NIO. Removing fat and gaining weight will significantly improve NIO's organizational efficiency.
Resource efficiency improvement means that NIO's resource investment direction is more pragmatic, focused, and commercial efficient. While ensuring core technology investment, it can better balance long-term and short-term investments and optimize financial performance.
Ensure what? Key technologies, products, and services
Remembering pain through hard work is the only way to have something to give up.
The above "two improvements" aim to achieve the "three guarantees", including:
1. Ensure long-term investment in core key technologies and maintain leading advantages in technology and products.
2. Ensure sales and service capabilities are able to cope with fierce market competition.
3. Ensure the timely launch of 9 core products from 3 brands.
Although the project investment that cannot improve the company's financial performance within 3 years will be postponed and reduced, NIO is very clear about what cannot be saved. The plates are laid out very large, and unimportant details need to be temporarily abandoned or shelved. However, the main thread still needs to be deeply cultivated, which means that key core technologies still need to be invested in for a long time to ensure the leading advantages of technology and products.
In terms of core technology, NIO has its own persistence. "There must always be some companies that need to participate in global competition in the high-end market, but we are very clear about our business and resource boundaries
A month and a half ago, NIO introduced its fully stack self-developed framework to external systems for the first time, including 12 key technical fields such as chips and on-board intelligent hardware, battery systems, electric drive systems, vehicle engineering, operating systems, mobile interconnection, intelligent driving, intelligent cockpit, intelligent energy, intelligent manufacturing, artificial intelligence, and global digital operations.
On these twelve main branches, some have already bloomed and borne fruit. For example, the all-around operating system Tianshu SkyOS of NIO has made its debut, which is the first low-level operating system released by a car company. It covers multiple fields such as vehicle systems, assisted driving, intelligent cockpit, and mobile internet. By building a "1+4+N technology cluster", it solves the integration of software, hardware, and services, as well as security, real-time performance, and application complexity in different domains.
In addition, NIO's first chip product, the LiDAR main control chip "Yang Jian", has officially been launched. "Our internal code NX6031 chip (also known as" Yang Jian ") actually has a good business model. While reducing power consumption and improving performance, we have also achieved cost reduction because it can indeed save a car hundreds of yuan, so investing in chips is quite cost-effective," Li Bin believes, Self developed chips are not advanced for the sake of advancement, and cost is also an important consideration.
Reducing costs and increasing efficiency is not only about short-term organizational and business optimization, but also about long-term technical capabilities. When necessary, the former will be used to support the latter. So regarding the self research of the entire stack, Li Bin's underlying logic can be summed up as "exchanging recent research and development investment for long-term gross profit".
Long termism may seem a bit difficult to please in today's rapidly fluctuating world, but Li Bin is very clear about what to do and what not to do. "Resources are limited, but it's better to prioritize and invest as much as possible. The money saved should still be saved." Just as the founder of NIO has always used the investment of parents in their children's education to compare NIO's investment in the field of electricity exchange, education cannot be poor.
In front of these key technology areas where significant investment has been made, NIO has completed the intergenerational switching of its products. Currently, 8 second-generation platform models are on sale. NIO's sales have significantly increased since the second half of this year, with monthly sales stable at over 15000 units and monthly revenue exceeding 6 billion yuan. According to internal sources, NIO has a market share of over 40% in the high-end pure electricity market of over 300000 yuan this year. In the second half of next year, the two brands of NIO, "Alps" and "Firefly" (internal code), which focus on the mid to low end market, will be officially launched. At that time, NIO will form a product matrix similar to Volkswagen Group, and more Volkswagen models will bring more revenue and profits to NIO.
Unloading some of the burdens is to quickly reach the entrance to the dawn, and the "light" equipped NIO should go even further.
This article is for reference only and does not serve as an investment basis