On November 3rd, NIO announced layoffs.
Li Bin, the founder, chairman, and CEO of NIO, released an internal staff letter titled "Organizational Optimization and Two Year Priorities" (hereinafter referred to as the "Internal Letter"), confirming that "the company will reduce positions by about 10%, and the specific adjustments will be completed in November", and mentioning that NIO will carry out adjustments related to organizational and resource investment direction. The full staff letter pointed out that the plan is to merge departments and positions that have been repeatedly constructed, reform inefficient internal workflow and division of labor, and eliminate inefficient positions; Delaying and reducing project investments that cannot improve the company's financial performance within 3 years.
After the news of NIO's layoffs spread, someone sent a message to Musk through social media asking him about his views on NIO's layoffs. Musk responded, "It sounds like they're having a tough time
Sound the horn of "cost war"
The relevant person in charge of NIO stated that after this business and organizational optimization, the goal of weight loss, muscle gain, cost reduction, and efficiency improvement can be achieved.
With the increasingly fierce competition on the track and the fact that most new energy companies are still burning money faster than revenue growth, the goal of achieving economies of scale is still far away. 'Reducing costs and increasing efficiency' is a wise move at the moment and may become the key to victory, "automotive industry analyst Xu Jiaping told China Times: The new forces of car manufacturing today are different from five or six years ago, and they are no longer a new trend in the capital market. The weakening of capital's favor for new car manufacturing forces, the intensification of financing difficulties, and the decline of subsidies all directly lead to the difficulty of self growth of new energy vehicles in the short term. Therefore, the level of 'fast sales growth and low profits' of new energy vehicles has not yet been overcome
Besides that. Although the growth of new energy vehicles seems to have become the norm nowadays, the larger the cake, the more consumers it will inevitably have. According to data from the China Automobile Association, in the first three quarters of this year, the production and sales of new energy vehicles completed 6.313 million and 6.278 million units respectively, with year-on-year growth of 33.7% and 37.5%, respectively. The market share reached 29.8%, and now the market share of new energy vehicles has exceeded 30% for five consecutive months.
Xu Jiaping pointed out that a large part of the reason is that traditional car companies are gradually releasing their advantages. Their accumulated brand strength, mature research and development capabilities, core technologies, and strong sales network over the years have determined their sales scale, which has had an undeniable impact on new forces in car manufacturing.
Therefore, the elimination race of this track has never stopped. In 2018, the Wall Street Journal published a study stating that there have been over 487 Chinese electric vehicle manufacturers. But this year, according to media reports, there are only over 40 new energy vehicle companies operating normally. The car makers such as Byton, Bosun, Sailin, and Ziyoujia, who have not yet landed, have long disappeared from the public's view, and Weima Motors, once considered a "dark horse" of a new force in car manufacturing, has also come to an end
So in the coming days, the new forces in car manufacturing, including NIO Motors, need to think about how to reduce losses as much as possible and achieve performance growth while ensuring expansion and research and development capabilities.
Li Bin pointed out in his internal letter that 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 huge uncertainty. This year, NIO Automotive delivered 5 new products and gained over 40% market share in the pure electric market with a transaction price of over 300000 yuan. However, its overall performance still falls short of expected targets. To win the qualification to participate in the finals, it is necessary to further improve execution efficiency and ensure that key businesses have sufficient resources invested.
Li Bin is very honest and straightforward, not only stating the current problems, but also showing the determination to change.
Objectively speaking, the sales performance of NIO Motors has begun to gather scale. As of October 31, 2023, the cumulative delivery volume of NIO Motors has exceeded the 400000 units mark, reaching 415600 units. But the car manufacturing industry is a long-lasting battle, and long-term investment is necessary to achieve development. Therefore, in the first half of this year, NIO Automobile's net loss reached 10.926 billion yuan, a year-on-year increase of 139.08%.
In Xu Jiaping's view, facing pressure, NIO chose to face problems directly and change them in a timely manner. This courage has created NIO Automobile's leading position in the new forces at present. To improve efficiency and increase free cash flow, timely choosing to sound the 'cost war' horn to ensure business level is a feasible path, but it also requires courage, which is not easy
Timely start structural adjustment
In the past two years, there has been a core issue that has become increasingly prominent in NIO, which, in the words of industry analysts, is that the stall has been too large. NIO Automobile currently not only focuses on the field of car manufacturing, but also involves battery replacement, self-developed batteries, and even mobile phone business, which further exacerbates NIO's financial pressure.
Li Bin has stated more than once that he wants to increase the construction of NIO's replacement power station to 2300 by the end of 2023. As of September 15th this year, NIO has arranged 1805 replacement power stations nationwide. According to its plan of 2300, NIO will need to build 495 replacement power stations by the end of 2023. At a cost of 2 million yuan, the construction of 495 replacement power stations requires NIO to invest another 990 million yuan, which is a significant expenditure.
On the Technology Day in late September of this year, NIO launched the NIO Phone with a starting price of 6499 yuan. Along with the NIO mobile phone, there are also NIO's research chip "Yang Jian", as well as key technologies such as on-board intelligent hardware, battery system, intelligent driving, and intelligent cockpit. Li Bin emphasized multiple times on Technology Day that "automobiles are a long-term investment, and NIO's underlying logic is to exchange short-term high investment in research and development for long-term gross profit." Li Bin believes that these technologies will meet NIO's needs in the research and development process.
But objectively speaking, the rapid expansion of the business has not yet reached a new point of profit growth, but has increased investment in research and development costs and personnel costs. The financial report shows that in the past three years, NIO's R&D investment has been 2.488 billion yuan, 4.59 billion yuan, and 10.84 billion yuan, maintaining an increase of over 80%. Upon careful study, it was found that NIO's R&D investment has been consistently above 1 billion yuan per quarter since the third quarter of 2021. Since the fourth quarter of last year, NIO's R&D investment has exceeded 3 billion yuan for three consecutive quarters, with a single quarter R&D expenditure of nearly 4 billion yuan in the fourth quarter of 2022. In the first half of this year, NIO's R&D investment was 6.42 billion yuan, a year-on-year increase of 64.2%.
NIO also bears a certain amount of pressure in terms of personnel. According to public data, NIO Motors had 26763 employees in 2022, while Ideal Motors had 19396 employees during the same period, while Xiaopeng Motors had 15829 employees.
The strategy provided by NIO Automobile is to learn from the pain and move inward, cutting into edge businesses, and strengthening its own "body" healthy competitive advantage.
At the same time, the reporter noticed that Li Bin stated in an internal letter that in the past two months, the company has held more than thirty two-year business plan analysis and discussion meetings to determine the goals, key success factors and priorities, action plans, required resources, and identify opportunities for organizational optimization, cost reduction, and efficiency improvement for each business in the next two years. And it is particularly pointed out that it is necessary to ensure long-term investment in core and key technologies, as well as to postpone or reduce project investment that cannot improve the company's financial performance within 3 years.
At this point, it is not difficult to understand NIO's goal - not only to reduce personnel costs, but also to streamline business planning and readjust business models.
Automobile industry observer Xu Jiaxin told China Times reporter: "For NIO Motors nowadays, cost control is particularly important. The lower the cost, the greater the ability to control dialogue power and product competitiveness. This will ultimately be reflected in the delivery scale and efficiency issues that enterprises are most concerned about
Xu Jiaxin believes that NIO Automobile has a relatively forward-looking strategic vision and timely realizes the necessity of cost reduction and upgrading. The difficulty of making profits at high costs has accelerated the pressure on the survival of enterprises. At a critical moment, decisions are made to adjust the structure to maximize cost reduction and efficiency, and to focus on core products and maintain leading advantages in technology and products, so as to maximize the potential of the enterprise, and it is also expected to enter the profit period as soon as possible.