On November 25th, NIO celebrated its 10th anniversary, and a reporter from Huaxia Times obtained an internal letter from NIO founder Li Bin from an insider. The letter mentioned that the most intense and brutal stage of the qualification competition for the intelligent electric vehicle industry has arrived, and only a few excellent enterprises will survive in two or three years. What we will face next is a higher dimensional competition. We cannot have any weaknesses, nor can we win quickly
In the past decade, NIO has completed 12 full stack technology layouts, applied for over 9300 patents, and has a market share of over 40% in the pure electric market with an average transaction price of over 300000 yuan in China. It has also built 2750 battery swapping stations and over 24200 charging piles in China and Europe. Li Bin said, "NIO will double its sales next year and achieve profitability by 2026
Review: Glory and Crisis Coexist in the First Decade
NIO, founded in November 2014, celebrated its tenth anniversary. In ten years, NIO has delivered over 620000 units and achieved monthly deliveries of over 20000 units. It holds over 40% of the pure electric market in China with an average transaction price of over 300000 yuan, and is the first Chinese company to be listed on the New York Stock Exchange, Hong Kong Stock Exchange, and Singapore Exchange simultaneously.
Of course, NIO's development has not been smooth sailing either. "Li Bin, the most miserable person in 2019" was once widely circulated in the automotive industry. Although Li Bin clarified at the time that it was not that bad, NIO still experienced crises such as a sharp drop in stock price, continuous layoffs, and the departure of key personnel. Li Bin later recalled this experience and admitted, "When NIO was in the most crisis, it almost failed." And it was the local investment funds in Anhui Province and Hefei City who crossed the life and death line with NIO, investing 7 billion yuan to overcome the difficulties.
Nowadays, NIO is able to face past experiences and future challenges more calmly and rationally: "Although we have experienced dark moments multiple times in the past decade, what we will face next is a higher dimensional competition. We cannot have any shortcomings, nor can we win quickly," Li Bin said in an internal letter.
The confidence to win the 'protracted war' comes from NIO's continuous R&D investment and accumulated technology and products. According to a reporter from Huaxia Times, since 2016, the cumulative R&D investment has exceeded 53 billion yuan, of which 3.32 billion yuan was invested in R&D in the third quarter of this year, a year-on-year increase of 9.2%. The R&D investment is higher than the 2.6 billion yuan, 1.9 billion yuan, 1.63 billion yuan, and 780 million yuan invested in Ideal, Jike, Xiaopeng, and Zero Run during the same period; NIO's R&D revenue ratio is 17%, which is also at a high level among new energy vehicle companies.
Driven by high R&D investment, NIO has formed a global R&D team of 11000 people, with a total of 9300 patent applications and authorizations worldwide. It has built a full stack technology layout covering all scenarios of intelligent electric vehicle business, achieved successful chip production of the Shenji NX9031, and promoted NIO's multi brand strategy implementation, accelerating the construction of charging and swapping.
In May of this year, NIO's second brand, Ledao, was launched; On November 20th, NIO officially confirmed that the third brand will be named "Firefly Firefly" and will share some charging and swapping services with Ledao. Among them, the first model of Ledao, L60, started delivery at the end of September, and as of the end of October, a total of 5151 vehicles have been delivered. Next, we will accelerate the process of climbing the entire supply chain. It is expected that the production capacity will exceed 10000 units in December and reach 20000 units in March next year, "said Li Bin.
In terms of charging and swapping construction, as of November 20th this year, NIO has deployed 2737 swapping stations, 4144 supercharging stations and destination charging stations (destination charging stations), 24282 supercharging and destination charging stations, and connected over 1.76 million third-party brand charging stations worldwide, providing users with over 58 million swapping services. At the same time, NIO's battery swapping business is also open for cooperation with the whole society, and has successively reached agreements with multiple enterprises such as Changan, Geely, Jianghuai, Chery, GAC, FAW, Lotus, and Nanwang Energy Storage Technology to establish battery swapping alliances. In May of this year, NIO Energy also received a strategic investment of 1.5 billion yuan from Wuhan Guangchuang Fund, which has government background.
In addition, NIO is actively expanding its global presence. Since 2021, NIO has entered the markets of five European countries across the entire system. In October of this year, NIO announced that it will officially expand its business in the Middle East and North Africa region, and plans to enter the UAE market in the fourth quarter of 2024. On November 15th, NIO announced that it will officially start business in Azerbaijan and begin product delivery in the second quarter of 2025. On November 28th, NIO's first store in the Middle East and North Africa market, the NIO Abu Dhabi Center, will officially open, and sales and delivery work has already been carried out locally.
Statement: Achieving profitability for the company by 2026 without any loss
The next two years are crucial. Continuously launching competitive new products, continuously improving operational efficiency, doubling sales next year, and achieving profitability for the company by 2026 are important tasks that cannot be missed, "Li Bin emphasized in an internal letter.
The reason why Li Bin emphasized that there should be no loss in achieving the company's profitability by 2026 is because NIO's profit commitment has been postponed by two years. At the beginning of 2022, Li Bin stated that "NIO hopes to achieve full year profitability in 2024", but now it seems that the profit promise cannot be fulfilled this year.
According to the financial report, NIO's third quarter revenue was 18.67 billion yuan, a year-on-year decrease of 2.1%; Operating loss of 5.238 billion yuan, a year-on-year increase of 8.1%; Net loss of 5.06 billion yuan, a year-on-year increase of 11%. Starting from the fourth quarter of 2023, the company has incurred losses exceeding 5 billion yuan for the fourth consecutive quarter.
Continuous losses are almost a common problem among new energy vehicle companies. Currently, there are only a few new energy vehicle companies in the industry that can achieve profitability, such as BYD, Tesla, Serys, and Ideal. Most other new energy vehicle companies are still in the loss making stage. However, losses are ultimately Achilles' heel and can also make heroes stumble. Li Bin's statement that 'the most intense and brutal stage of the qualification competition for the intelligent electric vehicle industry has arrived, and only a few excellent enterprises can survive in two or three years' is not unreasonable.
It is worth noting that NIO's overall gross profit margin has continued to improve and its free cash flow has turned positive, which has also added chips to this survival battle.
According to the financial report, NIO's gross profit margin for the third quarter was 13.1%, an increase of 2.1 percentage points year-on-year; The overall gross profit margin of the company was 10.7%, an increase of 2.7 percentage points year-on-year. Li Bin said during the earnings conference call, "We are confident that NIO's gross profit margin for vehicles in the fourth quarter can increase to 15%. By 2025, NIO's gross profit margin for vehicles will gradually increase from 15% to 20%
NIO CFO Qu Yu told a reporter from Huaxia Times, "With the continuous growth of sales and steady improvement of gross profit margin, we achieved positive free cash flow in this quarter." The financial report shows that as of the end of the third quarter, NIO's cash reserves rose to 42.2 billion yuan, higher than those of Xiaopeng, Lingpao, and Jike (35.75 billion yuan, 18.7 billion yuan, 8.3 billion yuan) during the same period.
According to a research report by Puyin International, the gross profit margin of NIO brand vehicles will continue to increase next year, and the company's operating leverage will be reflected quarterly next year, with operating losses and net losses continuing to narrow
An important driving force for Li Bin to win the battle of doubling sales and profitability is the launch of new products and the improvement of operational efficiency. At the third quarter financial report conference, Li Bin announced that the third brand "Firefly" will be released on NIO Day 2024 on December 21, and the first model will be delivered in the first half of 2025. Firefly is aimed at the high-end small car market, and its positioning in NIO is equivalent to BMW's MINI, continuing to adopt a pure electric technology route that is rechargeable, replaceable, and upgradable.
In addition to the Firefly brand delivering its first product, NIO and Ledao brands will also launch more than one product by 2025. Li Bin stated that NIO brand will gradually switch to the new generation platform, with the first product being the ET9, which has entered the final preparation stage before mass production. There will be new products or facelifts of existing products in the future. Ledao brand will also launch two models, including a mid to large 6-7 seater SUV and a large five seater SUV. At the same time, in the promotion of "electrification of counties and counties" in 2025, the channel and network construction of Ledao will be strengthened.
Several securities institutions such as Guohai Securities, Everbright Securities, Guosheng Securities, China International Capital Corporation, and Puyin International are optimistic about NIO's development. According to Dai Chang, an analyst at Guohai Securities, "NIO will enter a new round of product cycles and growth stages in 2025." Ni Yujing, chief analyst of the automotive industry at Everbright Securities, believes that "we are optimistic about the new product cycle driven by NIO's three major brands' renewed efforts in 2025, as well as the prospects for realizing intelligent technology. Therefore, we have upgraded NIO to a 'buy' rating