After four years, NIO (09866. HK/NIO. US) founder and chairman Li Bin once again fell into a slump. He publicly accepted media interviews before NIO Day and responded to all doubts. On December 14th, during a face-to-face event with NIO Media, Li Bin answered over 140 market concerns in just over 2 hours, including NIO's layout logic in battery swapping, products, technology, strategy, and other areas.
Li Bin stated that looking back at NIO's development history, the company's shortcomings lie in insufficient estimation of external risks and operational risks. The biggest lesson for NIO this year is that the lag in sales capacity construction has led to a significant loss of intended orders.
After opening up to the outside world, battery swapping remains NIO's moat.
Recently, NIO has successively announced cooperation with Changan Automobile (000625. SZ) and Geely Automobile (00175. HK) on battery swapping business, including promoting the establishment of battery swapping standards, battery swapping network construction and sharing, research and development of battery swapping models, and establishing an efficient battery asset management mechanism. This has caused a huge industry shock.
At a face-to-face media event on December 14th, Li Bin reiterated the importance of NIO's battery swapping system. He said that the rechargeable, interchangeable, and upgraded energy system is NIO's moat. "With the expansion of the internet and the increase of peers' participation, as their cars gradually go on the market and sell more and more, this moat will only become deeper and deeper."
Regarding external doubts about being forced to open up battery swapping due to financial constraints, Li Bin stated that it has nothing to do with the financial situation, but rather plans to open up to the public from the first day. "NIO's ultimate goal in battery swapping is to open up to the outside world." He pointed out that it is now time to do so. "Our shared battery swapping network is based on the next-generation 800V ultra charging and fast swapping platform. The earlier we develop it, the earlier we provide services to users; the earlier we incorporate it into the technical roadmap, the less rework we will have in the future."
Li Bin emphasized that NIO's battery swapping technology standards are 100% open to the public. He welcomes more car companies to join the battery swapping cooperation and calls on all car companies to explore which models under their umbrella can undergo battery swapping transformation. Li Bin revealed that multiple companies will also join the battery swapping alliance.
"Replacing the battery is not our burden. The main reason is the high electricity cost, not because of it." Li Bin said that the cost of a battery swapping station is about 3-4 million yuan per year, which can be used for more than eight years and can also participate in energy storage to make money. A battery swapping station can generate profits with 60 orders per day. "NIO Power's business will take a few more years to turn a profit. Shanghai has already made a profit, and partnering with Geely and Changan to exchange electricity will definitely make money, but it won't be profitable next year, so it will take some more time."
The second brand is aimed at households
NIO brand enters the business market
"Alps is not the name of a new brand, it was just our internal project code at the time." When talking about NIO's second brand, Li Bin first clarified a misunderstanding. He also revealed, "The second brand name has already been registered, very down-to-earth."
It is reported that the second brand is aimed at the mass market of households, emphasizing cost-effectiveness, comprehensive safety, comfort, space, and configuration. The second brand only has three cars, defined by the number of households. NIO hopes to achieve monthly sales of 50000 to 60000 units per model. Although the second brand VB car has been taken offline, NIO has decided to launch it later. "Don't worry now, let the market roll up one roll first, and finally we'll lift the table. We'll wait until everyone is exhausted before we go in, otherwise there won't be any water splashes if we lower the price now." Li Bin said, and the same goes for MPVs that have already been approved. "If you do it late, then you don't have to worry. It's just a last-minute attack."
In NIO's plan, the second brand will sink to the second to fifth tier markets. In terms of sales channels, the second brand will also adopt a direct sales model, and the after-sales service system is also under construction, adopting an authorized cooperation model. In addition, the third brand has entered the trial production stage.
Why did NIO launch a new brand in a time of severe losses and widespread questioning?
Li Bin explained that NIO's positioning is very clear, only focusing on the high-end pure electric market, not engaging in price wars, ensuring product leadership, technological advancement, and service that meets user expectations.
"We hope that NIO can have a high market share and good gross profit in the high-end market, which can support the company's development. The second and third brands can serve more users. The atomic capabilities of the three brands are shared, and there is no need to add too many people. The reason we are launching a new brand now is not because of serious losses, but because our investment needs to be realized."
NIO is about to release a million dollar executive flagship model. Li Bin said, "This is definitely the most technologically advanced car in the world. It cannot be said to be far ahead, but it is definitely the most advanced car in terms of comprehensive technology. Any car technology you can imagine will become a reality on this car."
The reason for releasing such a car is because the NIO brand is very determined to enter the business market. The NIO brand will adhere to technological leadership, focus on business, and balance family and individual needs. Li Bin mentioned that truly positioning a high-end brand requires tackling the business market, otherwise profits and the ceiling of the brand will be limited. The business market is the core base of BBA, and the administrative flagship is the cornerstone of the brand.
The high-end pure electric market will explode in the next two years
The biggest lesson this year is the lag in sales capacity building
It is widely believed in the industry that the next two years will be the later stage of the qualification race, and the competition in the car market will be very fierce. Li Bin also agrees with this viewpoint, but he is more optimistic about the race track where NIO is located, believing that 2024-2025 will be two years of explosive growth in the high-end pure electric market. Previously, due to infrastructure constraints and other reasons, the growth of range extender, hybrid, and plug-in hybrid models was faster than that of pure electric vehicles.
NIO still insists on not lowering the price. Li Bin stated that the NIO brand will not exchange price for quantity, but will increase gross profit margin and enhance the ability of the sales service system in exchange for an increase in sales volume. "NIO needs to maintain its high-end positioning, and prices will rise next year. There won't be any NIO brand models that are cheaper than the ET5."
Currently, NIO's monthly sales are around 16000 vehicles. With the construction of sales capacity, NIO believes that a reasonable target of 20000 vehicles is to maintain a market share of over 40% for high-end pure electric vehicles.
NIO currently has about 3000 sales experts, and by the second quarter of next year, the newly hired user consultants will only become experts. "We are very confident in the sales improvement after the second quarter of next year," Li Bin specifically mentioned that the biggest lesson this year is the lag in sales capacity construction, which has led to the loss of many intended orders.
Reducing costs and improving efficiency is the top priority for NIO. NIO announced layoffs in November, merging duplicated departments and positions, while also improving resource efficiency, delaying and reducing project investments that cannot improve the company's financial performance within three years.
Li Bin said, "There is no new round of layoffs, but continuously optimizing organization and efficiency is something that every company should do." NIO now needs to clarify the return on investment in various aspects of research and development, marketing, and daily management.
Long termism is not an excuse for not doing well in short-term execution
For NIO phones, Li Bin believes that their sales performance meets expectations because the expectations are relatively low. "I think the NIO Phone is very user-friendly, power-saving, smooth, and ad free. Now, the design and user experience of this phone have achieved the goals of the project proposal." He said that it was not until three years later that he found out whether making a phone was correct. "When mobile giants like Huawei, Xiaomi, and Apple sell more and more cars, everyone will know its significance."
NIO previously obtained independent production qualifications by acquiring assets of Jianghuai Automobile (600418. SH). Li Bin stated during the third quarter report conference call that independent car manufacturing can reduce manufacturing costs by 10%. At the media communication meeting, Li Bin emphasized, "It's not about a 10% reduction in the entire car, but more about taxes and reasonable profits, so we will have a 10% cost optimization."
In 2021, Li Bin once said, "There's no need to buy a gasoline car now," which was his biggest regret in the past two years. "Now it has become a label for me, feeling like a person who is arrogant, ignorant, and doesn't like the hustle and bustle of the world." He admitted that he was wrong, and now 60% of the market share is still gasoline cars. "My words must have been too early, maybe in five years it will be more appropriate."
Looking back at the company's development history, Li Bin admitted that his estimation of the company's operational risks was insufficient. "If we could be more cautious, many measures could be taken earlier," he said
He also stated that NIO's original intention will not change, and its long-term ideology will not change. "Long termism is not an excuse for not doing a good job in short-term execution. Talking about it all the time can easily lead to a culture within the company, which is not focused on short-term execution. Recently, I hope everyone can say that we are an executive company."
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