Released internal letters, reached battery swapping cooperation with Changan and Geely, acquired some factory assets in Jianghuai to obtain independent manufacturing capabilities, and appeared in the "Vehicle Production Enterprise Credit Information Management System" of the Ministry of Industry and Information Technology to obtain independent vehicle manufacturing qualifications... In the past month, NIO has been active in various topic centers and has received much attention.
Recently, Li Bin, founder, chairman, and CEO of NIO, spent about two hours answering 140 questions collected from the media, responding positively to various controversies and speculations faced in recent days, including layoffs, sales performance, battery swapping layout, product planning, market forecasting, and brand strategy. Words such as "increasing gross profit margin", "building a moat", "short-term ideology", "long-term ideology", and "three high priorities" have become the key words in Li Bin's mouth and have also become the key factors affecting "NIO's future".
It is worth mentioning that on December 18th, NIO once again received positive news, receiving approximately $2.2 billion (approximately RMB 15.7 billion) in strategic investment from Abu Dhabi investment firm CYVN Holdings (hereinafter referred to as CYVN). According to the usual delivery conditions for investment transactions in December, this delivery is expected to be completed in the last week of December. On that day, NIO's stock price rose by 4.70% in the US and 5.70% in Hong Kong.
Surviving is not the only goal, winning is the key
In the current calm capital market environment, NIO's ability to continuously obtain strategic investments from CYVN is sufficient to demonstrate NIO's brand and asset value. More importantly, after this round of delivery is completed, NIO's cash reserves will become more abundant.
The financial report shows that NIO's cash reserves in the third quarter were 45.2 billion yuan. That is to say, after the 15.7 billion yuan strategic investment is received, NIO's cash reserves will increase to 60.9 billion yuan. Li Bin said, "With the strengthening of its balance sheet, NIO is fully prepared to cope with the increasingly fierce competitive landscape. While strengthening its brand positioning, enhancing sales and service capabilities, and investing in core technologies for the long term, NIO continues to improve its execution efficiency and systematic capabilities."
Obtaining external investment and increasing cash reserves is a part of NIO's efforts to strengthen brand development and improve efficiency. Since 2023, NIO has made many attempts to reduce costs and increase efficiency, from personnel optimization, to delaying the self-made battery project, and then acquiring some assets from Jianghuai. NIO is continuously improving its system capabilities and profitability.
On November 3rd, Li Bin released an internal letter confirming a specific plan for organizational and business optimization, with a plan to reduce approximately 10% of positions and postpone or reduce project investment that cannot improve the company's financial performance within 3 years; Merge duplicate departments and positions, transform inefficient internal workflows and division of labor, and eliminate inefficient positions.
At this communication meeting, Li Bin responded to rumors of optimizing the process and expanding layoffs: personnel adjustments have basically ended, but expanding the scale of layoffs is false news. NIO will continue to maintain its existing team or expand its team size, and will continue to optimize the organization and efficiency.
Does NIO, which has always adhered to a long-term approach, begin to lay off employees and talk about efficiency? Does this mean that it has changed its long-term approach and shifted towards a short-term one? Regarding this, Li Bin explained, "Long termism will not change, but it is not an excuse for not doing a good job in short-term execution. Talking about long termism can easily lead to a culture within the company that does not consider short-term execution, which is definitely not feasible." He believes that long termism contains more negative connotations in the current context, "let's say NIO is a company that pursues short-term execution, which is quite good."
NIO, which has started pursuing short-term execution, has also not avoided the issue of low gross profit margins. Li Bin said that low gross profit margin is a common problem that troubles peers, especially pure electric enterprises. "Everyone is suffering, we need to survive first." From financial data, NIO's gross profit margin for the third quarter was 11%, an improvement from the second quarter. "Q4 is definitely higher than Q3, and the current perspective is to continuously improve gross profit," Li Bin said.
"Survival is not the only goal, we can win." Li Bin said that the automotive industry is a product driven industry that needs to ensure the intensity of investment, but at the same time, reducing costs and increasing efficiency is also an eternal topic. "If we save 5% from expenses and cost expenditures every year, it will be a huge amount of money." Based on NIO's expenditure of about 60-70 billion yuan in 2023, saving 5% is 3.5 billion yuan, "So this is endless and will continue to be done."
Recently, NIO acquired two asset packages of Jianghuai Automobile for a total price of 3.158 billion yuan, gaining the ability to independently manufacture cars. "Acquiring some assets of Jianghuai and independent production will improve future financial data," Cui Dongshu told a reporter from Huaxia Times. At the same time, Li Bin also revealed during the financial report conference call, "From a manufacturing perspective, if we were to manufacture entirely independently, manufacturing costs would decrease by 10%."
"On the basis of stabilizing gross profit, we need to increase sales. If it falls, it will definitely not work," Li Bin emphasized. Data shows that NIO delivered a total of 15959 new cars in November, a year-on-year increase of 12.6%; From January to November 2023, NIO delivered a total of 142026 new cars, a year-on-year increase of 33.1%.
In fact, under several rounds of price wars this year, NIO has been able to stabilize its sales while maintaining price stability, and the number of locked orders is still increasing month by month, which is very difficult. In Li Bin's view, the way to increase sales is definitely not to "trade price for quantity", but to start from management, insisting on not lowering prices or engaging in price wars, and continuously improving the entire sales related system. Sales will be a natural result.
Replacing the battery is not a burden, but a moat
2023 is destined to be an extraordinary year for NIO. This year, NIO not only underwent cost reduction and efficiency improvement, but also achieved independent operation in car manufacturing, receiving more financial support from investors. It also decorated its "circle of friends" in the field of battery swapping, adding more confidence to Li Bin's "win".
In November 2023, NIO signed cooperation agreements with Chang'an and Geely to jointly develop battery swapping models and promote the construction of battery swapping stations. According to Li Bin, NIO has been in close communication with its partners and has established a special team to explore with them which models are suitable for battery swapping.
The achievement of the battery swapping alliance sparked many discussions at that time. On the one hand, it was considered an attempt by the industry to promote the standardization of the battery swapping industry on the eve of unification. On the other hand, it was partially interpreted as "battery swapping is no longer a unique label for NIO" and "NIO is under great financial pressure and needs to shake off the burden of battery swapping".
Regarding this, Li Bin firmly stated, "Replacing the battery is not a burden, but a moat."
Li Bin explained that NIO's plan for battery swapping is ultimately to open up to the outside world, and that's what I've been thinking since the first day. It is not just about battery swapping, but a rechargeable, interchangeable, and upgraded energy service system. "Battery swapping is NIO's moat, and this moat will only deepen as the network expands, more peers join the battery swapping network, their cars gradually go on the market, and their cars sell more and more."
As of December 18th, NIO has accumulated over 2284 battery swapping stations globally. According to the plan, by 2025, NIO will lay out over 4000 replacement power stations globally and build over 3000 domestically. On this basis, we will open up the battery swapping ecosystem to make NIO more attractive. Li Bin revealed that recently, asset investment companies specializing in battery swapping stations have been in contact with NIO and have completed some agreements, "They will build battery swapping stations, join our network, and achieve profit sharing."
Li Bin bluntly stated, "The ultimate goal of the battery swapping business is still to make money, but it will take some time to truly achieve profitability." It is reported that NIO's battery swapping business has already achieved profitability in Shanghai. Li Bin came to the conclusion that the opening up of battery swapping stations is a win-win situation for society, users, and enterprises.
Li Bin firmly believes that the service models of Amazon Cloud and Alibaba Cloud will eventually be implemented on NIO. He believes that "battery swapping is NIO's layout in the 'energy cloud' aspect, and its logic is very consistent. It has three characteristics: first, strong network effects; second, a long construction period, whether it is from infrastructure or all aspects of the entire interconnection, it has a long construction period, with large investment and long investment cycle; third, it is for self use first and then open to others."
Regarding the curious question of whether NIO Power, a company under NIO that focuses on electric vehicle energy replenishment, will raise funds, Li Bin said, "There are some investors interested in NIO Power now, and we do not reject (independent financing), but there is currently nothing to disclose."
Three high priority plans for the future, sell cars well next year
While interpreting the profound meaning of the current layout, NIO is also planning its own future. Li Bin believes that 2024 and 2025 will be two years of explosive growth in the high-end pure electric market, and the qualification competition will enter the later price range. "Because once the infrastructure and brand consensus value are established, they actually become popular quickly, and I have great confidence in them."
In the new stage, NIO has three high priorities. The first is to ensure technological and product leadership, the second is sales and service network, and the third is the research and development of nine models from three brands.
In terms of product layout, NIO has launched eight electric vehicle models to the market, including ES, EC series SUVs and ET series sedans, mainly focusing on the market with a price of over 300000 yuan. It is revealed that the ET9, a high-end flagship model, will be unveiled at the NIO Day held on the 23rd of this month.
Just as the theme of NIO Day this time is "upward", this high-end flagship model represents NIO's determination to enter the high-end business market. In Li Bin's view, administrative flagship models are the cornerstone and standard of the brand. "We know this market is not that big, but we are still very determined to let the entire NIO brand enter the business market. The upcoming release of this car represents a new benchmark for intelligent electric vehicles in the global technological innovation field, and is a crystallization of our technological investment."
Regarding the online rumor that the NIO third-generation platform plans to have MPV models, Li Bin responded, "The NIO MPV model has already been approved, but it's not that fast. If it's too late, there's no need to worry, we'll take action later." According to incomplete statistics from the Huaxia Times, more than 10 new energy MPVs (including debut and pre-sale) have appeared this year alone, with a quantity about twice that of the same period last year, and most pre-sale or starting prices are above 300000 yuan.
On the sales and service network, Li Bin said, "We will definitely continue to increase investment while also improving efficiency." As of now, NIO has 468 NIO centers and NIO spaces, covering 152 cities; We have 314 service centers and 62 delivery centers, covering 217 cities.
According to a research report released by Industrial Securities, NIO actively expands its user base and sales channels, further expanding its national sales team, and continuously improving its overall sales capability. With the completion of model replacement and network expansion by the company, product competitiveness and delivery volume are expected to significantly improve.
In terms of brand layout, in addition to NIO brand wanting to continue to move forward, NIO has also planned a second and third brand. It is reported that the three brands will share R&D resources and will no longer establish a separate R&D team for a particular brand.