In 2016, Li Bin, the founder, chairman and CEO of NIO, put forward the classic car-building threshold theory at an event: "For new car-building forces, 20 billion yuan is the threshold for car-building. There is no such thing as 20 billion yuan." Prepare funds, it’s best not to come in.” At the time, he probably didn’t expect that seven years later, NIO’s losses in one year would not even block the 20 billion yuan threshold for car manufacturing.
On March 5, 2024, Weilai released its 2023 financial report, with a net loss of 20.7 billion yuan (a year-on-year increase of 43.5%), almost twice that of 2021. As the degree of "involution" in the new energy vehicle market continues to increase, many people are worried about Li Bin.
The good news is that Weilai’s delivery volume hit a new high last year, reaching 160,038 vehicles, with revenue of approximately 55.62 billion yuan, a year-on-year increase of 30.7% and 12.9% respectively.
01, where is the loss of 20 billion?
's financial report shows that NIO's gross profit margin and automobile gross profit margin in 2023 are 5.5% and 9.5% respectively, a significant decrease from 10.4% and 13.7% in 2022, and are at a low level in the past four years.
Specifically, NIO's car sales in 2022 will be 45.507 billion yuan, and the delivery volume will be 122,486 vehicles. The average price of a single vehicle is 372,000 yuan. In 2023, NIO's sales will be 49.257 billion yuan, its delivery volume will be 160,038 vehicles, and the average price of a single vehicle will become 308,000 yuan.
The average price of bicycles has dropped, but NIO’s pace of spending has not slowed down. In 2023, NIO's sales and administrative expenses will be approximately 12.885 billion yuan, with an expense rate of 23.2%; R&D expenses will be 13.431 billion yuan, with an expense rate of 24.1%. The total expense rate of the two has reached the highest level in the past four years.
According to the financial report, the increase in sales administrative expenses mainly comes from the increase in the cost of sales personnel. In order to motivate front-line sales staff to boost sales, NIO has significantly increased its commission on new car sales.
"City Jie" also saw in the statistical information of the automobile data company Jielan Road that starting from July 2023, NIO's sales commission for each new car will be increased from 800 yuan to 2,000 yuan, while the inventory car, The commission on sales of exhibition cars will increase from 800 yuan to 4,000 yuan.
In terms of R&D investment, as a representative of high-end pure electric vehicles, NIO is very willing to spend money. In comparison, in 2023, the ideal R&D investment will be approximately 10.6 billion yuan.
Let’s look at Xpeng Motors again. Although it has not released its annual report, the company’s R&D investment in the first three quarters of 2023 totaled 3.97 billion yuan, which is equivalent to NIO’s R&D costs in the fourth quarter.
According to industry insiders, the gap between NIO’s R&D costs and those of Ideal and Xpeng is probably because NIO’s business is relatively fragmented.
In the manufacturing industry, cross-border operations are not uncommon, especially in the fields of smartphones and smart cars. In recent years, there have been many cases of mutual integration. Xiaomi has entered the field of smart electric vehicles, Huawei has opened up a variety of cooperation models with car companies, Geely has acquired smartphone manufacturer Meizu, and NIO has also announced to build mobile phones in 2023.
But what is different from the first three is that Xiaomi, Huawei, and Geely have established a firm foothold in their respective main business fields and are making stable profits before crossing over. NIO’s layout was a bit ahead of its time, so it’s no wonder that it was criticized as “not doing its job properly” at the time.
Although Li Bin didn’t just create a mobile phone, he saw it as an important medium for human-car interaction and wanted to make it seamlessly connected to the car. The intention is good, but before the car can achieve profitability, NIO has to spend too much money. In areas where smart cars are more relevant, NIO's R&D projects involve smart hardware, battery systems, smart driving, smart cockpits, etc. Each of the 12 sections is a "gold-eating beast".
Someone in the industry once commented on Li Bin: He is idealistic, so there is a lot of advanced investment in business layout, which is a huge challenge to both funding and research and development.
02. Put aside the baggage and focus on the main business
In the past year, Li Bin also reflected on whether he had encountered the "trap" of long-termism. The investment scope is wide and the strategic planning cycle is long, but the changes in the market are ignored.
"The world is changing too fast now, and too many things have happened in five years." Li Bin said in an interview at the end of 2023. He thought it might be appropriate to change the strategic plan to two years.
The past two years have undoubtedly been the most intense stage of change and competition in the automotive industry. The environment is full of huge uncertainties. If you want to enter the finals, you must further improve execution efficiency and ensure sufficient resource investment in key businesses. Those businesses that cannot improve the company's financial performance in the short term may be postponed or cut off. In short, the province must save more.
In 2021, domestic lithium carbonate prices began to soar, rising from 50,000 yuan/ton at the beginning of the year to 266,000 yuan/ton at the end of the year. The strong rebound in lithium carbonate prices has greatly affected the gross profit margins of new energy vehicle companies. It was also from this time that Li Bin came up with the idea of developing his own battery.
At the financial report meeting in June 2022, NIO disclosed the progress of the battery business for the first time, saying that the new brand mass-produced in 2024 will be equipped with NIO’s self-produced batteries.
However, with sales hitting a trough in the first half of last year and the price of lithium carbonate falling sharply, NIO's battery business is obviously lacking in both funding and motivation.
Therefore, when Li Bin mentioned the battery business again at the third quarter financial report meeting in 2023, he was no longer as enthusiastic as before. He believes that the battery manufacturing investment cycle is long, and there are still challenges such as overcoming production capacity ramp-up and improving yield rate, and the company does not have sufficient resource support for the time being. In addition, NIO found after evaluation that self-produced batteries could not bring about an improvement in gross profit margin within three years, so it adjusted to manufacturing batteries through commissioned production. NIO only develops batteries, battery packs, etc. in-house.
In addition, regarding NIO’s most controversial mobile phone business, there was news at the beginning of this year that the original person in charge, Yin Shuijun, resigned and Bai Jian, the vice president of hardware, took over the business.
Before joining Weilai in February 2022, Yin Shuijun served as the president of Meitu Mobile. A person close to Weilai believes that Yin Shuijun's departure does not mean that Weilai will give up its mobile phone business, but it will not grow bigger and the development space is limited. It is normal for him to leave.
While ensuring resource efficiency improvement, Weilai will merge duplicated departments and positions and lay off 10% of its employees, approximately 3,000 people, to improve organizational efficiency. According to Li Bin’s calculations, this will save NIO 2 billion yuan in 2024.
In addition to the automotive business, other businesses represented by accessories and energy solutions also affect NIO’s gross profit margin to a certain extent. As shown in the financial report,
's gross profit margin decreased sequentially in the fourth quarter of 2023, mainly due to the decrease in gross profit margin in providing energy solutions. However, it can also be seen that the growth rate of NIO's other income is much higher than the total revenue, which increased by 69.1% year-on-year to 6.36 billion yuan, accounting for 11.4% of the revenue. As a business that cannot be slowed down, how can
increase its gross profit margin? Li Bin said that NIO will cooperate with Changan, Geely, Chery, China Southern Power Grid Energy Storage Technology and others to build power swap stations, which will not use its own resources and the cost will be reduced.
At the end of last year, Weilai acquired two manufacturing bases of Jianghuai Automobile, thus obtaining independent automobile production qualifications. At that time, Li Bin stated that from a manufacturing perspective, if it were completely manufactured independently, the cost would drop by 10%. In the third quarter conference call last year, Li Bin also said that the "second brand" Alps has completed trial production and independent manufacturing costs will drop by 10%.
03. Go up to make profits, go down to scale.
Since the NIO brand has not released any new models this year, almost all the variables have fallen on the company’s second brand “Alpine”. In a recent earnings call, Li Bin also revealed more plans for "Alps".
It is reported that the "Alpine" brand will focus on the family market. The first product will benchmark the Tesla model y, but the price will be lower than the model y (258,900-363,900 yuan). The starting price is expected to be around 200,000 yuan. The car is scheduled to be released in the third quarter of this year and will be delivered on a large scale in the fourth quarter.
In addition, the brand's second product is an SUV, which is currently in the mold development stage and will be launched on the market next year; the third product is also under development.
Li Bin said that the BOM cost of the new brand's first product will be about 10% lower than that of Model Y. Moreover, to achieve this cost reduction goal, it does not require a million-level scale. It is basically enough for a factory to achieve monthly sales of 10,000 units. "In the long run, the profit margin of the new brand is 20%."
Regarding the sales side of the new brand, Li Bin said that it will use new channels and independent location selection, with the goal of a sales store network of no less than 200. The new brand will not set up sales outlets similar to nio house, but will instead set up sales outlets like nio house. Tesla also prioritizes efficiency.
The "NIO" brand and the "Alpine" brand target different markets, and their brand strategies are also different. Li Bin pointed out that the NIO brand will not launch cheaper cars than et5, and will not participate in price wars. Focus on gross profit margin; while the Alpine brand will prioritize scale.
According to hiev reports, Alpine’s smart driving solution will be based on NVIDIA orinx chips, and will remove lidar and adopt a pure visual solution. A lower-cost smart driving solution, Giving more room for the new brand's pricing strategy.
Looking back at the entire year of 2023, although losses still gave Li Bin a headache, fortunately, he later focused on short-term execution and improving efficiency. On the one hand, reducing power batteries and The priority of the mobile phone business has been lowered, and staff redundancy has been solved through layoffs. On the other hand, a cooperative alliance has been established for the battery replacement business, and new brands have been used to enter the mass market to increase scale.
But to increase scale in the sinking market, "it really needs to be solved" The problem of efficient channel sinking. "Li Bin said. This year, Weilai will have a considerable part of its charging and swapping facilities in the lower-tier markets to increase the competitiveness of user experience.
Based on the above measures, Weilai's goal this year is to return to 20,000 units in sales per month. The annual gross profit margin level has increased to between 15% and 18%.
only needs to achieve the above goals. The first challenge is Weilai’s wallet. The establishment of 200 stores of the Alpine brand requires a lot of capital and labor costs, as well as charging and replacement infrastructure. Investment also requires money. The financial report shows that as of the end of 2023, Weilai’s cash and equivalents were 32.935 billion yuan.
Not long ago, Li Xiang, chairman of Li Auto, predicted at the performance meeting that by the fourth quarter of 2024, more than 200,000 For new energy vehicles, the top three brands in the industry will gain close to 70% of the market share.
This also means that the competition in the market of more than 200,000 yuan will be more intense. From the outside world, NIO is fighting with its back to the wall in this battle.
Author | Edited by Liu Dongxue
| Operated by Tian Yanlin
| Liu Shan
