NIO revealed two pieces of news yesterday that garnered international attention. According to insiders contacted by Bloomberg, NIO is planning to list in the United States in an IPO that is expected to raise $2 billion. Additionally, an article entitled “Opinions: Li Bin may become the next Jia Yueting” has been widely circulated in industry circles, raising a number of concerns about NIO’s production, financing, and tighter policy environment. Li Bin responded to the article in a restrained manner, subtly indicating that he welcomed the opportunity for media to fact-check some things.
In 2018, as the new car companies are about to face scrutiny from consumers and investors, NIO, as a potential leader, is receiving considerable attention. We hope to carefully examine and discuss NIO’s future to truly understand its challenges and opportunities.
NIO’s Challenges
Many Tesla owners can accurately state NIO’s challenges: “Elon Musk has led Tesla for 14 years, experiencing several bankruptcies and losing billions of dollars. Why should I trust NIO?”
Is this statement correct? Yes and no.
NIO is different from Tesla and can avoid many of the challenges that Tesla has faced.
It should be noted that Tesla, as a pioneer with a strong sense of crisis, has been very generous in investing foundational technology research and development, resulting in many unsaved costs that its competitors do not have to bear.
For example, Tesla’s snake-shaped charging pile, which can automatically locate the charging port, and its flexible charging arm that can automatically plug into the charging port.
However, it ultimately did not go into mass production, and for whatever reason, all the manpower and resources expended on product R&D became sunk costs.
If this lesson wasn’t expensive enough, let’s talk about the falcon wing doors of the Model X. To truly understand this design that led to Elon sleeping in the factory, multiple delays in Model X delivery, and the firing of several high-level executives, it’s necessary to consider whether it’s both beautiful and practical, as claimed at the launch event.
The beauty of the falcon wing doors is unparalleled, as the Model X is the world’s first mass-produced SUV equipped with them. But what about practicality? It is recommended to interview some old Model X owners and listen to their thoughts on the falcon wing doors.Actually, the attitude of the management can explain a lot. Earlier on, Elon was confident that Model Y should also be equipped with falcon-wing doors, but now he never mentions it. To be frank, the falcon-wing doors are more of a vase attribute.
This is a typical sunk cost expenditure. If a Chinese new car company came up and attacked the falcon-wing doors, it might be directly dragged down.
Can NIO avoid these challenges, does that mean Li Bin can sit comfortably and watch? He XPeng once said that many of Tesla’s problems stem from the CEO’s excessive technological innovation, which new domestic automakers can avoid. But many problems, even if they are aware of them, cannot be completely avoided.
For example, the workmanship and quality control during the early stage of the vehicle production capacity ramp-up.
As newcomers, NIO (and other new car companies) have a clearer understanding of the pitfalls that Tesla has gone through. For example, the workmanship and quality control issues that occurred in the early delivery of the Model S in 2012 will undoubtedly be highly valued by NIO.
What the public can see is that the ES8’s release conference has been completed, and NIO is still recruiting people. They eventually hired Shen Feng, a senior executive from Volvo’s Polestar, to be in charge of NIO’s quality management. Before Shen Feng, NIO had a group of executives, including Executive Deputy General Manager Zheng Xiancong, Vice President of Vehicle Production and Operations Jiang Ping, Vice President of Vehicle Engineering Mao Jie, former Vice President of BMW Global Hans Kroeppelt and former Vice President of Central Quality of BMW Steffen Wirth, who jointly supervised the production of ES8. Of course, poaching executives is just the first step, and the efforts made by these people after they become NIO’s executives are not further discussed here.
With such intensive proactive defense in the early stage, what is the result? NIO only completed the delivery of the first ES8 recently, which was nearly two months later than the initial plan of starting delivery in April (of course, the delivery process seen by the reserved car owners in the NIO app has not changed).
It is also advised that all ES8 reserved car owners need to be mentally prepared, as a young car-making team, although the management has given enough attention to the various issues that may arise in the early production, these types of problems can only be solved to an infinitely small degree and will never have a perfect result.
Looking at it from a different perspective, isn’t it true that Volkswagen, Toyota, and General Motors have experienced and robust automotive manufacturing and supply chain management, and still initiate recalls for problem vehicles from time to time? Therefore, what is important is not the occurrence of problems, but NIO’s attitude towards users and the solutions to the problems after they are exposed.Translate the Chinese Markdown text below into English Markdown with a professional tone, retaining any HTML tags inside the Markdown, and outputting only the corrected and improved parts without providing any explanations.
One advantage that Tesla has over the emerging Chinese automakers is, apart from being a leader in the electric vehicle market, Elon Musk has established Tesla as a brand with a lot of emotional appeal for American consumers by competing with the traditional dealers and executives of American car factories. In other words, despite the early Model S’s small bugs, the overall impact of vehicle OTA intelligence, compared with traditional tool vehicles, has given Tesla a chance to win back consumers’ favor.
Does NIO have this advantage? No. Fortunately, Li Bin is aware of this issue: “It’s no use talking about emotional appeal now; consumers won’t pay for environmental protection, but only for a better experience.” That’s Li Bin’s own words. Actually, it is not that emotional appeal is useless, but rather that NIO thinks it is useless. Which Tesla press conference did not mention the mission of “accelerating the world’s transition to sustainable energy” and the Keeling Curve?
NIO has already planned and defined multiple vehicle models after ES8, with one new product being launched every year. Therefore, the reputation of ES8 is crucial to NIO. How to make ES8 successful is NIO’s biggest challenge right now.
NIO’s Strengths
I always find it difficult to identify NIO’s strengths.
As NIO starts to organize test drive events for ES8 in various regions and car owners who have had dealings with NIO are becoming increasingly familiar with NIO’s brand, they are gradually transforming from skeptical bystanders to loyal fans of NIO.
Recently, some media outlets have been monitoring the progress of NIO’s joint venture with JAC Motors, and as a result, more and more people who do not trust the emerging automakers are starting to clash with NIO’s pre-order customers online. I have a feeling that if NIO’s official response is not prompt, there is a danger that NIO’s fan base will evolve into a group of overly passionate followers like those of Sony or Apple products.
(NIO pre-order customers, please put down your bricks and hear me out.)
Let’s use Tesla as an example. Tesla is an enterprise in which the brand is established around its products. Therefore, its advantages over traditional automakers are particularly easy to explain. For instance, there is no other traditional automaker that can produce a sedan or SUV that can match the acceleration of the Model S/X on a large scale. Tesla’s strengths, such as range, battery density, and safety, are all linear and can be listed in a series of easily comparable statistics.
NIO’s strengths are more emotional and experiential, and are difficult to comprehend for someone who has not experienced them personally.I have discussed NIO’s skateboard in the article “NIO Turns Left and WM Turns Right” before, but it had little effect. Many people read the article with a bias and can’t truly appreciate NIO’s “customer-centric” philosophy. I have explained the reason before: most people believe that “customer-centric” is just empty talk and PR rhetoric that any executive of a traditional automaker like BBA would use.
However, NIO has put this idea into practice in its own way, with a posture that is difficult for traditional automakers to imitate. Let me give an example: During the test drive event for the NIO ES8, Li Bin and NIO’s CEO, Qin Lihong, personally attended and communicated with the owners. You might think this is nothing special, but when a customer sent Li Bin some feedback via WeChat, he immediately added the relevant responsible persons into a WeChat group to follow up and promote the matter.
Mercedes-Benz owners, can you communicate directly with Cai Che and promote your improvement suggestions on the spot?
This is just a small example. From discovering NIO online to opening the NIO website, downloading the NIO app for further understanding, visiting NIO House, attending car shows (or other exhibitions), and ultimately placing an order, NIO provides highly unified and quality services that are currently unrivaled in the automotive industry.
Many people’s thinking has been shaped by the inertia of traditional automakers, which is as powerful as the gravity of earth: “I want to buy a car, why are you talking to me about services?” However, after half a year of exposure to NIO’s pre-order system, pre-order customers have fully understood and accepted this service system. Both sides cannot persuade each other, but the group of potential customers is undoubtedly larger. NIO’s core fans, do you understand what I mean now?
There is a strong rebuttal which I also highly agree with: the product is the 1, and the service is the following 0. If the product is not good, it doesn’t matter how good the service is.But is NIO ES8 a bad product? At least for now, isn’t the basic attribute of a car still a tool for traveling from A to B? Take a look at the various test drive evaluations posted online by reservation owners. Of course, there are also various minor issues, but when it comes to driving experience evaluations, how should we put it? Similar situations have only been encountered on foreign Tesla forums.
The other day, after multiple tests, Model 3 exposed a problem of stopping distance up to 46 meters. After being noticed by Elon, it was solved by the operation of OTA updating brake accuracy. However, NIO ES8, a large 7-seater SUV weighing 2.5 tons, has a stopping distance of only 33.8 meters, and its 0-100 acceleration of 4.4 seconds has been proven to have performance reservations.
Therefore, if we take Tesla’s car performance as 1, then NIO ES8 should be above 0.8.
Let’s talk about NIO’s strengths. Assuming that more and more consumers begin to accept NIO’s service system, can BBA (Mercedes, BMW, Audi) copy it easily?
It is no less difficult than making a car that can accelerate faster than the Model S. Behind this service system is NIO’s new management mechanism, which is fully oriented towards providing high-quality services in terms of the company’s values, culture, and business operations.
Finally, let’s face the unavoidable problem: can the problem of NIO ES8’s short single charge range be solved through the rechargeable battery swapping system? In fact, can we understand that NIO compensates for performance through its services? As the longest board of NIO, can it shoulder this responsibility? We will wait and see.
Where will NIO go in the future? Discussing the endgame is too early, but it has already evolved into a potential stock.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.