NIO ET5 opens for booking

After the NIO ET5 opened for booking yesterday evening, NIO hosted a larger-scale interview. Li Bin and Qin Lihong discussed more macro-level topics, such as whether NIO is doing underlying research and development, the penetration rate of new energy, and the amount of funding required for building cars:

1. Can you disclose the order volume?

Li Bin: The ET5 is the largest ordered car in NIO’s history.

2. What do you think of the 5th NIO Day? How is the European market?

Qin Lihong: We had 3,000 users who couldn’t attend due to the pandemic. To meet the epidemic prevention requirements, we revoked these tickets. It’s already a great achievement that this NIO Day can be held safely.

Fortunately, we had a charity street and more than 400 volunteers from other cities, as well as 106 sub-venues. We still feel the warmth.

Every year, the general environment and social mood are different. This year, we experienced some anxiety and uneasiness, so we chose a warm and kind theme. Hello World is a perspective on the diverse and changing world for the user advisory group and executive committee. The opening film, piano and cello performances, and every sentence that followed were all interpretations of “hello” written by our users. Including the lyrics of the song specially written by Alan Walker, what we want to convey is this atmosphere. We are not saying that we are entering the global market. The theme of NIO Day is very complete.

We are very recognized in Norway now. Every four test users purchase a car, which shows that our products and services are also very recognized. But there are also many challenges. We need to adapt to many regulations and do a lot of software development.

Next year, we will go to Germany, the Netherlands, Denmark, and Sweden, and the challenges there are larger than we imagined. I saw a surprising number that day, Lexus sold only a few thousand cars in Europe in a year, and even a company as strong as Toyota faced such challenges. Although we know the difficulties are great, we still want to try.

3. Can you introduce the progress of the sub-brand?Li Bin: We will have a new brand entering the mainstream market, NIO is targeting the mainstream high-end market and ET5 will be an entry-level product for NIO brand in the foreseeable future. We have been working on efficiency-oriented cars for some time now, and currently there are seven to eight hundred users engaging in related work, and we hope to meet with everyone as soon as possible.

4. Does Li Bin still travel to many cities every week? What is the focus of work this year?

Li Bin: I have been busy this year, with a lot more white hair, all of which are due to brain-burning work. Our R&D work is very large, and the NT2.0 car is about to go into mass production. There is a lot of underlying self-research work, and I directly manage the company’s R&D. I have indeed spent a lot of time on recruitment and internal R&D, and next year is very important for NIO as a transitional year, with a focus on developing our internal strengths. This includes work in Europe and the United States, among other areas.

Qin Lihong: The European company’s meetings often start at 10 pm and go into the early hours of the morning, and those of the US company start at 7 am. This year, we have a deeper understanding of time zone differences.

“NIO, XIAO LI” was born in the same era, and there is social rationality in grouping us together, but in the subdivision market, we cannot put surface data together to see.

We have a term called NBA internally, and we hope that NIO can change the BBA’s pattern to NBA’s pattern. We place more emphasis on our competition with traditional mainstream car models such as BBA. In the next ten years, the mainstream competition is not between Tesla and other brands, or between NIO and Xiaoli, but everyone is rising, and there are still many excellent brands doing over 5,000 in subdivision markets. New energy vehicles, as a whole, are concerned about the relationship between the two camps of new energy vehicles and fuel vehicles, and the internal competition between them has not yet begun.

5. Are you worried about ET5 impacting ET7?

Li Bin: Either way, it’s fine if one of my two children succeeds.

Regarding delivery, we previously only had SUVs, and now we have entered two new subdivision markets. We cannot remain the same, we must grow. This year, we have maintained a 100% growth rate.

In terms of sales, we are about 4 years behind Tesla, equivalent to the volume before its Model 3 delivery. Of course, they are global, and we are in China. In such a fiercely competitive Chinese market, we can survive and we also have some confidence in overseas markets.

6. How to maintain service quality while expanding delivery volume?

Li Bin: We have increased the construction of infrastructure, including battery exchange stations and NIO Houses. Just like with JD, a better experience is often related to their services. In addition, there should be a good mechanism, and users’ experience and product quality should form a closed loop iteration. Thirdly, we involve users to be more open and honest.7. Why is the 3-million-pixel surround-view camera emphasized at the press conference?

Li Bin: Previously, we had 11 cameras with 8 million pixels each. Now, the ET7 will also have a combination of 7 8-million-pixel cameras and 4 3-million-pixel cameras. We have premiered a special camera from Sony.

Qin Lihong: We understand that some ET7 users might hesitate, but it depends on who ET5 targets. Our slogan is “5 is greater than 3”. ET5 should be younger and sportier. Of course, ET5 is a new product and needs to grow longer. For example, the Clean+ material we talked about yesterday is very high-end, but many people still prefer leather, even including those who like HUD. They can consider ET7.

Many users who rushed in yesterday had never bought a NIO product before. A new product should open up virgin territory, not internal circulation.

Li Bin: Many people have downloaded the NIO APP for a long time but have not placed an order. Each person should buy the car that suits them.

8. How do you view the ranking of new forces?

Li Bin: Don’t always evaluate based on monthly data. I think many companies are doing well. We still mainly focus on the comparison with mainstream high-end markets and gas-powered cars. Actually, the replacement rate of the high-end market this year is not as good as expected, instead the market segment of 200,000 RMB is performing very well. This is an interesting thing and also our opportunity. If we can occupy 20% of the high-end market, it’s not bad, and it’s even better if we can reach 30%.

9. How do you see the possibility of diluting energy on battery swapping and charging?

Li Bin: This is not a dilution of energy. We have enough energy. We have deployed so many destination charging networks and built so many fast-charging piles. Your title goes like this: “I really didn’t expect NIO’s charging experience to be better than XXX.” Our overall direction is that charging is more convenient than refueling.

Three advantages of battery swapping: energy storage, automatic energy supplement equipment, and flexible upgrading.

10. Does the overseas strategy need to replicate every aspect of the previous compass? How will overseas battery swapping stations be planned?

Qin Lihong: We plan to have 1000 battery swapping stations and enter 25 countries by 2025. On average, there will be 40 in each market. Actually, 1000 is a basic number. We hope that what we say can be over-fulfilled. The automotive industry should be born global, and design and supply chains should be globalized.11. What is the status of NIO’s full-stack self-developed technology?

Li Bin: We increased our focus on research and development starting from the second half of last year. At the height of our company in the United States, we had up to 700 employees, and we also held a testing permit for autonomous driving in the US. However, in 2019, we shifted the focus of our research and development to China.

Starting from the ET7, we have been using our own technology for autonomous driving, except for the chip, from perception. So far, our evaluation has been very good, and the process of opening up to NAD is gradual.

12. How do you view the European market?

Li Bin: In some ways, the challenges are still significant, including the carbon border tax and many regulatory challenges. Our basic principle is long-term planning, careful preparation, and maintaining patience, as there is no overnight success. It is a long-term process.

We suggest that everyone look at the market with a long-term perspective. Toyota and Korean companies have also undergone a long period of time, and China’s market should also have the determination to succeed.

13. About the VR/AR technology on the ET5

Li Bin: This is something that we plan with hardware, software, and content. As for content, AR is relatively easier to do. We need to do more work in terms of the matching of sound and vision, and how to use our sound system effectively.

VR will be more challenging in terms of content ecology. Of course, there are many types of content, such as game-specific videos, which we will have.

14. Does the replacement of the ET5 vehicle’s caliper with self-developed technology mean that NIO is increasing its research and development efforts on vehicle hardware?

Li Bin: We have self-developed the caliper, and we also have some patents on air suspension. In the long run, we will increase our self-research efforts related to the driving experience of the vehicle.

In addition, the one-piece subframe at the rear of our vehicle is made using one-piece die-casting, which is also our development effort.

15. Will the increasing number of vehicle models put more pressure on the supply chain?

Qin Lihong: This is a problem we must face. The complexity does not stem from having two more vehicle models, but rather from intelligentization and unpredictable events like the pandemic.

16. How do you view the current decline in NIO’s stock price?Li Bin: We pay more attention to the fundamentals of the business. Overall, Chinese concept stocks are under great pressure, more stemming from the impact of Sino-US relations. Investor sentiment is somewhat negative, but generally I believe that the market is rational. It is important to focus on the essence of the business, and often a longer time horizon yields different results.

We will have reasonable arrangements for investors’ returns.

17. How do you evaluate the current level of software?

Li Bin: Today, our software team also encountered some difficulties. We skipped the 1.5 platform and went straight to the second generation. The intelligent aspects changed significantly in just one year. For example, chip computing power has greatly increased, and software has been responsible for replacing hardware. Overall, the abilities of our second-generation platform are still very good.

Today’s vehicles need to consider things far into the future. For example, if the ES8 has a safety bug by 2035, we still have to maintain it. Therefore, we need to establish a mechanism. I calculated that our initial cars may still need to provide services until 2038. This is something that PCs and consumer electronics have not experienced.

We named our 3.0 system Aspen this year, meaning that this forest has to grow on its own. Different software platforms will form different forests, in parallel universes. Although some code reuse is possible, each forest must grow on its own.

Now, we cannot compare our software with that of 2018, as young poplars cannot be compared with old pines; they are all growing in their own ways.

18. What is the situation with follow-up models for MPVs?

Li Bin: There will always be a car that fits you, and you can wait for it. MPVs are very interesting, and we are actively considering them. However, we are still thinking about how to position them, whether they are high-end or mid-range. In the long run, we will definitely have an MPV, but it is not a high priority, and we are still studying when we will have one.

19. What is the situation with 11 kW charging stations?

Li Bin: If they can be installed at home, they will be installed for free.

20. What changes have occurred in the supply chain challenges due to the chip shortage?

Qin Lihong: Supply chain challenges cannot be simply equated with localization. Many semiconductor shortages occur below the third level. Many companies with a longer history than ours have not figured out where their chips come from. This is also a good impetus for improving the management capabilities of the entire industry’s suppliers. We have discovered some optimization opportunities, and we believe that the management capabilities of automotive companies’ supply chain companies will also improve.

21. How do you see the new energy market in 2025?Li Bin: I have always believed that the penetration rate of new energy vehicles is underestimated. I thought that the penetration rate in 2030 would exceed 90%. We can do another interview in 10 years. If I am wrong, I will give everyone a red envelope.

22. How do you view the current funding scale for automotive startups?

Li Bin: It’s not just a matter of making and selling cars. A truly competitive company still depends on its long-term and sustained competitive capabilities. The automotive industry is still a high-investment industry, not only in fixed assets, but also in research and development and service system investment. I think the threshold is even higher now.

I think that from the current perspective, the funding scale may be more than doubled compared to the 20 billion yuan a few years ago. Without a reserve of 40 billion yuan, there is not no opportunity, but a higher risk. We have done one additional issuance and recently reserved 50 billion yuan. With such a large reserve and continuous additional issuance, you can see that Volkswagen and Toyota will also invest several hundred billion dollars, while Tesla’s Texas factory will cost tens of billions of dollars. Starting a business in this industry is now even harder.

23. Finally, I asked another question: How do you view the pressure on the energy system after the delivery of the ET5 next year?

Qin Lihong: We have made preparations in advance. The ET5 will be delivered in September next year, and the larger preparations will be made in the following year. It takes several months from selecting and reserving the location for a battery swapping station to putting it into operation. We have already reserved more than 900 sites for building stations.

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.