1. What is the direction for the deployment of battery swapping stations in 2022?
Qin Lihong: By the end of the year, there should be 750 stations, and at least 550 new stations will be added next year. The layout involves three directions. The first is areas with a relatively large ownership volume, where a large number of stations are needed to reduce the market pressure. The second is to achieve coverage from 0 to 1 in several areas. Next year, even places with only 50 vehicles may need to deploy stations. The third is to deploy on highways for intercity travel, including important national roads and large ring roads in cities.
Li Bin: In fact, there is still a lot of room for destination charging piles. I found that many 5A-grade scenic spots surprisingly do not have good charging facilities.
Qin Lihong: The number itself is not important. If the cars sell well and our gross profit is high, it would be acceptable to add more stations. We need to return to our initial direction and seriously improve the user’s travel experience to be able to respond to rare events from all aspects. The final showdown is that adding electricity is more convenient than adding fuel. We have not given up in the competition with gasoline cars.
2. Is third-generation charging station needed for unmanned battery swapping? Will they all be deployed?
Qin Lihong: Our second-generation station supports unmanned operation, but it hasn’t been implemented yet. For example, the interaction between cars and the NT 1.0 platform has not been done well enough, and we need to consider situations such as vandalism, severe weather, and small animals getting in. We will probably implement unmanned operation at our second-generation stations. For now, in Shanghai, we will have some human-patrolled stations with support in place for non-peak hours when battery swapping is less frequent.
Li Bin: People underestimate the three advantages of battery swapping. First is its advantage as an energy storage facility, which we found is more significant in Europe. In China, there may only be one peak time for the power grid per day, but in Europe, electricity prices are changing almost all the time, and swapping has supported virtual power grids with tremendous potential.
Second is that once autonomous driving becomes mature, battery swapping will be an automatic charging facility. Charging, as an action, is not easy to achieve, especially without a robot. In the future, the first choice in autonomous driving scenarios might be battery swapping, such as cars swapping batteries by themselves at night.
Third, swapping is flexible for upgrading. Therefore, no matter how large the capacity, it can be done in three minutes. These are all inherent advantages of battery swapping that cannot be achieved by charging facilities.
3. How is the progress of NAD? How many features will be released initially?Li Bin: All of our underlying technologies on NT2.0 are developed in-house. Our first priority is to build an advanced assisted driving system on top of this. This is not an easy task for us to accomplish, and it represents the initial stage. We must ensure the quality of the system and ensure that it meets customer requirements for new car delivery. The second stage is called NOP Plus, which primarily represents our highway and expressway navigation assist system, incorporating advanced autonomous driving capabilities. Finally, the third stage is NAD, which encompasses many of our reflections on technical underpinnings and operational considerations.
NAD is a service, not a feature, and it serves different people differently. For example, if you asked me to solve the problem of driving in Harbin during a snowy winter, I would not be able to do it because the snow would have covered everything. But the vast majority of other scenarios can be improved by NAD. We offer a subscription service and until the functionality meets your needs, you don’t have to pay for it.
Li Bin: We need to compare apples to apples. For example, today I talked specifically about the dual-electric motor system. For achieving autonomous driving, a single motor system is simply not practical. If you look at Tesla’s official website, you will also see that they claim dual motors can improve safety and redundancy. At our initial stage, we discussed whether we should develop a cheaper single motor system, or whether we should reduce costs on the sound system, etc. If we did so, we could easily achieve the price of Model 3. But we feel that would be irresponsible.
For example, if we did not include 7.1 sound as standard in our VR system, the owner’s experience would be significantly reduced. We have minimized the number of optional items for intelligent and safety redundancy features, and made them all standard. We believe that the development direction of intelligent electric vehicles should give users a complete experience. We have added more colors and interior options, just like buying different clothes; we believe this will enhance the user’s experience.
Compared to Model 3 and Model Y’s dual-motor versions, with the same configuration, we actually have a cost-effectiveness advantage. In the future, all our assisted driving versions will definitely use dual motors.
As for comparing with petrol cars, I can’t understand why people are still buying them now. If it’s not for nostalgia, why buy a petrol car?
I think people who buy electric cars now are making wise decisions. There are many inconvenient aspects of electric cars in the past, but now many anxieties stem from the fact that petrol car users are projecting their own emotions onto electric car users. This will take some time to resolve, but this year is a major turning point, and I believe the key is the 20% market share. Look at Norway, it took only three years for the market share to climb from 20% to 90%. Of course, Chinese companies are very outstanding, and we believe that our electric cars have significant advantages over BBA’s petrol cars. If you really can’t make up your mind, buy a BMW electric car instead of a petrol car, but before you buy it, come and take a look at us.
4. When will the hardware of existing models be upgraded?
Qin Lihong: The hardware upgrade for existing vehicles will probably be in the second quarter of next year. We will do our best to walk with our old friends. Our goal is to give existing users no reason to consider other brands when they change cars. We will announce this in March, and it may start in April or May.
Li Bin: I suggest that everyone manage their expectations. There is basically no possibility for advanced driving assistance, but the cabin will definitely not be a problem.
I have invested in many companies in the second-hand car industry. We will definitely do a good job of maintaining the value of second-hand cars, so that everyone can sell their cars with the highest possible resale value. We do not place too much emphasis on sales volume. Instead, we are more concerned about the increasing number of users and employees. How can we improve our service through the closed-loop system and improve customer satisfaction? We don’t care too much about sales volume for a month or two, or the gains and losses of one or two cities. We are a pure electric vehicle brand, which performs well in first- and second-tier cities and faces some challenges in third- and fourth-tier cities. Objectively speaking, our cars are still a bit expensive.
Of course, we have also announced that we want to become a brand for the mass market. We will not do too much at once just for sales volume. The automotive industry still needs to lay a solid foundation.
5. Will the ET5 affect the gross profit margin of the entire vehicle? Many users say that the ET5 does not have HUD. What are the application scenarios in AR and VR in the future?
Li Bin: You don’t need to worry too much about gross profit margin. Overall, as our sales volume increases, the overall cost is also decreasing. Tesla’s gross profit margin is 30%. Although ours is not that high, we will not sell cars at a negative gross profit margin like the ES8, nor do we have such a strategy.
HUD is standard in the ET7 and optional in the previous models. Many users think it is necessary, while others think it is not necessary. We have retained the instrument panel and solved most scenarios. Please understand that if we provide HUD for an entry-level car, the cost will be higher.
AR/VR will certainly be used in a stationary state. Even in the case of NAD, the driver cannot use it while driving, but the co-driver can.
Our data shows that people spend more and more time in stationary state in the era of electric cars. There is nothing more immersive than VR.
The VR in the car can reuse many things in the car. We use original design and can use the computing power and control system in the car.
My dream has always been to eliminate screens in cars. We are now closer to this goal, as when we designed the ES8 in 2015, we were against the central control screen in the car. This is still related to technological development, such as how to make the interior of the car lighter. Moreover, these technologies will also be reused in the ET7. VR glasses will be offered to users at cost or even below cost.
- When will the sub-brand be launched?
Li Bin: We will launch it when the time is right.
Qin Lihong: Let’s make it clear that this is NIO Day, and we will not talk about other brands. Why should we talk about our younger brother’s matters on our elder brother’s birthday?
- How many people in NIO are not engaged in technical-related services?
Qin Lihong: Roughly half of the company’s personnel provide services, and half of this is divided into two parts. Half provide users with services related to the car, such as roadside assistance, and half are unrelated to the car, such as other services. We hope that one-third of the personnel in the future will be this type of people, as their understanding of the world and service models has not been established. In our system, skills are secondary to values, and choosing values in society becomes more challenging as we proceed. For example, in 2019, we did some things for sales promotion, but we are now paying for those behaviors, such as reducing the price of some inventory vehicles. However, our prices are now very stable.
Li Bin: It is necessary to understand the period and personnel efficiency. Traditional luxury brands may need 150 stores to achieve sales volume like ours. From a broader perspective, our sales volume is sufficient. Our primary reason for losses now is due to our long-term layout and early investment. I do not want to think about things that are five or ten years away; thinking about things that are two years away will certainly make money.
- Has there been a change in mindset and strategy since 2019?
Li Bin: I am now busier. If we compare ourselves to gasoline-powered cars, we are only one-tenth of theirs in China, and even less globally. From now until 2024 or 2025 is a critical period. I think it will be around 2030 before the global situation settles down. Today, from now until 2025, the biggest challenge we face is the ignition of the United States.# We Are Going Global: Highlights from NIO Day 2021
Today’s global live streaming event was all about embracing our Chinese heritage and showcasing our brand on a global scale. We don’t say “nationwide”, we say “China”. Alan’s music, for example, had its global debut today. As a Chinese-based company, we’re striving to compete in high-end markets worldwide. We’re not selling our cars in South America or Africa – we want to sell in places like Europe, Germany and the United States. We’re aiming high. The idea of coming to America has been discussed for the past four years, and it’s a big challenge. We don’t have a headstrong mentality about it – we have a global perspective on how we’ll do it.
Who else dares to take on such a challenge like we do? We might get into trouble, but we’re not headstrong. We have a long journey ahead.
Qin Lihong: Is there anything unique about NIO’s business model?
Li Bin: What I’m most proud of is not Yiche or NIO. It’s creating the college student formula racing. With so many car companies in China, why did nobody support this? In 2009, I invested two to three million myself. Why not establish a mainstream high-end brand in China or build battery swap stations? These are all rational things to do.
Q: How was NIO Day this year?
Li Bin: This year’s main challenge was preventing the spread of COVID-19. We originally planned for 8000 people, but only 5000 could attend. It was lucky that we could even hold the event this year – we wouldn’t have done it without approval.
To be frank, we had to suppress our emotions a little bit. We think this year’s NIO Day was worth celebrating, especially the charity auction and user-generated performances, as well as the theme song by NIO Band. Of course, this year’s event was too short – we wanted more. But that feeling is exactly what we’re striving for.
There was also a significant amount of information released this year, such as the Welfare Partnership Program and the CleanParks Initiative. The latter, in my opinion, will become a worldwide project. NIO Day 2021 had a very high quality and theme, Hello World. It’s an event worth savoring.Qin Lihong: I want to add something. Alan Walker’s position has been neglected this year. Someone like him, a king of electronic music, went to London to build a special performance stage for us, and behind all of this is technology. It’s just like the panoramic digital cockpit that was released today. We don’t jump on the bandwagon and talk about the Metaverse, but it’s the same thing. There are many planets behind it, and NIO’s logo is even engraved on one of them. We may feel that it’s just a remote release because of the pandemic, but he may come and release it this way.
Li Bin: Users who come to the event are relatively active in the community. If we watch the live broadcast, the online activity will be longer.
10. Are there any big tricks in terms of spatial design? Will it be launched first in MPV models?
Li Bin: If you look at the queen’s co-driver, it’s really suitable for SUVs, and the significance of sedans will be smaller. We still give up on some things. For example, we don’t have a glove compartment, but we still have our own thoughts on space. ET5 has a beautiful picture viewed from top to bottom. When you sit in the ET5 and look down, it’s completely different from looking at it from outside. This may become a trend for intermediate and compact sedans in the future.
11. Has NIO’s design language become less sharp? Has NIO Day spent too much money?
Li Bin: NIO’s value has been consistent since 2015, and our logic has been clear from the beginning. ET7 already reflects our design DNA, and ET5 further reflects this. Why do phones look like this today? It’s because they are more inclusive and compatible with applications. Of course, we will listen to everyone’s suggestions, but we need to find the maximum common denominator.
Like our theme for today’s Hello World, we are thinking of anyone advocating for kindness, optimism, and sharing. This is what sets NIO apart from other companies, and it’s something people like about us.
12. When will the 150kWh battery be available? When will the ground lock be made? With the cold weather in winter, is it possible to have two stations in one location? And why is the paint price the same for ET5 even though it’s much smaller than ES8?Li Bin: Parking locks have been installed in some places.
Qin Lihong: The installation of charging stations in Beijing is slower this year. We planned to have 60, but now there are only 46. Shanghai already has 61, but this year we were influenced by public management issues. Our stations now combine charging and battery swapping. When swapping at a station, you can charge for free next to it. Next year, Beijing’s goal is 100, and so is Shanghai’s. Both cities need to move toward triple digits. Charging electric vehicles is more convenient than refueling with gas, and that is a trend. We must work towards that day.
Li Bin: We still have many optimizations to make. We must still consider a combination of charging and swapping. Swapping has an advantage when it comes to more energy, but it isn’t as advantageous for 30% or 40% charge recovery. This is why we need to implement destination charging stations, but as soon as people discuss swapping, the topic tends to dominate. In addition, there are many operating schemes, and there is time to use mobile internet to adjust.
150 kWh in Q4 2022, the plan hasn’t changed. However, 150 kWh will not be mainstream. We can boldly predict that demand will not be so high. The battery will most likely only be available for rent and won’t be for purchase, to be used for flexible swapping. However, this hasn’t been finalized yet.
Qin Lihong: Concerns about the range of electric vehicles have changed greatly over the past few years. Three years ago, media articles about electric vehicles placed range at the forefront, but now that vehicles with ranges of 600km or 700 km have been released, people aren’t so eager for range. From a macro perspective, we will eventually move beyond concerns about range. It’s still important to install more charging and swapping stations. We won’t be discussing this issue in a few years.
Li Bin: However, there is one problem that can never be solved, and that is the problem of peak hours. Gas stations can’t solve this issue, either.
Qin Lihong: The 150 kWh battery is not a world-saving solution, and we don’t think it’s important to build hundreds more swapping stations. We have many operating methods that we can use. We need to implement flexible swapping as soon as possible. For example, in one area we can set up a single swapping station and a single upgrade dispatch station to solve the issue.
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.