Author: Wang Pan
Recently, Photon Planet participated in Tencent Technology 2021 year-end planning and exclusively interviewed the founder, chairman, and CEO of NIO, Li Bin. In the interview, Li Bin talked about why he didn’t cooperate or merge with XPeng Motors during the toughest time in 2019, responded to the controversy about his statement of being “nostalgic” for gasoline cars, and also shared his views on Apple’s rumored car project.
“I don’t know how I accidentally became a hot search again. Actually, my original intention was that electric vehicle products have become increasingly rich in the past two years, with good options available in different price segments. In addition, infrastructure is becoming more and more complete, and there are indeed fewer concerns when buying EVs today compared to a few years ago.”
Li Bin said that it may seem a bit sensational because only that part was selected, but he still hopes everyone can consider electric vehicles when buying cars. Generally speaking, there are more and more reasons to buy EVs now.
Regarding Apple’s car project, Li Bin said that Apple has been preparing for this for a long time, and now everyone feels it’s getting closer. Some companies in the industry chain have already started to take action based on their requirements.
“I think (Apple’s car project) is a positive thing. For the industry itself, people will have more products to choose from, and from a competitive perspective, it will definitely be more intense.”
The main content of the interview is as follows:
Question: Can you describe NIO’s 2021 with one keyword?
Li Bin: If I had to choose one keyword, I think “preparation” would be more accurate. 2021 is indeed a year that lays the foundation for our future development. We have invested heavily in the team’s scale, whether it’s in research and development, or customer service personnel.
We have also expanded our infrastructure, including battery swap stations, service centers, and NIO Houses, and have started delivering vehicles in the global market, starting from Norway. We announced that we will enter 25 countries worldwide by 2025, and the launch of new NIO products has also started to accelerate.
At the beginning of the year, we launched ET7, and on December 18th, we released ET5. The market response was very positive, so for us, 2021 is a year for laying the foundation for the next few years of development. “Preparation” or “laying the foundation” are both appropriate descriptions.
Question: As 2021 is the only year without new car deliveries since the release of NIO ES8, what kind of feelings do you have?
Li Bin: There is undoubtedly some pressure because the cars we are delivering now, ES8, were launched in 2018 and still use our first-generation intelligent technology platform. With the release of ET7 at the beginning of 2021, we announced that the second-generation technology platform will soon be put into mass production. From ET7 onwards, all cars will be based on the second-generation intelligent technology platform. Due to the events in 2019, we had to give up some of our plans for the first-generation and have been slightly passive this year.
Question: Can you describe your predictions for the industry’s competition in 2022? What do you think will be the “X” factor next year?
Li Bin: I proposed an idea in 2019 that before that year, for NIO, it was a stage of forming a team, publishing a brand, and establishing a preliminary business model. From 2019 to 2023 or 2024, we call it the qualification stage. The team has been formed and trained, starting with the group stage, the qualification stage, and earning the right to participate in the final competition. I think around 2024-2025, the entire industry will enter the final stage of the competition.
In 2021, we have seen many tech companies like Huawei, Xiaomi, and Apple have increasingly clear plans in the automotive field. From 2022, everyone will definitely be busy. Therefore, I think the real final competition in this industry will still be around 2024-2025. More fundamental changes in the industry structure will be clearer by then.
Question: Responding to what XPeng previously mentioned as the “darkest moment,” he recently said on CCTV that no investor was willing to meet with him. Was it the same for you, or did you encounter this more?
Li Bin: Yes, that is certain.
Question: When you talked about merging or similar cooperation in 2019, why didn’t it happen in the end? Was it because of reporting or other reasons?
Li Bin: Neither. In fact, I told XPeng at the time that we were both in the intensive care unit and could pass away at any moment. I said that he was also near the door of the intensive care unit. Both of us still had some strength, but if we continued to struggle, we would both lose our strength, and both of us might not make it.But XPeng is indeed a very excellent company, they have done many things very well, and our relationship is also very good.
Question: With the release of ET5, the price ranges of several new forces are becoming more and more similar. Does it mean that everyone’s relationship is different from before?
Li Bin: It’s okay. In fact, the competition between us is something that media like to write about together. But from the perspective of business, everyone’s segment market still has significant differences. Our average selling price is more than 400,000 RMB, and their price is certainly lower than ours.
The target user groups we all target are also different to some extent. From another perspective, the automotive industry is not a winner takes all industry. Compared with Internet companies, the competition in the automotive industry is not as intense (as everyone thinks). I think the real challenge now is to convince traditional gasoline car users how to consider electric cars, because everyone still has more or less misunderstandings about electric cars.
From the perspective of stock, China has nearly 300 million vehicles, and the proportion of electric vehicles is still very small, only 2% -3%. Therefore, how to make more users consider electric cars is our common goal, and there is no special competition.
Question: When it was the most challenging time in 2019, you were watching The Long March. What are you mainly watching in 2021? Do you have any recommendations?
Li Bin: I still read a lot of books this year. I recommended Huntington’s “The Clash of Civilizations” a while ago. I actually reread it and found a lot of feelings about it, because the global environment is changing, and all companies, even if you do not have international business, will be affected more or less. In fact, we have been affected since 2018, including our financing and the capital market changes. In 2021, we entered the global market and became more aware of some of these pressures. For example, every country has very strict policies on data control. How to meet local policy regulations is actually a significant challenge for a company’s development and research from all aspects. So I read more books about it this year.
Question: Is there anything that makes you particularly sleepless this year? Is it the supply chain?
Li Bin: Yes, the supply chain is a problem for the entire industry, not just our company. In 2021, the global automotive industry faces supply chain challenges caused by chips and the epidemic, which bring a lot of uncertainty to the supply chain. As a company like us, we use a lot of chips, so the pressure is certainly greater. But the good thing is that our entire supply chain team has been solving various challenges since 2019, when we had no money. Last year, we faced the epidemic, and this year we have encountered chip problems. Overall, we have coped quite well.
Question: Does this kind of industry-wide shortage of chips have any new thinking for you?Li Bin: Definitely, such as how to ensure the safety of the supply chain, and how to ensure the company’s operation as smoothly as possible in an increasingly volatile market. I think the operation mechanism and the ability to deal with emergencies are definitely higher requirements than before. Since the end of 2019, we have had many emergency response teams internally, which is something we have been doing all the time.
On the other hand, since we use more than 1,000 chips in each car, if one chip is not available, the car cannot be delivered. How to ensure that there are alternative chips available in case of chip shortage, and how to react quickly, conduct research and development, testing, and ensure quality, are all part of a comprehensive ability. I think these challenges are quite significant, and this year we have formed some of our own capabilities around this area.
Q: Is it possible, like some peers, to deliver the car first and then supplement some missing parts later?
Li Bin: We have considered this, but in the end, we did not do it. We believe that each company has different strategies, and we currently have not done this.
Q: Everyone is rushing to grab chips. Some peers’ founders have to go out for drinks. Will you go as well?
Li Bin: We are also doing this. However, my alcohol tolerance is not that good, but we will definitely seek support from our partners.
Q: Will it change your thoughts on whether to build your own supply chain?
Li Bin: I think it is very important to work with supply chain partners to align our long-term planning. Therefore, we have a very important thing this year – we will discuss our 3-year and 5-year plans with our supply chain partners because the supply chain is a very long chain, and the preparation cycle is also very long. If we do not align our long-term plans, it can be easy to have mismatched situations. Therefore, we have done a very important thing this year, which is to open up our long-term strategic planning with our partners so that everyone knows how our products are planned, what our production capacity demands are, and we are not just discussing things for one year. We hope to discuss things for 3 or 5 years so that they are prepared beforehand and everyone’s efficiency can be improved.
Q: In the long run, will car companies refer to the layout of BYD and Great Wall on the supply chain?
Li Bin: The strategy of each company is different. I think the automotive industry is still a very well-organized division of labor and cooperation system, and each company has different strategies as to what they will do and what they will delegate to their partners.
Q: Your recent statement that “I don’t understand why people still buy gasoline cars” has caused a lot of controversy online. Do you have anything to say about it?Li Bin: I don’t know how I accidentally made it to the hot search again. Actually, what I meant was, in recent years, electric vehicle products have become more and more abundant, and there are good products at different price ranges.
In addition, the infrastructure is also increasing, not only for NIO’s own charging and battery swapping stations, but also for many third-party companies, including State Grid, Star Charge, Techrules, etc. Many companies are expanding their infrastructure, and many places where electric vehicles could not go before can now be reached. This year, we have also deployed many destination charging routes for this purpose. I think there are indeed fewer things to worry about when buying an electric vehicle today compared to a few years ago.
It may indeed have seemed a bit sensational because only that section was quoted, but I still hope that everyone will consider electric vehicles when buying a car. New energy vehicles do have many advantages and of course, there are also some shortcomings. It is impossible for one thing to have only advantages and no disadvantages. However, I think that the penetration rate of new energy vehicles in China in 2021 has exceeded 20%, with 2 out of 10 cars being new energy vehicles, compared to only 5% at the end of 2020.
This year, it has increased from 1/20 to 1/5, indicating that more and more consumers are recognizing the benefits of new energy vehicles and electric vehicles. Of course, this has indeed caused controversy, and some remarks have caused misunderstandings. But overall, I think there are more and more reasons to buy electric vehicles now.
Question: Does the controversy surrounding your previous comment about “more advanced than the Porsche factory” mean that your team may make requests or restrictions on your speech in the future?
Li Bin: Yes. That’s why you can see that I am very nervous during interviews now and I try to be very careful with my words.
Question: What label do you personally want to tear off?
Li Bin: Do I have any labels? I don’t know if there are any labels for me.
Question: For example, the most pitiful, good, or idealistic.
Li Bin: There’s none. I am who I am. Actually, because you are more familiar with me, what I care more about is how the people who know me and have helped me view me. I can’t change those labels that I disagree with.
Question: Does NIO have any labels that you want to tear off? For example, people might label NIO as a company that does battery swapping or provides services, and once this label becomes too heavy, people may feel that your products are actually weakened.
Li Bin: Yes, I think so. Because in this industry, NIO is about battery swapping, services, and experiences, and it’s easy for people to talk about these things when they spread the word, including the media and users. But in fact, when people talk about battery swapping, they may not know that we are one of the brands with the best charging experience, we have installed thousands of high-power charging networks and destination charging networks, and the proportion of our home charging installation is also very high.When it comes to our services, you may overlook the fact that we invest billions of dollars annually in R&D, making our ES8 a leader in technology upon its release. Although we have yet to deliver any new products in 2021, there is still room for improvement in areas such as technology and software. However, we have invested heavily in areas such as autonomous driving and intelligence.
For example, our NOP navigation assistant is one of the earliest to be introduced in the industry. While Tesla was the first to introduce it, we were the first to introduce it in China. There may be many similar situations in which we are not fully recognized. That’s okay; we will just focus on doing our best, and let time do the rest.
Speaking about enhancing efficiency, some automakers require their engineers to achieve KPIs in terms of cost savings on a specific product. We do not have such a requirement. Since last year, with the increasing delivery volume, our gross profit margin has also increased to about 20%. Tesla’s gross profit margin is even higher, at about 30%. Our scale is about 10,000 deliveries per month, and we believe that with the increasing delivery volume, our gross profit margin will also perform better. Some things will show the benefits of economies of scale with time, and we will have to be patient.
Regarding our OKR goals for 2021 and 2022, I cannot provide too many details as they involve some internal confidential information. We have our own work system called VAU (Vision Goal, Action Plan, and Upgrade Plan) that is similar in spirit to OKR. Every quarter, I write a VAU, including the most recent 2022 VAU. Our colleagues will then align and each individual will have their own VAU. This system is effective because it not only focuses on long-term goals but also short-term actionable plans to ensure they are in line with our long-term goals. As the world changes rapidly, it is crucial to establish a connection between our goals and actions, and it is essential to create relationships between what we do now and what we plan to do in 2023 and 2024.Question: How do you ensure the allocation of your personal energy given its limitations? For example, when visiting customers, internal management, or other areas, how do you allocate your time to ensure greater efficiency?
Li Bin: For instance, this year I had a lot of time, so I spent more time integrating with the team during the interview process. In addition, it is crucial for me as a CEO to develop the product and technology roadmap and the strategic direction. I also spend a lot of time on critical business plan promotion. I participate in the details more often.
In fact, visiting customers is a relatively relaxing time for me. I do not view it as a simple job. I usually go on weekends, but this year, because of various meetings on weekends, I spent less time on this aspect. I hope to have more time to visit customers across the country next year. It is essential for me to obtain feedback on our products and services from them.
It is difficult to have such perception if you do not face the users; you only look at some cold, hard numbers or text. Therefore, I am very willing to see how users use our cars, what aspects they criticize, and what suggestions they have. This is very important for us.
Question: You previously emphasized several times that in 2019, the user actually saved NIO, but during 2021, some negative public opinion events are actually related to users. How do you ensure that they can have a more positive and enthusiastic participation and do not have a negative impact on the brand? Is this difficulty greater?
Li Bin: As the number of users and employees increase, the situations also increase. It is normal to encounter some problems or some negative feedback, but it is a significant challenge for us.
From an internal perspective, we do not feel any particular pressure. We must accept that this is a more diverse and diversified community, with different ideas we need to address. It is normal for users to have different ideas. The most important thing is to remain loyal to our original intention of serving users.
In solving every problem, are we thinking from the user’s perspective? Can the process be more optimized? Can feedback be more responsive? We usually examine ourselves from an internal perspective to determine how to do better.
However, we have never been naive enough to believe that every user or every thing is satisfied with us. Indeed, it is impossible to do so. But, have we tried our best to perform better in every matter? This is our requirement for ourselves.
Question: How would you rate NIO’s recent months in terms of the overseas market?
Translated by VectoTrans.Li Bin: Norway started deliveries at the end of September, and demand is still very good. I had a meeting with the general manager in Norway, and I told him that I’m not very concerned about the delivery volume, I only care about one thing which is user satisfaction because user satisfaction sounds simple, but it’s actually quite complicated. For example, can our products, especially the software, meet the needs of Norwegian users? Our Chinese users might complain, but at least we can hear them, but how can we ensure that we are able to hear Norwegian users?
We also need to make sure that our entire company’s R&D and service systems are prepared to support users outside of China which is much more complex than we imagine, as well as the infrastructure needed to overcome cultural differences. So, to make the users satisfied, you actually have to achieve in every aspect, otherwise, you are just a good person but you mess up everything, which is not correct, even if you have a good attitude.
Everything related to the business process should match this goal. At present, I have a VAU (user satisfaction rate) for Norway in the fourth quarter, which is 4.6, but we still need to improve it. There is still room for improvement. However, overall, in Norway, one out of every four test drivers will order a car, which is still a very high proportion. From this perspective, the Norwegian team has done a very good job.
Question: Do you have a long-term plan, for example, what percentage of the overseas market do you want to occupy?
Li Bin: Of course, we have a long-term plan, but I think these plans are more internal. When we talk externally, it feels like we are making a declaration. If we look at the high-end market, it’s roughly 8 to 10 million units worldwide, but China is the largest market, accounting for about 40%, while Europe and the United States account for about 50%. So, if we look at it, China, Europe, and the United States together account for 90% of the global market.
Without a doubt, if we want to succeed globally, we must succeed in both the European and American markets. Otherwise, if you rely only on the Chinese market, it’s difficult to participate in global competition.
As a Chinese company, there is a lot of pressure to expand to other markets. But I think somebody has to do it. If we don’t do it, people will feel that no Chinese company can do it. Although we know that it’s difficult, we are willing to bear this pressure and risk and provide our products and services in Europe and the US.
Of course, we are just taking the first small step. In 2022, we may take slightly bigger steps, and then we will gradually pick up the pace. It’s much more difficult than selling cars in China. We have a long-term plan and are mentally prepared, even if we encounter various problems that we don’t usually encounter in China, we will remain patient and determined to do this.Question: Apple is also making cars, what changes do you think it will bring to the industry or practitioners like you?
Li Bin: Everyone is paying special attention to Apple. It has been preparing for this for a long time. now everyone thinks it is getting closer. We also see that some companies in the industry chain have begun to move based on their requirements. I think this is a positive thing. For the industry itself, everyone has more products to choose from. From a competitive standpoint, it is certainly more intense, but I think it is meaningful for users and the industry.
Question: So will NIO’s goal be to benchmark Apple?
Li Bin: They probably won’t push cars that are too cheap either.
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.