English Markdown
At the 2022 NIO media face-to-face event, NIO founder Li Hong Qin shared his summary of 2022, difficulties encountered, and future prospects. Here we share the Q&A session that everyone is most concerned about in advance. Let’s hear Li Hong Qin’s answers about the planning of the new brand, channel planning, and multi-model strategy.
Q1: XPeng and Tesla will not launch many models. Will the continuous launch of new cars by NIO increase overall sales? What is the reason for launching new models? Will so many cars bring challenges to the supply chain, software, and cost?
A1: Some models enrich the product line, while others are responsible for achieving sales volume. As a luxury brand, it is necessary for NIO to have a rich product line. However, at the same time, we must achieve a high degree of platformization. NIO hopes to achieve three major categories in the passenger car category: sedans, SUVs, and crossover models (MPVs and hunting-style ET5s belong to this crossover model category).
The main models of the new brand, Alpine, are expected to have a monthly sales volume of 50,000 units, and the planning of product richness and single-model sales of this brand will be different from that of NIO.
Q2: What measures will be taken for the supply chain issue? Will NIO have organizational restructuring similar to XPeng’s Ideal? Will NIO phones be released at Nio Day?
A2: NIO is not a company that is powerless on the supply chain. Although there are challenges at present, I think we can do better in the future in supply chain management.
This year’s challenge lies in the supply chain, coupled with the intermittent epidemic control, which results in great pressure. The supply chain of intelligent electric vehicles is more complex than that of oil-fueled vehicles. On average, each car has more than 1,000 chips, with hundreds of categories included. You don’t know where there might be problems next week, and it has a certain degree of unpredictability.
Organizational structure does not have to follow the trend. The rhythm of each company is different, and organizational adjustment is not necessary for every company. Adjust when necessary, and don’t adjust when not necessary. We have our own rhythm. We hope that all companies can smoothly carry out their organizational innovations.
The phone will not be released at this year’s Nio Day. NIO has invested reasonable and sufficient efforts, which are controllable by the company. And mobile phones and car machines have a certain degree of reuse.Q3: What specific impact will relaxed control have on NIO?
We have already made many precautionary arrangements. Of course, since the policy adjustment has been made for only a few days, we cannot make a clear prediction about the future. However, we will do our best to manage and control the health of our employees, including providing care for them.
Q4: Two months have passed since NIO’s Berlin launch event. Can you share your thoughts on the European market in these past two months? How are NIO’s subscription and purchase orders in Europe?
NIO will not disclose its order status. In the European market, firstly, NIO’s brand and culture are recognized. Although not as large a scale as in China, there are many positive or critical voices. Secondly, there will be obstacles for new brands in Europe, and it will not be in short supply when they first arrive. However, it would be beneficial for the team to come back and solve the problems.
Q5: As 2022 is coming to an end, how would NIO evaluate the achievements of this year? What experiences has NIO gained in supply chain, product planning, technology investment and market competition in this year? If time could rewind, what decision would NIO revise?
A5: Of course, every year has its own progress and experiences. For example, last year, we talked about NAD and the second-generation platform as “pie in the sky,” but this year, the cars are running all over the streets. I think that we are more mature in all aspects today compared to the same period last year, and the company is still progressing.
We also remind ourselves constantly that if at any moment we feel that something is perfect, we need to remind ourselves that there may be a problem somewhere.
But I think that if we could go back a year ago, we seriously underestimated the impact of overlapping pandemic policies and the ET7 mass delivery time for us this year. Both the guarantee of the supply chain and the quality management of the initial ET7 bring challenges.
If we had two more months in Shanghai, I would mobilize as many colleagues as possible, including supply chain partners, to move to the front line and continue our work.
Q6: Will NIO carry out a sinking layout? What are the special advantages of NIO in Europe?
A6: Currently, the cheapest car that NIO plans for the future is the ET5, and we will not use a single brand to cover all price ranges; we will leave other price ranges to be resolved by new brands. Cars include perceptibility, emotional value, and tool properties. It is necessary to satisfy different needs with multiple brands.
The penetration rate of electric vehicles is rapidly increasing, mainly in the price range of 200,000 to 300,000 RMB. Therefore, in this price range, Tesla, BYD, and XPeng are both promoters and beneficiaries. Similarly, for the market above 400,000 RMB, NIO is a promoter and beneficiary.In the European market, we don’t just simply find a car rental company. We believe in establishing a strong foundation based on brand, product, service, community, and the recognition from the locals.
The first thing we need to adhere to in Europe is a long-term strategy. Changing consumer behavior takes time and shortcuts should be avoided. We don’t want to be an outsider in Europe, but rather integrate into the mainstream consumer market and ideas.
Q7: What are the main challenges and expansion plans for the North American market compared to the European market? Can you provide an update on the progress? According to NAD and NOP+, it seems that most NAD functions won’t be available until 2024 or even later. Is there any plan to charge for NAD as a separate item? Will the sub-brands integrate with NIO’s battery swapping resources?
A7: The North American market is undoubtedly tougher for Chinese companies compared to the European market. At least China and Europe share similar definitions regarding automotive products, safety regulations, and entry rules. China’s automotive industry developed along with the European standards system over the past 40 years.
Therefore, producing a car for the European market might cost a few hundred million, while making a version for the American market could cost several billion or even more.
Secondly, there is little chance of separating NAD from NOP+. We will keep it free for a while, and when it’s time to charge, we will charge for it.
Thirdly, our goal is to achieve cross-brand compatibility for our battery swapping system. We may be flexible in terms of service, for example, sharing resources within Shanghai’s central area or during off-peak hours. During peak hours or holidays, we may not do so. In the future, we will rely on algorithm-based operation methods for more flexibility.
Therefore, I think it’s crucial for the entire group to start acting fast.
Q8: In the current market where many competitors are copying NIO’s strategies, how does NIO maintain its competitive edge? Should we be concerned about the financial report’s loss?
A8: It’s a good thing that others are willing to watch and follow us. It means that we are doing the right thing. However, the most disastrous thing is to be beaten by imitation. Our only solution is to keep running fast without wavering from our direction.
Regarding return on investment, if you are in the food and beverage industry, it may take only a few months. But for the automotive industry, it takes at least ten years. Therefore, based on our establishment in 2014, I can see our profitability by the end of 2024. Looking at our later stage, our loss basically balances with the R&D investment.
The peak period of this track objectively will not arrive for at least a dozen years. Therefore, it is not necessarily a good judgment to pursue profit maximization in a hurry at this time. We believe that we should still invest in product technology, service capabilities, infrastructure, etc. to achieve a competitive state. Intelligent electric vehicles are one of three trillion-level tracks, and we should judge them with a longer period.
Q9: Has NIO’s strategy and tactics changed from 8 years ago?
A9: The direction and framework of the strategy have not changed, and the tactics have become more refined and precise. Sometimes there will be continuous setbacks and summaries at the tactical level. In August 2014, when I talked to Li Bin about the entrepreneurial project of today’s future, Li Bin opened an Excel sheet he made and showed it to me.
80% of what I’m talking about today is in that table: the cost of the battery swap station, the average number of people per station, the cost of labor after ten years, and how many square meters, etc. Looking back today, more than 90% of the things on Li Bin’s table are still being done by us. From the perspective of today, the deviation has not exceeded ±20%.
Regarding battery swap, the product and layout of the battery swap station presented today are mainly contributed by Dr. Shi Fei and his team. I think that the consensus in the industry will eventually be reached, but the part of the disagreement in the process is the part that has opportunities.
Q10: What difficulties have NOP+ encountered in research and development? Will homogenization occur with the self-development of suppliers such as Bosch?
A10: NOP+ did indeed lag behind expectations due to subjective and objective reasons. On the one hand, road testing was not convenient recently. On the other hand, we used very new parts, and the production time of suppliers is also our prerequisite. I am sorry for the users of the 2.0 platform. Currently, what we can do is to work hard, push it as soon as possible, and charge it later.
Regarding homogenization, I think that the performance of products will inevitably be homogenized, but we need to grasp our own pace. And with the launch of Alps, everyone shares the intelligent platform, and we may achieve a certain scale within the system.
Q11: Will there be any changes in sales channels next year?
A11: The increase in channels next year will be similar to that of this year. Compared with other brands, NIO and Tesla have relatively large masses in first and second-tier cities. It is not that we do not value the third- and fourth-tier markets, but the time has not yet come. We are sinking step by step.The weight of XPeng and LiXiang in the fourth-tier market is relatively high, which is related to their product positioning and pricing. We will continue to adopt this direct sales approach and focus on urban business districts. There might be two changes: 1. we need to continuously adjust the proportion between the city center and the suburban center, and between the first and second-tier cities and the third and fourth-tier cities; 2. NIO will improve the single-point efficiency of its own channels.
Q12: If NIO wants to achieve profitability, it needs to make some adjustments in research and development investment. NIO currently has many new businesses, including mobile phones and upstream mineral purchases. So, when will NIO reach a turning point or peak in research and development investment? What is the sales target of the NT 2.0 platform next year?
A12: Next year, the sales of the 2.0 platform will be about equal to our annual total sales. As for the turning point in research and development, I think it is too early to judge now.
The market pattern has not reached a turning point yet. For example, if there is a new battery formula, will you follow it or not? If a generational change appears in lidar technology, will you follow it or not? I think it is harmful to make an early judgment on the turning point at this time. As long as my gross margin is stable and sales are increasing, the burden will become smaller and smaller, and the R&D burden will be effectively shared.
Q13: Why do we need to have a second brand?
In the pure electric high-end market above RMB 400,000, NIO’s market share has reached 77.6%. With limited growth space in the existing market, we need to proactively explore a larger market.
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.