“NIO’s sales target for next year is to surpass Lexus.”
In 2023, NIO’s performance indicators for the entire year were set by Li Bin early on. Li Bin judged that 2023 will be a year for the release of demand and sales of NIO’s second-generation technology platform products. It is expected that the potential for overall sales of the second-generation platform can be seen in the fourth quarter of next year.
Facing this sudden KPI from Li Bin, Qin Lihong seemed to have no great pressure and stated that “this activity is not difficult.” With NIO’s rich product matrix, Li Bin and Qin Lihong do have enough confidence.
Since the delivery of ET7 began in March 2022, NIO successively launched mid-to-large SUVs ES7, ES8 (version 2022), ES6, EC6, and also released the sports SUV EC7 and the new ES8 at NIO DAY 2022, achieving an upgrade from “866” to “877.”
Li Bin also revealed that NIO plans to launch three new cars in 2023.
After getting out of the new product “drought” and no longer worrying about the lack of offers, NIO still cannot avoid suspicion of “simple clone” due to the high consistency between its electric drive systems, motor configurations, and intelligent driving aspects.
If NIO’s second-generation platform NT2.0 has entered the platform warfare stage, then for the highly anticipated 150-degree battery pack, NAD intelligent driving and launching enough models, achieving the value of platform’s maximal expansion is undoubtedly NIO’s big move in the future.
Platform-based Car Manufacturing, Rejecting Simple Clones
On December 24, NIO released EC7 and the new ES8 at one fell swoop. However, the two cars did not cause too much surprise like the ET7 and ET5.
The reason is not difficult to find.
The EC7 and new ES8 based on the NT2 platform are highly consistent with the previous models in the three aspects of “three electric” (battery pack, electric motor, electronic control unit), cockpit and intelligent system, including two versions of the battery pack – 75kWh and 100kWh, four Nvidia Orin chips, and one TuDato LIDAR intelligent driving system.
Apart from the car body size, interior material, air suspension, and other configurations, there is basically no difference in other aspects. NIO is inevitably suspected of cloning its products.“`
For NIO’s “nesting” behavior, Li Bin explained that: “We can’t simply interpret the similarity of products as” nesting “. NIO’s product style is increasingly settling into the design trend that is most suitable for smart electric vehicles, which conforms to NIO’s own defined genes.”
“Porsche’s front and rear are very similar, BMW’s iconic designs are the same, and Volkswagen has always been nesting, but this does not affect its sales. NIO’s design is becoming more and more faithful to itself, not simply nesting. High-end brands need to have some introverted spiritual support, such as brand tonality, product styles.” Li Bin further explained.
In fact, the high consistency of the vehicle model is actually a manifestation of platform-based car-making, and IDEAL and XPeng also have similar operations.
After IDEAL ONE was discontinued, IDEAL successively released L9, L8, and L7. The three models also share a large amount of software and hardware configurations, and even the appearance design is highly consistent, and they have also been described as “nesting” by the outside world.
XPeng has three product platform matrices: E, F, and H. In addition to the G9 based on the E platform this year, the models under the three platforms will also share power systems, intelligent driving systems, chassis, electronic and electrical architectures, as well as supply chain and production manufacturing capabilities in a large proportion.
Platform-based car-making is a traditional skill in the automotive industry, and the head new forces such as We Xiaoli have successively entered the platform-based car-making stage, which also shows that they have achieved phased results in electrification and intelligence.
From a product perspective, the essence of platform-based car-making is: replicable experience.
On the one hand, this operation increases the sharing, and even reusing, ratio of raw materials and components, thereby lowering costs and increasing gross margins through large-scale procurement. The reuse rate of parts in Tesla Model 3 and Model Y exceeds 75%.
On the other hand, at the beginning of product development, a replicable product example can reduce the R&D costs of the next generation of products. After the Ideal L9, at least 80% of the R&D time was saved in the Ideal L8.
It can be seen that platformization is also a road that new car forces have to take.
Although it is the same set of electric and intelligent systems, NIO still meets the needs of different segmented markets through some configurations, such as the refrigerator of the new ES8 and the lift-up and down tail wings of the EC7.
Platformized car making can indeed reduce car-making costs and improve vehicle gross margins, but how to maintain its individuality through details, instead of homogeneous products, is obviously a problem that cannot be ignored in platform modularization.
NIO’s Solution: Blossoming in Multiple Ways
At NIO Day 2022, Li Bin summarized all the achievements of NIO since its establishment:
As of the end of November 2022, NIO has delivered a total of 273,741 cars, built 97 NIO Centers, 298 NIO Spaces, and 1,286 battery switch stations.
In addition, the intensive delivery of ES7, ET7, and ET5 also accelerated the transition of NIO’s new and old platforms, but NIO’s sales volume from January to November 2022 was 106,671, completing only 71% of the target sales volume of 150,000.
Regarding the problem of rich models and no obvious increase in sales volume, Qin Lihong believes that factory full load situations are not common (affected by the epidemic), with a monthly production capacity of more than 10,000 vehicles.
“NIO is in the process of transitioning between the first and second generations of products, and the transition is approaching the end. After the production capacity is fully ramped up, it will enter the straight-line acceleration phase in the second half of next year,” Li Bin further added.
Thanks to the full release of production capacity, Li Bin believes that by 2023,
NIO sales will surpass Mercedes-Benz, BMW, and Audi, but still have a distance from Lexus,
and he is very confident to surpass Lexus.
According to data from the China Association of Automobile Manufacturers,
in 2021, Lexus sold a historical record high of 227,000 vehicles in China,
and from January to November 2022, Lexus accumulated sales of 168,600 vehicles.
This means that in order to achieve Li Bin’s goal, NIO’s sales next year need to almost double.
From the product matrix perspective, NIO has formed three sub-segments: EC, ES, and ET.
Among them, “EC” is a sleek SUV with a coupe-like design, “ES” is an SUV that caters to both home and commercial use,
and “ET” is positioned as a mid-to-large-sized sedan, which can be said to cover the largest sub-segments among new car makers.
However, if NIO’s sales data is split, the average sales volume of each of NIO’s products rarely exceeds 5,000 units.
After the release of new cars such as the ET5, NIO once faced doubts that “3 cars sell 10,000 units per month, and 5 cars also sell 10,000 units per month.”
For comparison, the peak monthly sales of the Ideal ONE reached 14,000 units, and the XPeng P7 and the JiKe 001
have also each broken the monthly sales of more than ten thousand records.
Obviously, NIO has more product planning, but it may also bring about “inefficiency” issues.
Regarding why NIO does not concentrate its efforts on creating blockbuster products, Qin Lihong believes that although the combined sales of ES6 and EC6 did not achieve the effect of two models, they still had the effect of one and a half models. If NIO lacks any one of them, the additional 0.5 increase will not be available. Users hope to have a range of options, rather than just one dish to choose from.
In other words, NIO actually refers to the traditional automakers’ “sea tactics,” and expands around the two major categories of cars and SUVs.
According to the plan, NIO plans to release three new models in 2023 and have eight models on sale simultaneously in the second half of next year.
For this product strategy, Li Bin believes that higher-end brands have higher demands for personalization, and the performance and intelligence level of electric vehicles cannot be compromised. Therefore, NIO has opened up the three systems of the second-generation models, including battery, cabin, and intelligent driving. However, in terms of modeling, size, and space, it still needs to meet the needs of different consumers.
Undeniably, the “vehicle sea tactics” can attract more potential car buyers’ attention and promote conversion to a certain extent. But the problem that comes with it is that NIO is already at both ends of the balance- heavy investment in research and development and operation.
On the one hand, NIO’s R&D investment plan is maintained at the level of 3 billion RMB per quarter.
NIO is the domestic new force with the deepest and widest layout of new technologies. In addition to the general self-developed cabin and intelligent driving systems, NIO has also entered into the fields of motors, batteries, chips, and even mobile phones. It has also assisted the laser radar supplier Tianding Technology to develop signal processing chips and is expected to start mass production next year.
This also means that it is more difficult for NIO to achieve a balance between profits and losses than others.
In addition to the layout of electric and intelligent vehicle development fields, NIO will also build 1,700 charging stations in China next year and launch the third-generation charging station with two additional Laser radars and two NVIDIA Orin chips, which can automatically enter the service area for rapid battery replacement on highways. The plan is expected to be implemented next year.
On the other hand, NIO has also become embroiled in a quagmire where the wider its coverage, the more severe its losses for consumers.
In the first three quarters of this year, NIO’s net loss expanded by 311% year-on-year to 7.99 billion RMB, nearly twice the annual loss last year. Li Bin once did some calculations, excluding the cost of service personnel, NIO’s annual loss on services is about 4,000 RMB per vehicle.
As a “user company,” NIO can be said to spare no cost and make every effort to do a good job of being a user company.
As the 300,000th mass-produced vehicle officially rolls off the assembly line, NIO’s user base continues to expand, and whether it can maintain high-level user service in the long run is a challenge for NIO.
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Platform-level competition has just begun, and NIO’s system efficiency is about to be put to the test. Whether it can strike a balance between both ends or not, there are still many challenges before NIO can reach profitability.
Uncertainties in the Turning Stage
User experience and service are the biggest differentiating factors for NIO, and this is the reason why it has surpassed BBA in certain regions and certain models in the past.
In the high-end pure electric vehicle market in China with prices over RMB 400,000, NIO’s market share has reached 77.6%, and the latest average transaction price has reached RMB 466,000.
Although NIO’s market share is not significant in the entire automobile market, the NIO ES8 has already surpassed traditional luxury car brands like BMW X7 and Mercedes-Benz GLS in sales in the four first-tier cities.
Undoubtedly, NIO has become a benchmark high-end brand that cannot be ignored in the camp of Chinese brands.
In Li Bin’s eyes, the development of intelligent electric vehicles can be divided into three stages:
- 2014-2019: Group training
- 2019-2024: Qualifying/Group stage
- After 2025: Real finals stage
Li Bin believes that NIO is currently in the later stages of the group stage and qualifying, and in this race of technological change, the accumulation of technology and core capabilities of intelligent electric vehicles, whether it be traditional automakers or new forces in car manufacturing, will be the key factors in determining the final standings.
As the helm of NIO, Li Bin’s strategic judgment and leadership style determine NIO’s direction.
It is reported that NIO has the habit of setting long-term goals like Japanese enterprises. Li Bin usually looks at the big picture for a long term, which may provide a footnote for the large-scale investment in the current stage.
For example, in the early days of NIO’s development in 2018, internal staff believed that there was no need to rush to expand channels and that they could pilot in 10 cities. However, Li Bin thought that since they will eventually do it, NIO built dozens of “Niu houses” nationwide in just a year.
Investment in research and development and channels is essential, but the other side of the coin is that, compared with competitors in the same industry, NIO will bear losses and uncertain research and development outputs for a considerable period of time.
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According to the previous plan, NIO will achieve a balance of income and expenditure in the fourth quarter of 2023. However, the statement at the financial report meeting in the third quarter of 2022 has changed to “the NIO brand can achieve a balance of income and expenditure“.
This slight change indicates that the market is unlikely to see a “profitable” NIO in the fourth quarter of next year.
“As long as the seeds are sown, it is impossible to reap the harvest tomorrow,” Li Bin emphasized most frequently at the exchange conference.
In his view, the automotive industry is a marathon. To achieve long-term competitiveness, it is essential to practice inner strength. Focusing on the layout of intelligent and electric upstream is undoubtedly necessary. No matter how the external environment changes, NIO is determined to invest in R&D and infrastructure, which can enable us to go further.
From the current perspective, NIO has launched a full-line campaign, including mid-to-low-end brands, self-developed chips, self-developed and produced batteries, mobile phone business, and overseas markets, all of which have entered the stage of investment.
Against the backdrop of the whole market’s pressure, whether NIO can achieve its established goal in 2023 will directly determine whether it can make a profit in 2024.
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.