Sales Volume Strikes Back
Author | Roomy
Editor | Zhou Changxian
Last week, NIO was attacked by short-selling institution Grizzly Research, arousing public attention. Fortunately, the doubts raised by Grizzly Research were soon clarified by the market, and the gloom dispelled rapidly.
On July 1st, NIO released its vehicle delivery results for June, which set a new monthly record and not only boosted NIO’s confidence but also provided a strong response to Grizzly Research’s “short-selling” attempt.
The data shows that NIO delivered a total of 12,961 new cars in June, an increase of 60.3% year-on-year. From January to June, NIO delivered a total of 50,827 new cars, a year-on-year increase of 21.1%. As of now, NIO has delivered a total of 217,897 vehicles.
This performance can be summarized as “setting a new monthly delivery record, and all data continues to improve.” NIO stated that the rebound in sales was expected as the supply chain and vehicle production recovered.
In fact, “monthly deliveries exceeding 10,000 units” has long been the market’s expectation for NIO, and for NIO, it can be described in four words, “it should be so.”
Behind NIO’s record-breaking monthly delivery of more than 10,000 units in June, there are two important supports: the NT2 platform’s new products entering a period of intense promotion, and technological innovation entering the deep water area.
It is worth mentioning that the capital market, which is always picky, not only ignored Grizzly Research’s short-selling attempts but also expressed full recognition of NIO’s new technologies and car models with practical actions. Morgan Stanley gave NIO an increase rating with a target price of USD 31. At the same time, Daiwa Capital also reiterated its buy rating on NIO.
The impressive delivery performance and recognition from the capital market not only put a period to the ups and downs of NIO in the first half of the year but also laid the foundation for the second half of the year to blossom.
Fighting Back with Sales Volume
In the first half of the year, NIO faced great challenges. Its competitors, such as XPeng and Li Auto, were thriving in the same battlefield, while Grizzly Research kicked NIO when it was down. In the public debate, NIO’s market and reputation were both damaged.
Headlines in newspapers were mostly around “NIO Falls Behind?” “Will Li Bin become the most miserable person again?” Various comments were made, and saying that there was no pressure was a lie. But NIO revealed that it was “not worried.”
The reason for not being worried, as NIO put it, was that the turmoil in the first half of the year not only allowed the brand to settle but also cultivated its inner strength and began to demonstrate its hard muscles externally.
June’s delivery volume exceeding 10,000 vehicles gave the industry new expectations for NIO: a company that has passed through the hibernation period and is about to enter a new growth period.
From NIO’s release of technology and new cars, it can be seen that Li Bin has changed some of the ways of operation. Or it can be said that he has become “more aggressive”, with faster and more definite tactics than before.
As a key weapon for NIO’s future competition, the new car built on the NT2 platform has entered a period of intensive release. In June of this year, NIO released the all-new SUV model ES7, which is based on the second-generation technology platform NT2 and, along with the previously released ET5 and ET7, has launched three new cars on the NT2 platform.
From the construction of the NT2 platform, one can also see the “aggressiveness” that Li Bin has brought to NIO.
Through the NT2 platform, NIO’s new car models are equipped with advanced technology that can realize more functions. Among them, the NIO Pilot automatic assisted driving system on the NT2 platform is built on NIO’s own technology, including perception, algorithm, and the entire regulation and control system.
Through the enhancement of software and hardware platforms, full-stack self-developed algorithms, end-to-end closed-loop data, and operational capability, the NT2 platform has achieved the ability to quickly iterate and upgrade. In addition, the NT2 platform has launched more than 200 new features, allowing NOMI to achieve a comprehensive evolution of interactive experience.
It can be said that the emergence of NIO’s NT2 platform has pushed China’s automotive intelligence to new heights.
For example, NIO’s first new car on the NT2 platform, the ET7, has set off an internal competition within China’s intelligent car field. NIO’s chief engineer for the entire car program, Xiao Baihong, introduced that the R&D team has achieved two “firsts” in the chassis technology of the ET7, namely China’s first full-stack autonomous development of the suspension control system and China’s first autonomous development of the chassis domain controller ICC.
The self-developed chassis controller allows NIO to have absolute autonomy. Whether it is the self-developed intelligent chassis or the use of LiDAR, NIO is not hesitating or wavering when it comes to autonomous driving. “High performance, high safety” is the technology label that Li Bin is eager to apply to NIO’s models.
In addition, NIO plans to continue to increase its investment in the field of power batteries. In order to further improve the endurance of its car models, NIO is currently working on the research and development of an 800V battery pack that supports battery swapping and ultra-fast charging, which is planned to be launched in 2024.
Currently, NIO has built a relatively comprehensive technological layout and established an independent research and development system that includes motors, electronic controls, battery packs, and intelligent systems. Keeping the core capabilities in its own hands is NIO’s bargaining chip in the competition.Starting from Li Bin’s grand dream of building a car company in 2014, self-reliance has been NIO’s constant pursuit. Today, it has become his most powerful weapon and the capital that helped NIO distinguish itself from skepticism.
NIO overcame two challenges
No matter how grandiose a dream is, it must be grounded in reality and subjected to the most direct market test. In the first half of the year, NIO passed two tests or two challenges, you could say.
The first challenge was the degree of consumer recognition of NIO, and NIO smoothly passed this test by delivering over 10,000 cars in June. Currently, NIO is facing the second challenge, which is the capital market.
As the bearish sentiment fueled by Grizzly Research continued to ferment, NIO needs to use technological leverage to regain the confidence of the capital market. Obviously, the capital market recognizes Li Bin’s persistence in self-reliance.
Regarding NIO’s development prospects, Morgan Stanley believes that with the help of a strong product line, NIO’s June sales growth and good sales trends in the second half of the year will restore investor confidence in the company’s operations and trigger a stock price rebound. Daiwa Capital reaffirmed its buy rating on NIO.
China International Capital Corporation Limited (CICC) concluded in its research report that high-quality services and intelligent electric vehicle technology based on independent R&D will further strengthen NIO’s competitive advantages. NIO continues to enrich its product portfolio, having already launched four sporty multi-purpose SUV models, namely the ES8, ES7, ES6, and EC6, and two sedans, namely the ET5 and ET7. CICC believes that NIO has a highly competitive high-end electric vehicle business, and the company plans to enter the mass market in 2024 with a new brand.
In recent research reports, Deutsche Bank believes that the NIO ET7 has excellent power performance and high intelligent configuration, and its new model launch will have a significant market impact.
The trust of the capital market in NIO is also the best counterattack against the Grizzly Research’s allegations of NIO. Grizzly’s accusations had two pillars: inflating revenue and net profit through the BaaS business, and over 21,000 fake batteries.
After a thorough analysis, JPMorgan and Daiwa believe that “NIO’s 2021 IPO prospectus in Hong Kong shows that all 40,053 battery assets of Wei Neng in September 2021 were from BaaS users, of which 19,000 batteries were only used as asset securitization financing and only a portion of the assets.” Therefore, the speculation that Wei Neng purchased over 20,000 additional batteries from NIO is a misunderstanding.# Translation
Deutsche Bank stated that no new significant information was found in the short-selling report regarding Grizzly Bears’ unfounded concerns about NIO’s battery asset management business. Additionally, Deutsche Bank shared some background information regarding NIO and its relationship with NIO.
The capital market’s trust is also due to NIO’s willingness to spend money on research and development and continuous technological innovation. As of the end of May, NIO had filed approximately 5,000 patent applications and granted patents. Continuous technological innovation is inseparable from NIO’s increased R&D investment. The first-quarter report for 2022 shows that NIO’s R&D investment in the first quarter reached CNY 1.51 billion, a year-on-year increase of 132.9%.
There are only two reasons for spending a large sum of money on R&D: to maintain NIO’s competitive position and to lead the Chinese automotive industry in the intelligent era.
Conclusion
Times are changing, and significant issues keep emerging. A new battlefield regarding the present and the future is being opened, and nothing will remain the same.
Musk and his team from across the ocean have successfully stirred up the New Energy Vehicle market in China. In the future, who will become the winner? Will it be the faraway Musk, the tireless adventurer Li Bin, or other fierce competitors?
There is no doubt that Li Bin hopes it will be himself.
Obtaining the right to speak for China’s automotive industry in the intelligent era is Li Bin’s dream, as well as the dream of all Chinese automotive professionals. Li Bin, He XPeng, and Li Xiang all know that technological innovation is a powerful weapon that can help them win the battle for the right to speak.
In fact, from the history of 1G to 5G, countries and companies have always been openly or secretly competing for the “Iron Throne” of the communications industry. In recent years, whether Huawei has been suppressed or DJI has been sanctioned, they all tell a story that “the battle for the right to speak is imminent.”
The automotive industry, which is currently transitioning to intelligent connected vehicles and autonomous driving, is inevitably moving “full speed ahead” towards achieving a 5G mobile network. The prelude to the rebuilding of the automotive industry’s landscape has begun. From 2019 to the present, in just two or three short years, new automakers such as NIO, XPeng, and Li Xiang have gained some confidence and written new chapters for Chinese automotive brands in the global competition.
Against this backdrop, only by viewing Grizzly Bears’ short-selling report from a higher perspective can we understand the cause and consequences of the event.
Similarly, looking back at NIO’s various barriers in the first half of the year can help us better understand its courage and hard work in advancing amid challenges.
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.