WEILAI reflects on the ability to control the production chain and wants to find a greater sense of existence through new brands

Zhou Ju, a reporter from the Economic Observation Network, said: "I think it is the norm now, the time when the 'pyramid' market pattern is formed. Different positioning of the brand, when everyone solves the problem of production capacity and initial climbing, there will be such a (sales) distribution, I think it is not surprising. In response to Weilai's loss of the sales champion of new car manufacturers for several consecutive months, the answer of Qin Lihong, the co-founder and president of Weilai Automobile, made the industry read the meaning of "this is sooner or later".

Qin Lihong's logic makes sense, but it does not divert the industry's attention from the change in rankings. The sales ranking of new car manufacturers has changed significantly from the second half of the year. According to the latest data, Weilai sold 10,878 vehicles in November, an increase of 105.6% year-on-year, but it was still surpassed by Xiaopeng and Ideal, ranking third. Since the second half of the year, this is the fourth month of Weilai's failure to win the championship, which has also led to the cumulative sales of Weilai in the second half of the year to fall back to fourth, ranking behind Xiaopeng, Ideal and Nezha. The previously stable pattern of Weilai, Ideal and Xiaopeng "three points of the world" has been broken.

For WEILAI's performance next year, Qin Lihong expressed his views at the NIO car battery flexible upgrade conference on December 5.

"Frankly, the first two years of deliveries of a car that is 1/3 or 2/3 cheaper than ours are not as good as ours, which is something I don't understand." Qin Lihong said. In response to the differentiation of sales, he said that Weilai will not use short-term sales volume to demand itself, the key is to look at the gold content of delivery. In view of the production capacity constraints, he is relatively satisfied with the state of WEIlai in recent months, because the production and marketing synergy efficiency is relatively high.

How to achieve a breakthrough in production capacity as soon as possible and a more efficient synergy between production and marketing is considered to be the biggest challenge of NIO at present, and it is the main explanation for its failure to maintain a leading pace of delivery scale growth.

In fact, whether it is to blame sales on insufficient production capacity, or to become the only new car manufacturer to stop production due to lack of core, behind these objective reasons, what is exposed is Weilai's estimation and early investment in capacity reserves, the ability to adjust and control the production line, and the lack of management capabilities of the entire automotive supply chain. In fact, this is the new car manufacturers into the auto industry at the beginning, it was identified as the "soft underbelly", the car is after all a large-scale manufacturing industry, as the leader of the new car camp, the rapid rise in sales scale, but also let Weilai quickly taste the constraints from the manufacturing link.

For the external sales competition, compared with the internal competition of new car manufacturers, Qin Lihong emphasizes the trade-off between camps. He reminded that Weilai Automobile's competitors are not new car manufacturers, but traditional fuel vehicles.

"The premise for us to further expand the results in the future is not the ideal, Xiaopeng sells less, it should be BBA less to sell, because the high-end market competition is not so fierce, we have to expand the results in the high-end mainstream fuel vehicle market, rather than to follow other new energy brands positioned in a market to compare how much." Qin Lihong said.

Capacity constraints

At the actual operational level, the fluctuation of NIO's sales also projects its current growth stage and characteristics. The first is the limitation of production capacity. Although NIO is one of the first new car manufacturers to be established, its current production capacity has obviously not matched its rapidly expanding demand scale. In April this year, Li Bin said that WEIO's monthly production capacity was 7,500 units, which was increased to 10,000 units in the third quarter, but this obviously did not fully meet the demand.

"In the short term, we are still limited by production capacity, although the Xinqiao base plans a long-term production capacity of 1 million units, but in the short term it is rapidly improved (more difficult)." Qin Lihong said. Whether the lag in the planning of production capacity will make Weilai miss many opportunities during the high-speed growth period is also a problem that Weilai is currently focusing on solving. "The market opportunities are there every day, and we don't catch more opportunities, which also makes us think about this (capacity) thing."

Unlike Weilai, Ideal and Nezha chose the road of self-built factories at the beginning, and Xiaopeng also started investment in self-built factories after being initially foundry by Haima. In fact, NIO had a plan to build its own factory at the beginning of its establishment, and it was once close to the landing of this plan two years ago, but it was ultimately delayed for various reasons.

As we all know, WEILAI had planned to build a factory in Shanghai, but was eventually robbed of the "quota" by Tesla's Shanghai Gigafactory, and then WEILAI chose to co-build the Hefei factory in Anhui Province by Jianghuai Automobile.

In May 2019, NIO signed a framework agreement with Beijing Yizhuang International Investment & Development Co., Ltd., under which NIO will receive a RMB10 billion investment from Yizhuang SDIC and will set up a new entity "NIO China" in the Beijing Economic and Technological Development Zone. In addition, NIO will build a new plant in the Beijing Economic and Technological Development Zone to produce its second-generation platform models. But this plan has once again been shelved with the era of Yizhuang financing projects.

Today, NIO has begun to step up its expansion of production capacity. In October this year, NIO announced that the production line of JAC NIO Hefei Base has completed a phased upgrade, which will be completed in the first half of 2022, and the production capacity will reach 240,000 units from 120,000 units after the upgrade is completed. Nio said that it can increase its annual production capacity to 300,000 vehicles by working overtime or increasing the frequency of shifts. At that time, the problem of insufficient production capacity of Weilai Automobile will be alleviated.

In addition to upgrading the capacity of existing factories, in April this year, the Xinqiao Intelligent Electric Vehicle Industrial Park planned by WEILAI and Hefei, Anhui Province, has also officially started construction. According to the data, the Xinqiao Intelligent Electric Vehicle Industrial Park invested 50 billion yuan in advance, and the planned vehicle production capacity was 1 million vehicles per year. In this case, Qin Lihong believes that WEILAI's production capacity will not be a problem in the long run.

In fact, at the moment when the competition in the new energy vehicle market is upgrading, new car manufacturers are rapidly reserving production capacity. Previously, Ideal Auto pocketed a factory in Beijing Hyundai with a production capacity of 300,000 units, which was believed to help Ideal Auto quickly increase production capacity. At present, the ideal Changzhou plant has an annual production capacity of 100,000 units, which is being renovated and expanded, and the production capacity will be increased to 200,000 units in 2022. After the completion of the renovation of the first hyundai plant in Beijing, the ideal automobile production capacity will reach 500,000 units.

Xiaopeng's production capacity is also expanding non-stop. After Xiaopeng's self-built Zhaoqing plant was put into operation, its second plant in Guangzhou broke ground and is expected to be completed and put into operation by the end of 2022, with a planned annual production capacity of 100,000 vehicles; in July this year, Xiaopeng Automobile's Wuhan plant was launched, with a planned annual production capacity of 100,000 vehicles; in August, Xiaopeng Automobile's Zhaoqing plant phase II project increased capital and expanded production, with a planned annual production capacity of 100,000 vehicles. After the expansion of the three self-built plants has been completed, the annual production capacity of Xiaopeng Automobile is expected to reach 400,000 units.

In addition to the constraints on production capacity, the upgrading of production lines and the shortage of components such as chips have also had a certain impact on the production and sales of Weilai Automobile. Previously, Weilai Automobile said that its sales in October were affected by the upgrading of some production lines and the launch of new products in preparation. In the same month, NIO delivered only 3,667 units, down 65% from September. In November, as production lines resumed, NIO sales rebounded to more than 10,000 units.

In March this year, WEILAI Automobile announced that it would suspend production for 5 working days due to lack of cores, becoming the only new car manufacturer to stop production due to chip shortages. In addition to chips, Weilai CEO Li Bin also revealed in the second quarter of this year's earnings call that the epidemic has also led to a shortage of many parts, affecting the production rhythm of Weilai. The shortage of chips and other parts caused by the epidemic is a problem faced by all auto companies at present, and Ideal, Xiaopeng and so on have also been affected to varying degrees.

Under the influence of these factors, Weilai admitted that it "underperformed" the market this year. "Our volume from January to November has doubled compared to the whole of last year. But the entire new energy market from last year's more than 1.1 million vehicles, this year may dry to 2.60-280 million vehicles, although we are very efficient, but also progress, but at least compared with the general trend of this year, we are running losing, not winning, this is what we are worth thinking about at the operational level. ”

Prepare for a new brand at a low price

In the face of increasingly fierce competition and fluctuations in the rankings, the attention of the new brand to be launched by NIO has continued to increase. Earlier, Li Bin, CEO of Weilai Automobile, said on the earnings call that Weilai Automobile will launch a new brand to enter the mass market. It is reported that NIO will use sub-brands to push entry-level models, named "Gemini" in English and "Gemini" Chinese.

"One of our strategies this year is to prepare a new brand, but the launch of the new brand depends on the opportunity." Qin Lihong said. Behind the launch of the new brand, Weilai also has its own considerations.

"The replacement of non-intelligent non-electric vehicles by smart electric vehicles will be the mainstream phenomenon in the next market, but there will be no growth in global sales, and it would be good not to decline." In the case of such internal substitution, in the larger mainstream consumer market, we may not have a sense of existence. So for users who are too different, we need to build different communities, rather than putting all of them together. For the logic of launching a new brand, Qin Lihong explained.

The launch of the new brand is believed to be WEILAI's desire to gain a broader market share with more abundant products and lower prices. At present, the average selling price of NIO's models on sale exceeds 400,000 yuan, which is much higher than the products of Tesla and a number of new car manufacturers. Based on this, Weilai Automobile launched a new brand, which means that it will start a head-on competition with Tesla.

Li Bin previously mentioned in an interview that the Volkswagen brand that Weilai Automobile will launch hopes to be lower than Tesla in price, but the experience will surpass the latter, which means that the price of Weilai's new brand may drop to 250,000 yuan or even below. According to the data, the starting price of Tesla's Model 3 is only more than 260,000 yuan. Moreover, Tesla has officially indicated plans to produce a low-cost entry-level compact hatchback based on the Model 3 platform, focusing on the European and Chinese markets.

In fact, NIO's new brand may be aimed at more than just Tesla. At present, almost all traditional car giants have begun to lay out new energy products, and the price is also for the mass market, such as the Volkswagen brand, and the price of the new energy ID series products launched by it is basically 300,000 yuan and below. In addition, with the entry of new car makers such as "price butcher" Xiaomi, the necessity of Weilai Automobile's layout to the low-price market has become increasingly prominent.

On the other hand, the relatively low-priced products will also help WEILAI shorten the loss period and achieve profitability as soon as possible. In the industry, Weilai's profitability is a problem that has always been concerned. Since its establishment 6 years ago, although the sales volume of NIO automobile has continued to grow, from the perspective of operation, NIO is still losing money, and the loss is not low. In the first three quarters of this year, WEILAI accumulated a loss of 2.86 billion yuan. However, Qin Lihong pointed out that since the third quarter of this year, the gross profit created by Weilai's car sales has been able to fully cover the marketing and management expenses of the three fees, and the loss is due to the continuous investment in research and development.

"The part of our loss is research and development, the purpose of our financing is to invest in research and development, this matter we feel can not be ambiguous, because this is the beginning of an emerging big track, in this period of non-investment in research and development, it means that there is no future." Qin Lihong said that if profit is the highest goal, then it is very simple to achieve, "R & D activities are stopped, immediately profitable, but we pay more attention to the qualification to make a profit in the future." According to the data, WEILAI's research and development expenses in the third quarter were 1.1931 billion yuan, an increase of 101.9% year-on-year and a 35% increase from the previous quarter.