In July last year, at the zero-run car 2.0 strategy conference, founder Zhu Jiangming announced the latest strategy: to catch up with Tesla within three years. At that time, Zero Run had just completed the Pre-IPO round of financing of more than 4.5 billion yuan invested by the Hangzhou Municipal Government.
Time to March 17 this year, following the "Wei Xiaoli", zero-running cars submitted a listing application in Hong Kong stocks, is expected to become the fourth listed company of new car-making forces before Nezha.
According to the data in the prospectus, in the whole year of 2021, zero-run cars delivered a total of 43,748 electric vehicles, an increase of more than 400% year-on-year, which can be called the fastest growth rate among the new car-making forces. Gross profit margin increased from -95.7% in 2019 to the latest -44.3%, living away from the picture of the birth of another member of the new car-making force.
But in fact, the main force is the zero run of the 70,000 yuan model, and now every one sold has to lose more than 60,000 yuan, doing the work of "ten billion subsidies" of Pinduoduo, but thinking of catching up with Tesla.
By perusing the prospectus of Zero-Run Cars, this article will answer the following questions:
1. How is the high growth of zero run achieved?
2. What is the strategy of zero running away?
3. Is this road easy to walk?
01
One seventy thousand lost sixty thousand
The main model of zero-run is the mini car T03, which will deliver a total of about 46,000 units by the end of 2021, that is, models similar to the Wuling Hongguang Mini and Euler Black Cat, priced at around 70,000. Relying on the big sale of this car, zero-running cars have rushed into the top five of global pure electric car companies in terms of quantity, and if T03 is sold to C-end users alone, it can even rank third in China.
But common sense tells us that the more fixed words in a list, the greater the moisture.
First of all, these two ranking lists do not include brands with plug-in hybrid models, so that the scope of comparison is greatly reduced, leaving only pure electric vehicle brands such as Tesla and Xiaopeng, while the restriction of "selling to C-end customers" in the other list removes brands such as GAC New Energy.
More critically, the price of this zero-run car is only about 70,000. According to the prospectus data, zero-running cars delivered 1,037 vehicles, 8,050 vehicles and 43,748 vehicles respectively in three years. Based on net losses, each vehicle corresponds to losses of 869,000, 137,000 and 65,000. That is 70,000 cars, selling a loss of 65,000.
Although new energy vehicle companies did not make money before they went public, they always had to have a degree. Compared with other new energy brands, in the third year after the first car was produced, Xiaopeng Automobile lost about 101,000 yuan per vehicle, and Weilai lost about 12,000 yuan per vehicle, ideally about 10,000 yuan. Considering the pricing, the loss of zero-run cars is almost to sell a car and take one, and the growth rate of more than 400% of the delivery volume is basically exchanged for "white delivery".
Although zero-run has begun to deliver coupe S01 and C11 SUV series, but the proportion is very small, delivering more than 2700 vehicles and 4000 vehicles respectively, the main force of shipment is still T03.
According to the prospectus, the latest revenue of zero-running cars was 3.12 billion yuan, a year-on-year growth rate of 395%, while the revenue growth, the loss growth rate was as high as 159%, and the net loss was 2.85 billion yuan. In the three years of the reporting period, the zero-run gross profit was -95.7%, -50.6% and -44.3%, respectively, which is almost the level of selling a car and losing half a car.
Also calculated according to the data three years after the mass production of the first model, the gross profit of Wei Xiaoli's three companies was 11.5%, 4.6% and 21.3% respectively, at least the car was sold without upside down.
However, strictly speaking, the object of zero-run T03 is more suitable for benchmarking is not "Wei Xiaoli", but Wuling Hongguang MINI and Euler Black Cat, which are also in the new energy vehicle market below 100,000. In addition to burning oil to become charging, these two cars have no intelligent functions at all, and zero runs aim at this feature, focusing on the "most cost-effective scooter" attribute.
The zero-run T03 has a range of 403 kilometers and is equivalent to the Euler Black Cat, hanging more than 100 kilometers of Wuling Hongguang, and has the strongest power in the same level, and is also the only model with L2 level intelligent driving assistance function (that is, automatic acceleration and deceleration and automatic keeping in the lane), which can be said to be the best choice for wanting to experience smart cars in the sinking market.
The problem is that Euler Black Cat sold a car but lost about 10,000 yuan, and it has been discontinued, and the parent company Great Wall Motors has begun to sprint for models below 200,000 yuan. In the environment of chip shortage and new energy vehicle reimbursement, the business of zero running and throwing money for drinking is not so easy to do.
The choice of zero running is to smash out the word of mouth, with research and development, upward breakthrough.
02
From the headlights to the system, I want it all
The strategic intention of zero running is obvious, 1, invest a lot of research and development to improve performance; 2, by spending money on the price side and performance side to crush the same level of models; 3, the launch of new products upward breakthrough; 4, the final realization of scale effect to find the break-even point.
If you look at the cost side of zero running, the surge in sales expenses represents the word-of-mouth strategy, and the growth of research and development expenses is the cornerstone of full-stack self-development.
Zero-run cars claim to be self-developed in the whole region, unlike other car companies or focus on chips, or focus on intelligent driving, zero running up to do all core systems and electronic components of independent research and development design and manufacturing. In addition to the battery cell, chassis, automotive electronics and electrical appliances, interior and exterior decoration for self-developed and outsourced production, all other parts including car lamps are self-produced and self-developed.
The core of self-development and self-production is to shape its own competitive barriers, but if even the lights have to be built by themselves, it is to reduce the cost of the supply chain.
At the previous zero-run C11 new car conference, CEO Zhu Jiangming used the lamp as an example to illustrate the impact of global self-research on the difference in cost - the gross profit of the lamp manufacturer is basically between 15% and 20%, and the C11 set of lights is about 4,000 yuan, calculated according to the gross profit of 15%, and the self-research method can save about 600 yuan [4].
This all-round self-development is admirable, but the cost to be invested is not small, from 2019 to 2021, the company's R & D expenditure is 358 million, 289 million yuan and 740 million yuan, accounting for 306.4%, 45.8% and 23.6% of the total revenue.
However, in terms of absolute amount, this bit of R & D expenditure is really nothing, Wei Xiaoli's R&D expenditure in the year before its listing generally reached more than 2 billion yuan, and the current R&D expenditure of WEILAI plans to reach 5 billion yuan in 2021, and Xiaopeng plans to spend 4 billion yuan in 2021.
Moreover, the Zero Run plan will launch eight new models by the end of 2025 at a rate of one to three models per year, covering sedans, SUVs and MPVs of various sizes, and the acceleration of new models means that the company needs to invest more in research and development. The fundraising is at least $1 billion, and 40% of the net amount is expected to go to technology research and development.
Not only the cost of research and development, in fact, zero run the pressure of the entire supply chain, all of which are on their own financial reports.
In terms of sales expenses that have started word of mouth, the sales costs of zero running are basically used to open stores, and the total number of stores has soared from 95 in 2020 to 291. However, there are only 23 directly operated stores.
Directly operated stores are a source of traffic for new energy brands, and they are also one of the important ways to establish a brand image. Therefore, most new energy brands will take the lead in seizing the most core business district position in the city. And compared with C11 in the same price range of Xiaopeng, Xiaopeng has 167 directly operated stores, only 104 authorized stores, so it seems that the number of 23 directly operated stores at zero run is far from enough.
The strategic intention of zero run can be said to be no big problem, but the key is that its first step is to step on the price band below 100,000 yuan, and in this price band, it can be said that it is the simplest thing to crush its peers by burning money to fight a price war, but what about further? When you walk into the most terrible price band of 200,000?
There are not only a number of new energy vehicle companies here, but also a large number of traditional fuel vehicles waiting for you.
03
Pinduoduo can't withstand the price increase of raw materials
In 2019, after zero-running cars released their first product, Zhao Gang, vice president of zero-running cars, said that the future target sales will reach 35,000 units in 2020 and 80,000 to 100,000 units in 2021[5].
However, the final sales volume is far from the originally envisaged target, with sales of 11,391 in 2020 less than one-third of the target, and 43,900 vehicles in 2021, which is worth 50% of the minimum target. With the current sales volume of 40,000, to reach the target of 800,000 vehicles in 2025 at last year's strategic conference, an annual growth rate of more than 100% is required.
Sales are not as expected on the one hand, the new model listing process is also relatively slow, in 2019 pure electric coupe S01 listing, zero running set the goal of the first micro tram in 2019, the second year of the second pure electric coupe listing, but in fact, the first micro tram car in 2020 is only listed, the new large sedan C01 is expected to be launched in the second quarter of this year.
The speed of the new car is not as good as expected, and the problem may still lie in the model of self-development and self-production in all fields.
Under this highly vertical system, the entire intelligent driving system from hardware to software is all developed by itself, which will lead to a longer research and development cycle, and the unknown money cost and time cost are likely to directly lead to a phenomenon - the enterprise burns money in vain without getting any results, "returning to China next week" Jia Yueting is a living example.
The zero-run even the headlights are made by themselves, which may lead to excessive lengthy production lines and organizational structures, which in turn will affect production capacity. Last year, Zero Run received more than 22,000 orders for the C11, but only 4,000 were delivered. Moreover, the new energy vehicle market has long passed the stage of crossing the river by feeling the stones, and the first batch of crab eaters will already use eight crabs, and the cost-effective advantages of mature suppliers will become more and more obvious.
More realistic are two external factors: 1. the government's withdrawal of new energy vehicles; 2. the rise in raw material prices.
On March 18, zero-running cars officially announced that due to the rise in raw material prices and the decline of national subsidies, the price of zero-running C11 was increased, of which the price of the deluxe version after subsidies rose from 159,800 yuan to 179,800 yuan, and the price increase range of the whole series reached 20,000-30,000 yuan, and at the end of last year, Zero Run had announced that the T03 price increase was 9,000 yuan, an increase of about 12%. The price increase of other new car-making forces is generally below 10,000 yuan.
For cars priced below 100,000, the profit margin itself is low, and consumers are most sensitive to price increases. Euler Black Cat has stopped taking orders because each unit loses more than 10,000 yuan.
Although Zero Run said that the future goal is still the high-end market, the company's current best-selling model is the mini car T03 below 100,000 yuan, and the most impressive for consumers is also this car. Looking at the entire new energy vehicle market, the portrait of zero running is more like a runner who is not weak in all aspects, but lacks outstanding highlights, which is difficult to remember.
If this kind of person is placed in the blind date market, it is generally called "honest person".
It is not difficult to see that zero running has chosen the simplest road of burning money for the market, but it has plunged into the never-ending full-stack self-development road in research and development, although it is the most correct choice for the pursuit of intelligent new energy vehicles, but this is a bottomless pit that burns money, and the road paved by that money is not easy to walk.
Maybe the oil price is still not high enough, and the number of people who are willing to buy new energy vehicles is still a little less.
[1] Zero-run car prospectus
[2] Niolai Automobile, Xiaopeng Automobile, and Ideal Automobile have reported financial reports over the years
[3] Zero-Run Auto announced its strategic target for 2.0 for the next five years
[4] Dialogue with Zhu Jiangming: Why zero run should we insist on doing global self-research Autohome
[5] Zhao Gang: Zero-run cars strive to sell 30,000 vehicles within two years to obtain production qualifications and news news
We are revising the "Togawa Business Review", and in the new "DataVision", we will return to the most essential things of business: prospectuses, financial reports and data, through a variety of data to interpret the essence behind business phenomena.