NIO makes a mobile phone, how far is Li Bin's goal?

At the owner meeting at the end of January, NIO co-founder and president Qin Lihong revealed the plans and progress of NIO's mobile phone - faster than expected, and will open EP CLUB user internal testing in the second quarter of this year, which is expected to be officially released in the third quarter.

NIO's mobile phone business has made obvious layout moves last year. NIO Mobile Technology Co., Ltd. was officially established in August. In its business scope, it involves mobile terminal devices and wearable smart devices. In December, NIO registered the "NIO PHONE" trademark.

Founder Li Bin once revealed that NIO has mobile phone teams in Shanghai and Shenzhen. According to the plan, NIO will launch a mobile phone a year like Apple. And according to the news, the first mobile phone or positioned as a high-end flagship, the price will exceed 5,000 yuan, or even reach the price range of 7,000 yuan.

NIO is not the first car company to enter the mobile phone industry. Under the trend of mobile phone manufacturers such as Xiaomi and Huawei to build cars, car companies have also begun to expand their mobile phone business. The manufacturing of mobile phones and cars is further integrated.

In July last year, Geely's Hubei Xingji Times officially acquired Meizu, holding a 79.09% controlling stake in Meizu and obtaining sole control of Meizu. Li Shufu, founder and chairman of Geely Holding Group and chairman of Xingji Times, said that in the future, the consumer electronics industry and the automotive industry will move towards deep integration, rather than going their separate ways, expressing Geely's idea of building a user ecological chain and achieving super collaboration.

Under the transformation of automotive intelligence, mobile phones are increasingly closely associated with automobiles, and mobile phones and software will play an increasingly important role in the trend of vehicle-machine interconnection in the future. The idea of multi-terminal integration has become the common development vision of almost all companies entering the car manufacturing industry.

It is worth noting that NIO's mobile phone is not intended to step into the red sea market of domestic mobile phones. Founder Li Bin once said, "We make mobile phones, not to compete with Xiaomi and Huawei, the logic is not the same." You can understand NIO Life, we are not going to be a clothing company, food company, but around the needs of users, based on our connection with users, to meet their use scenarios. ”

As for the prospect of mobile phone sales, he also gave an answer that sounded unambitious at this stage: if half of the users bought NIO mobile phones, they are already very happy.

New energy vehicles no longer take the engine alone as the core, but need to take into account software and hardware innovation. The competition around key hardware technologies such as batteries and chips is still in the glue, and the innovation and development of supporting software and ecology has also become a key point of competition. Li Bin, who has been using Internet thinking to make car companies, is even more concerned about this.

Just as he first founded Bitauto.com and used the Internet to challenge the original car dealer model, NIO also used Internet thinking to blaze a different business path from other car companies. His emphasis on brand ecological construction has enabled NIO to form some differentiation in the convergent new energy vehicle market.

NIO launched the NIO App two years after its founding. By the end of 2022, the NIO APP had accumulated more than 5 million registered users and more than 380,000 daily active users, of which a considerable number of users were fans who had not bought a car. Li Bin has already written a different business idea from traditional car companies in the 2018 NIO IPO prospectus - operating NIO as a community. In addition, NIO also launched the "Power Up" app for unlimited car brands in 2019 to provide new energy vehicle owners with information on the use of charging piles.

Building a mobile phone can be seen as a defensive rather than offensive move in this business model. Li Bin once said that mobile phones are the most important device for NIO users to connect to cars. 50% of NIO owners use iPhones, another 40% use Huawei, and after Huawei fell into trouble, some users switched to iPhones. He said that car companies build mobile phones mainly to create their own ecology and prevent being "stuck in the neck" by traditional mobile phone manufacturers. I don't produce my own mobile phone, and I have a sense of crisis that the car keys are in the hands of others.

Under the complex competitive environment, automakers began to think about strengthening ecological barriers. This sense of crisis does not belong to Li Bin alone. At the end of 2022, Twitter faced censorship from Apple and Google App Stores, suffered ad cuts, and was at risk of being taken down. In the face of the passive situation, as a counterattack, Musk said that if there is no choice, he will produce a mobile phone himself. In fact, the rumors of Tesla's mobile phone have never stopped, and the concept map of the Model π mobile phone has long spread all over the Internet.

Behind the use of mobile phones to strengthen their own defenses is NIO's sense of crisis.

At the beginning of 2023, Tesla has experienced several price changes. On January 6, Tesla announced that the price of Model 3 and Model Y models was reduced, with a price reduction of 20,000 yuan to 48,000 yuan, a record low. After the price cut was announced, Tesla China received orders for 30,000 vehicles in three days.

Subsequently, on February 10, Tesla raised the price of the Model Y rear-wheel drive version, long-range version, and high-performance version by 2,000 yuan, further harvesting buyers with a "buy up, not buy down" mentality.

The cancellation of new energy subsidies has put pressure on most new energy vehicle brands, and Tesla's price reduction has further put pressure on car companies in the Chinese market, and Xpeng, Aion, and Qianjie have followed up to reduce prices. NIO, which insisted on the principle of not reducing prices when it was sniped by prices two years ago, also compromised this time.

With monthly sales of more than 15,000 units in December 2022, NIO's sales fell to more than 8,000 units in January after experiencing this wave of market price cuts. Therefore, in early February, I had to choose to reduce the price for volume, and the comprehensive preferential range was as high as 100,000 yuan.

Tesla has an outstanding gross margin with its supply chain advantages, providing the basis for significant price reductions. Tesla can afford to fall, and other companies may not. High battery costs make it difficult for new energy vehicle companies to make profits. Except for Tesla and BYD, almost all other car companies are in a state of loss. According to the data released by major car companies, for each car sold, Tesla made an average profit of 9711 yuan, BYD made an average profit of 1466 yuan, while Li Auto lost an average of 883 yuan, Xpeng Motors lost an average of 9889 yuan, and NIO lost an average of 15299 yuan.

When Tesla first entered the Chinese market, it launched the Model S with a price of up to 7.8 million, which launched the concept of luxury cars and successfully established a high-end image in the Chinese market. Now the pricing is set at more than 200,000, making NIO, which also focuses on the mid-to-high-end market, difficult to overcome. Consumers have the option to buy similarly positioned electric vehicles at lower prices, posing a threat to NIO's target customer base.

NIO is doing its best to preserve its service advantages as a signature brand. For the guarantee of user experience, whether it is Li Bin or Qin Lihong's attitude has always been firm. Providing better services and creating a more complete ecological chain experience means higher investment in R&D and infrastructure. After entering the mobile phone business, the money-burning action was further expanded. According to Li Bin, the company's R&D investment is mainly in batteries, chips, sub-brands, and mobile phones, and its R&D expenses reach 3 billion yuan per quarter.

NIO, which insists on battery swapping technology, also needs to pay for its highly ambitious infrastructure plans. According to NIO's official Weibo news on February 21, NIO will add 1,000 substations in 2023, and more than 2,300 substations will be built in total. According to NIO's prospectus, before 2021, the construction of a replacement station in China will be about 5.6 million yuan.

Even so, in Qin Lihong's eyes, NIO's energy replenishment facilities are still far from enough, and said that profit is not the focus of the company's consideration, and the first thing to ensure is the user experience. He also previously revealed plans to build more than 4,000 swap stations around the world by the end of 2025.

Although this business idea has allowed NIO to gain a group of loyal users, the huge cost that the company has to pay for this has also become a burden for NIO. NIO uses its own route to build mobile phones, but the target audience is positioned in a narrow range of NIO car users.

Even as Li Bin said, if consumers buy hundreds of thousands of cars and buy thousands of mobile phones, the pressure to make decisions is not great. However, subverting the public's cognition and consumption habits of mobile phone brands in the past many years is not an easy task for a car company. The mobile phone business will be a transaction that will be difficult to return in the short term.

Like the power station, mobile phones are also an indispensable part of the NIO ecosystem in the eyes of the company's founders. However, compared with further improving the ecology, NIO may now need to consider the "blood recovery" path, expanding sales that have diluted and gradually thickened costs.

Li Bin has said that the biggest cost in business is not money, but opportunity cost, and from 2024, the new energy vehicle industry will enter the final stage. NIO's massive investment can be seen as paying for opportunity costs. However, at the 2021 earnings conference, Li Bin also personally set a goal of achieving full-year profitability in 2024. Judging from the current situation of NIO's market situation, there is still a long way to go before the goal is approaching in the face of gradually approaching time.

The ultimate user experience pursued by NIO should at least be the same as the goal of the overall new energy vehicle industry, that is, to first make up for the obvious shortcomings compared with traditional energy vehicles - infrastructure construction to equalize, charging speed and battery life improvement. But these can not be achieved by overnight investment, and the mobile phone business has little help. However, the pressure of NIO's continued bleeding and sales is imminent. (Fortune Chinese Network)

Editor: Angel Yang