The cold wave hit again, and NIO was in a hurry

Original debut | Golden Horn Finance

Author | Corgi's Ke

This time, NIO preempted Ideal and Xiaopeng and released a letter to all employees. Instead of being stuck at the end of the year and the beginning of the year, NIO chose to bring the first "chill" to the entire new energy vehicle industry in early November.

On November 3, Li Bin, founder, chairman and CEO of NIO, issued an internal all-staff letter (hereinafter referred to as the 'all-staff letter') on "Organizational Optimization and Two-Year Priorities", in which he confirmed that NIO will reduce the number of positions by about 10%, and the specific adjustment will be completed in November.

Li Bin said in an internal letter that NIO will carry out "three guarantees" and "two efficiency improvements". "I'm sorry that this adjustment will affect some of my colleagues, and please understand that this is a difficult decision that the company has to make in the face of fierce market competition." Li Bin said.

According to the company's financial report for the second quarter of this year, NIO achieved revenue of 8.77 billion yuan, less than the market expectation of 9.254 billion yuan, a year-on-year decrease of 14.8%; The net loss was 6.056 billion yuan, a year-on-year increase of 119.6%, and the market expected a net loss of 5.332 billion yuan.

This is the third consecutive quarter that NIO's revenue has fallen short of expectations since the fourth quarter of last year. With such a poor financial performance, and Li Bin is gradually moving away from the goal of monthly sales of 30,000 yuan, even if he gets the financial assistance of Middle Eastern tycoons, it is difficult to fundamentally solve the problem.

In the case of further intensification of the industry's involution, Li Bin can only "swing a knife to cut people", even if it is the mobile phone business in his heart.

Late reforms

This "chill" is a belated reform.

In addition to the 10% layoff, Li Bin mentioned the "three guarantees" in the all-staff letter: NIO ensures the investment in core key technologies and maintains the leading edge of technology and products; Ensure that the sales and service capabilities are sufficient to cope with the fierce market competition; Ensure that 9 core products of 3 brands are launched as scheduled.

On the basis of the "three guarantees", NIO will also merge the departments and positions that have been redundantly built, reform the inefficient internal work process and division of labor, eliminate the inefficient positions, improve the efficiency of resources, and postpone and reduce the investment in projects that cannot improve the company's financial performance in the next three years.

In fact, in the all-staff letter at the beginning of this year, Li Bin clearly pointed out that he listed all 8 areas where the team was inadequate: the growth rate of deliveries lagged behind the overall growth rate of China's smart electric vehicle market; In response to supply fluctuations, many manufacturers have responded more quickly and efficiently; In view of demand fluctuations, the inertia is too strong, and the adjustment is not timely, resulting in unnecessary losses; The quality of software and hardware before and after the launch of new cars has affected the reputation and reputation of products.

Li Bin also said that the work tasks in 2023 will increase a lot, but the company's resource investment will only increase slightly, and the potential must be tapped from within, especially for inefficient organizations, inefficient teams, inefficient processes, and inefficient projects, which need to be comprehensively sorted out and optimized.

However, it was not until near the end of the year that NIO began to launch the strategic policy formulated at the beginning of the year, and the degree of "inefficiency" of the entire organization can be seen.

Before the release of the all-staff letter, in addition to finding a financier in the Middle East in the middle of the year, NIO almost carried out its business step by step, and several price cuts were forced to respond passively to the price war of the opponent, and there was no change in the company's business rhythm, and even the mobile phone business that was once shelved was once pushed to the market again, causing a lot of controversy.

In contrast, Xiaopeng, who was also in crisis at the beginning of the year, chose to "cut the mess quickly", and the head of the company, He Xiaopeng, found Wang Fengying and other car circle bigwigs to assist not long after the release of the all-staff letter, followed by a series of reform measures, including the internal anti-corruption drama in the middle of this year.

In the end, the embodiment of the results is: in October this year, Xiaopeng's sales exceeded 20,000 units, exceeding Weilai's 16,000 units.

The Middle Eastern tyrants are also ineffective

If NIO does not substantially "reduce costs and increase efficiency" internally, it is not realistic to quickly replenish funds by simply financing money or selling assets to solve the liquidity problem.

On the evening of June 20, NIO announced that it had signed a share subscription agreement with CYVN Holdings, an Abu Dhabi investment institution, which will make a strategic investment in NIO with a total of about $1.1 billion.

Subsequently, in September, NIO announced the issuance of US$500 million aggregate principal amount of convertible senior notes due 2029 (the 2029 Bonds) and US$500 million aggregate principal amount of convertible senior bonds due 2030 (the 2030 Bonds, together with the 2029 Bonds, collectively referred to as the Bonds), for a total of US$1 billion.

According to the data of NIO's first quarter report this year, the cash on the books at the end of the first quarter decreased by more than 5 billion yuan compared with the end of last year, leaving only more than 14 billion yuan, but the current liabilities to be paid in the short term exceeded 40 billion yuan; Referring to the net outflow of NIO's operating cash flow of nearly 4 billion yuan last year, the funding gap in the coming year is nearly 30 billion yuan.

Compared with the funding gap of 30 billion yuan, the above-mentioned financing means are a drop in the bucket, and with the current capital environment, it is difficult for most new energy vehicle companies, including Weilai, to obtain high premiums.

Therefore, NIO's top priority is to effectively control costs while increasing sales. In 2022, NIO's annual loss will be 14.437 billion, an increase of 259.4% year-on-year, and the loss will exceed 10 billion again after three years. If calculated based on the delivery of 122486 cars last year, NIO is equivalent to a loss of 117,800 yuan for every car sold.

In 2023, losses are still widening. In the first half of this year, NIO delivered a total of 54,600 vehicles, with a net loss of 10.8 billion, equivalent to a loss of nearly 200,000 yuan for selling a car.

Even so, NIO still failed to touch the tipping point of scale effect. We media brocade has calculated in "The "Singularity Effect of 360,000 Electric Vehicles" that the "low-security" value of the scale effect of new energy vehicle companies is that the monthly sales volume is about 30,000 units, that is, it will reach 360,000 units a year.

In NIO's earnings call for the second quarter of this year, Li Bin expressed confidence in the fact that "30,000 vehicles will be delivered in a single month in the second half of the year": "In June this year, we found that the company's sales capacity could not meet the demand for selling 7~8 models at the same time. Since July, the company has begun to comprehensively improve its sales capacity, with the goal of reaching a sales capacity of 30,000 units per month. By the end of September, we will complete this sales capacity building, and the results of sales capacity building will gradually be visible from October. ”

But Li Bin failed to deliver on his promise, and in July, NIO delivered 20,462 new cars, followed by 19,329, 15,641, and 16,074 vehicles in August, September, and October, respectively, and never exceeded 20,000 vehicles.

In this way, it is not only difficult for NIO to trigger scale effects to reduce costs in the short term, but also will be in a state of loss for a long time. The assistance of Middle Eastern financiers is ultimately only a temporary solution, and the market also needs NIO to come up with real measures to "reduce costs and increase efficiency" to stabilize pessimism.

According to the second-quarter financial report data, NIO's expenses on automobile sales, general and administrative expenses reached 2.857 billion yuan, an increase of 25.2% year-on-year and 16.8% quarter-on-quarter. In contrast, Xpeng and Li spend much less on this area than NIO, with 1.54 billion yuan and 2.31 billion yuan respectively.

According to Li Bin's statement of "comprehensively improving sales ability", if the expenditure shows a downward trend in the third quarter and subsequent financial reports, it will inevitably make a big fuss about personnel and organizational structure.

"Cut" the phone first

While its peers are intensively expanding sales, streamlining personnel, and focusing on core business, NIO is obsessed with "side business".

In addition to chips, batteries, battery swap stations, autonomous driving systems and other businesses that are strongly related to new energy vehicles, NIO is also trying to move the cake between Huawei and Apple, which has caused NIO to actively find money under financial pressure on the one hand, and expand the Red Sea field with weak correlation with its main business on the other hand.

At the NIO Innovation Day in September this year, Li Bin repeatedly emphasized: "Cars are a long-term investment, and the underlying logic of NIO is to exchange long-term gross profit for short-term high investment in R&D." Subsequently, NIO launched the NIO Phone, with a starting price of 6499 yuan. Together with NIO's mobile phone, there is also NIO's self-developed chip "Yang Jian", as well as key technical fields such as on-board intelligent hardware, battery systems, intelligent driving, and intelligent cockpits. Li Bin said that these technologies will meet NIO's needs in the research and development process.

The price of 6499 yuan means that NIO Phone will be directly attacked by Huawei mate 60 series and iPhone 15 series.

However, from the original intention of the research and development of Weilai mobile phones, Li Bin's purpose is to complete the closed loop of Weilai's car machine and allow users to get a better product experience. For the shipment of mobile phones, Li Bin set a goal for the company, that is, "I can sell hundreds of thousands of units, and half of the users are very happy when they buy them."

As of October this year, NIO's cumulative sales over the years have approached 400,000 units, that is to say, the upper limit of NIO Phone sales is 400,000 units, compared with Huawei, Apple's shipments that are close to 10 million, it is also difficult to reach the scale effect to reduce costs.

Combined with the costs of R&D, sales, and promotion, it is difficult for NIO Phone to have the ability to make hematopoiesis independently.

At the moment when Huawei, Xiaomi and other mobile phone "veterans" can't bear the fact that the industry has been rolled up and trying to enter the field of new energy vehicles, Weilai's "reverse version" operation has really made itself mired in two major losses.

Li Bin once revealed that most of Weilai's current users use Apple mobile phones, but Apple has not opened UWB positioning technology before, and if Apple has not opened this interface, it will be difficult for Weilai's digital key to land. Even with the open Android system, software such as clearing the cache of various mobile phone manufacturers will directly erase the car key in the background, so NIO has to "pay taxes" to a number of mobile phone companies, which invisibly increases many operating costs.

Apple has now opened the UWB interface, and some car companies have submitted applications for approval, making Li Bin's one-pass operation in the field of mobile phones somewhat "redundant".

According to relevant media disclosures, some of NIO's non-critical businesses will have a large proportion of layoffs, involving batteries, chips, and mobile phone departments. In addition, an employee revealed, "There are internal discussions that some departments of Alps may merge with NIO, and it is estimated that it will be implemented soon, and there may be some layoffs at that time."

If the boots finally land, then Li Bin will personally practice a farce of "fast life and quick death" in the mobile phone business.

Resources:

Blue Whale Finance "Li Bin Moves to Cut 10% of Weilai's Employees: Business Is Not Focused, with a Loss of Over 20 Billion a Year"

Golden Horn Finance "Behind the price reduction of NIO, the capital chain may not last for a year"

Snow Leopard Finance Club "Wei Xiaoli's Letter to All Members: Family Letters, Military Orders and Guilty Edicts"

China Business Daily "When will the "long-term" NIO catch the "big fish""