The Middle East tycoon smashed $3 billion to become the largest shareholder of NIO, and the founder Li Bin became a worker?

Introduction: Why do NIO and Li Bin always get themselves to the point where they need someone to save their lives?

Text | Blue Shark Hard Tech Flying Snow

NIO once again swiped the circle of friends. Similar to the plot in June this year, when NIO received a total strategic investment of US$1.1 billion from Abu Dhabi-based CYVN Holdings, this time NIO and CYVN signed a new share subscription agreement with a total investment of US$2.2 billion (about 15.710 billion yuan).

The biggest difference from the investment in June is that after the completion of the transaction, CYVN will hold a total of 20.1% of NIO's shares, surpassing Li Bin to become the largest shareholder.

With the completion of the above transaction, CYVN will have the right to nominate two directors to NIO's board of directors as long as it continues to hold not less than 15% of the shares of NIO, and one director if it holds less than 15% but more than 5% of the shares.

As for whether Li Bin is still the largest shareholder at the capital level, at least he still "has the largest voting rights".

However, based on the development of technology companies, a growing number of business management researchers are realizing that giving founders voting control could undermine the checks and balances needed for corporate accountability, and could even lead to big problems.

For example, WeWork founder Adam Neumann demanded "express authority to fire or veto any director or employee." But as his behavior became more and more erratic, the company experienced a massive cash flow loss before finally canceling the IPO.

In fact, what is more paradoxical than who holds the voting rights is that the Middle Eastern tycoons are not just investing in NIO, but are re-investing in new energy vehicle companies with a "not bad money" attitude.

On June 11, the Saudi Investment Authority signed a $5.6 billion cooperation agreement with Human Horizons. Human Horizons is the parent company of Hi-Hop Automobile. On June 19, Great Wall Huaguan signed a strategic cooperation agreement with Manaseer Group in Jordan to establish a joint venture in Jordan. Great Wall Huaguan is the parent company of Qiantu Automobile.

In December 2022, Tianji Auto established a joint venture with Sumou Holding in Saudi Arabia to set up a manufacturing and R&D base for new energy vehicles in Saudi Arabia.

After receiving the investment of the Middle East tyrant, Li Bin is no longer a major shareholder, although he still holds the first voting right, but it is still unknown whether the company's major decisions will be affected and influenced in the future.

01

There was an emergency in Anhui in the front, and there were local tyrants in the Middle East rushing to help, why did Li Bin and Weilai always ask someone to "save"?

On December 9, 2023, at the 2023 China Business Leaders Annual Meeting, Li Bin, founder of NIO, told the story of "Hefei saved NIO from the intensive care unit".

Back in 2020, NIO, which had burned too much money before, fell into a situation of depletion of funds, although it could maintain production, it had no funds to develop new cars, and urgently needed a capital transfusion.

This time, Li Bin's hometown Anhui came to the rescue. On April 29, 2021, NIO signed a definitive agreement with strategic investors including Hefei Construction Investment Holding Co., Ltd., SDIC Investment Management Co., Ltd., and Anhui High-tech Industry Investment Co., Ltd. to invest in NIO China.

Pursuant to the investment agreement, the investors agreed to pay NIO China a cash investment of RMB7 billion in five tranches, of which the first tranche of RMB3.5 billion will be paid within five working days after the closing conditions agreed in the definitive agreement are met, the second tranche of RMB1.5 billion will be paid on or before June 30, 2021, the third tranche of RMB1 billion will be paid on or before September 30, 2021, the fourth tranche of RMB500 million will be paid on or before December 31, 2021, and the fifth tranche of RMB500 million will be paid on or before March 31, 2021.

As of June 29, 2021, NIO Anhui has completed financing of RMB 7.356 billion as planned, easing NIO's cash flow.

One cannot step into the same river twice, but it is possible to be pushed forward. After two years, the tight cash flow and the rumors of NIO's collapse once again brought NIO and Li Bin into the same river.

In order to save themselves, layoffs, cutting unprofitable businesses, disguised price reductions and promotions, and opening battery swap alliances...... Almost all the tricks that can be used have been used, but the more violent the rumors in the industry about the "collapse" of NIO. As a result, there is a "plot" of CYVN in the Middle East investing 2.2 billion US dollars (about 15.71 billion yuan) in NIO.

The question is, why are Li Auto and Xiaopeng Motors, which are also new car-making forces, alive and well, and why is NIO, led by Li Bin, once again falling into the point of selling shares on a large scale and letting the local tycoons in the Middle East come to save their lives?

02

Why did NIO become a loss-making king?

Although the industry is Xi to compare "Wei Xiaoli", from the financial report, the three actually have different performances.

26.965 billion yuan is the cumulative net loss of Xpeng Motors from 2018 to the first half of 2023, 6.464 billion yuan is the cumulative net loss of Li Auto from 2018 to 2022, and it is worth noting that in the first half of this year, Li Auto turned losses into profits and achieved a net profit of 3.244 billion yuan.

In comparison, from 2018 to 2022, NIO's net losses were 9.639 billion yuan, 11.296 billion yuan, 5.304 billion yuan, 4.017 billion yuan, and 14.437 billion yuan respectively.

If you add the net loss of 10.926 billion yuan in the first half of this year, the cumulative net loss of Weilai Automobile in just a few years is as high as 55.619 billion yuan.

There are even statistics that in less than 6 years of NIO's car-making career, its cumulative loss has exceeded 80 billion yuan.

The heavy burden can be alleviated by a temporary capital injection, but the improvement of core competitiveness is the key to the survival of an enterprise.

From the perspective of competition, new energy vehicles have entered the second half, and "Hua Xiaoli" has the potential to replace "Wei Xiaoli", especially the explosive sales of models such as Wenjie and Zhijie empowered by Huawei's smart car model, which made Li Xiang of Li Auto express his helplessness of "not quarreling with Huawei".

With the increasing price war of new energy vehicles, a number of independent brands are also responding to the battle, whether it is BYD, which can complete the sales target of 3 million units this year, or Geely, which has a plan to launch a krypton, all staged a price reduction drama at the end of the year. With the sharp decline in lithium carbonate raw materials, coupled with the sharp decline in the cost of smart driving and smart cabins, it has become a fact of high probability that the price and battery life of new energy vehicles will be rolled up in 2024.

In this case, at the 2023 NIO face-to-face media communication conference held on December 14, Li Bin said frankly that "NIO's top priority is to ensure that it survives first", but he also emphasized that the NIO brand will continue to make efforts to the high-end, insisting on not reducing prices and exchanging price for volume.

Li Bin even said: "ET5 will be the lowest-priced product of NIO, there will be no NIO product with a lower price than this car, and the NIO brand will not sink to the market of 200,000 to 300,000 yuan (price range), and we can't roll it up with others." ”

NIO hopes to participate in the competition in the range of 200,000-300,000 yuan by launching sub-brands Alps and Firefly.

Previously, Li Bin revealed that NIO will not launch a new car next year, and the focus is on the Alps, whose goal is to become a popular car, and Li Bin expects the Alps to have a lower price than Tesla.

On the third-quarter earnings call, He Xiaopeng made it clear: "In 2024, we will not only launch competitive new models based on the Fuyao architecture, but also plan to launch a new brand at the level of 150,000." ”

150,000-300,000 is the main battlefield for car companies. If Xpeng is looking at the competitive advantage of low-end models brought about by the reduction of the cost of various parts and intelligent driving in 2024, it is said that it has a good eye on new energy vehicles in 2024. Then, BYD, Geely and other independent brands "roll out of the sky" means that they must use more aggressive price wars to harvest the market and seize share.

What's more, the power of Hongmeng Zhixing, the out-of-the-circle of "Hua Xiaoli", and the general attack of independent brands are not limited to low-end models. With the intelligent driving ability of Huawei's car BU, the internal cultivation of its own brand, and the vertical and horizontal cooperation, they are on the way to encircle and suppress the mid-to-high-end market with a variety of models.

What's more, in this era when popular models are king, NIO, which lacks popular models, is particularly alternative and passive.

03

Write at the end

The cost of building a car, the cost of research and development, the cost of replacing electricity, and the cost of service...... , NIO, which burns money endlessly everywhere, has received investment from local tyrants in the Middle East, but how long can these funds last?

Under Li Bin's "long-termism" strategy, how can we find a balance between heavy investment and open source and reduce expenditure, and how to launch some Volkswagen models for profit and sales while insisting on only building high-end cars?

In many cases, persistence is actually a kind of stubbornness and paranoia, and it is not wrong for NIO to hit the high-end itself, but the limited sales volume in the high-end market may not be able to contribute enough to NIO's stressed cash flow.

As a businessman, you should pounce where there is a need. As a serial entrepreneur, Li Bin actually understands this better than anyone else, and has personally invested in many practices. The easycar network he founded was not "tall" at that time from web design to various functions, but Li Bin insisted on making easycar a listed company;

And what left a strong mark in the history of Li Bin's entrepreneurship is the popular Mobike. Although Hu Weiwei is the founder in the external publicity, the real founder and angel investor is Li Bin himself.

If we compare the short-lived Mobike bike with today's NIO, we may find a commonality: that is, human beings can do without Mobike, but they can't do without bicycles, and the market can do without NIO, but new energy vehicles must bloom everywhere.

In a post by Xueqiu Finance, the author wrote: "If only from the perspective of investment, as the founder Li Bin sells NIO for cash, it is also a success of the business, just like the operation model of Mobike, although the company has suffered huge losses, Li Bin himself has won."

The question is, does Li Bin want to win like this?