NIO de-Chinese-capitalized
Original debut | Golden Horn Finance
Author | Zelda
On the one hand, there is financial pressure, and on the other hand, NIO's business expansion still needs to continue to burn money.
On December 18, NIO announced that it had signed an agreement with CYVN Holdings, an Abu Dhabi investment institution, which will make a strategic investment of about US$2.2 billion in cash to NIO through its subsidiary CYVN Investments.
This is the second time that Abu Dhabi Capital has increased its investment in NIO after investing nearly US$1.1 billion in July. In the second half of 2023 alone, capital from Abu Dhabi has invested about US$3.3 billion in NIO, or about RMB23.6 billion at the latest exchange rate.
In the first three quarters of 2023, NIO lost 15.554 billion yuan, and in the first half of the year, NIO had a net operating cash outflow of 11.597 billion yuan.
The continuous addition of battery swap stations and the acquisition of independent car manufacturing qualifications are all investments of billions of yuan, and in addition, NIO obviously has to set aside some resources to deal with the fierce industry price war. The increasingly tight "money bag" has made NIO more "aggressive" in terms of financing, even if the company's founder Li Bin paid the price of "ceding the largest shareholder".
Li Bin is no longer the largest shareholder
The ownership of NIO's largest shareholder has attracted market attention, and related topics have even appeared on Weibo hot searches.
In the latest round of additional investment, CYVN Investments will subscribe for 294 million newly issued Class A ordinary shares of NIO at a price of US$7.5 per share. According to NIO's U.S. stock prospectus, the company has three classes of shares: A, B, and C. Among them, each Class A share corresponds to 1 vote, each Class B share corresponds to 4 votes, and each Class C share corresponds to 8 votes.
According to the announcement, the deal is expected to be finalized in the last week of December.
Abu Dhabi is the capital of the United Arab Emirates, and CYVN Holdings is a majority owned investor by the Abu Dhabi government, with a focus on advanced and intelligent mobility.
In July 2023, CYVN Investments made a total strategic investment of approximately US$1.1 billion in NIO through the issuance of new shares and the transfer of existing shares, and the subscription price of the new shares was US$8.72 per share at that time, and the investment of approximately US$2.2 billion in this round is an additional investment.
NIO announced that after the completion of the transaction in December, CYVN Holdings will own 20.1% of the total issued and outstanding shares of NIO, becoming the largest shareholder of NIO.
Li Bin said that he had transferred 50 million shares to the user trust at the time of listing, and now the equity table has not been reduced, and he has long been not the largest shareholder in the economic sense;
Abu Dhabi's additional investment in NIO can be said to be in line with the general trend of overseas capital to increase investment in China's high-end electric vehicle companies, especially in the second half of this year, a number of Chinese car companies have received overseas funds.
The loss in the first three quarters exceeded 15 billion,
It is planned to add 1,000 battery swap stations this year
The additional investment in Abu Dhabi is extremely important to NIO's plans.
NIO needs to focus its resources on more strategic areas at a time when external competition is under great pressure.
For a long time, NIO has positioned itself as a "user-oriented enterprise", not only building its own battery swap stations and social venues NIO House, but also providing "worry-free" packages, etc., where users only need to pay less than 12,000 yuan in annual fees to enjoy insurance, free maintenance, door-to-door tire repair, and free scooters and other services during car maintenance or repair.
Therefore, all of NIO's adjustments and layouts revolve around services and experiences, and in the case of tight operating cash flow, it must slow down in some areas such as R&D.
In June 2022, Li Bin said that the new brand that will be mass-produced in 2024 will be equipped with NIO's self-produced batteries. Li Bin pointed out at the time that NIO's long-term battery supply strategy is to combine self-production with external procurement, which is very important to increase the company's competitiveness, product competitiveness and profitability. But in mid-July, NIO changed its tune and said that it had postponed the mass production of batteries based on business needs.
The construction of battery swap stations can further improve the user service experience, while the independent car manufacturing qualification solves the problems of OEM cost and product experience.
From the early days of its establishment, NIO has chosen the battery swap technology route. Compared with charging, the battery swap time is short, which is comparable to refueling, and through the battery swap service, NIO has directly won the recognition and goodwill of users, which also provides a good "potential energy" for the company to accumulate user orders in the early stage, and at the same time, NIO supports the battery leasing solution (BaaS) model, that is, users can "buy a car without buying a battery", reducing the cost of buying a car for the first time.
In an internal speech, Li Bin said that the rechargeable, swappable, and upgradeable energy service network is the most important "moat" and one of the most important service experiences for NIO.
NIO's business strategy naturally requires a large number of battery swap stations to match, and the company landed its first battery swap station in Shenzhen in May 2018, and by the end of 2022, a total of 1,305 battery swap stations have been built. According to data from the China Electric Vehicle Charging Infrastructure Promotion Alliance, as of July 2023, there are 2,675 battery swap stations in the country, of which NIO battery swap stations account for more than 60%.
In addition, NIO plans to add 1,000 battery swap stations in 2023. About 600 of the new battery swap stations are in urban areas, and about 400 are high-speed battery swap stations, and the new urban battery swap stations focus on new markets such as third- and fourth-tier cities with a certain user base, and the intention of the battery swap mode to expand to the sinking market is obvious.
However, a large number of new battery swap stations mean that they will continue to burn money.
The investment cost of the battery swap station includes the site cost, equipment purchase cost, construction cost (including distribution and substation facilities), battery cost, etc., in addition to the operating cost, including power purchase, equipment maintenance, etc. According to a person from the China Automotive Center, the average investment cost of a single battery swap station for NIO is between 4 million and 5 million yuan.
In this way, NIO will invest as much as 4 billion to 5 billion yuan in battery swap stations alone in 2023.
In addition to the planning of battery swap stations, NIO may also need to spend billions of yuan in the short term to invest in the acquisition of independent qualifications.
On October 20, 2023, JAC announced that it intends to transfer some assets through public listing, including the inventory, fixed assets, and projects under construction of the third plant of the passenger car company, as well as the structures and equipment assets of the Xinqiao plant of the passenger car company, with an appraised value of 4.498 billion yuan.
According to relevant media reports, the third plant and the Xinqiao plant are both factories of JAC Motors for NIO, and the transferee is NIO.
Although it is very important to the business blueprint, the large amount of capital investment required for the continuous addition of battery swap stations and the acquisition of rival qualifications has caused a lot of financial pressure on NIO, which has lost more than 15 billion yuan in the first three quarters and has a net outflow of more than 11 billion yuan in operating cash flow, and it is obviously difficult to save money by saving money.
At this moment, Abu Dhabi's additional investment can be regarded as a relief in disguise.
"NIO should have cut prices a long time ago"
Abu Dhabi's additional investment, in addition to giving NIO financial assistance to support future business planning during difficult times, also gives it the confidence to continue to roll up under the dilemma of the industry's price war.
"There is not necessarily a tomorrow for price reduction, but there is no tomorrow if there is no price reduction. For the current new energy vehicle industry, Zhu Kai, founder of the automobile market research institute Jielan Road, said bluntly.
In fact, since the beginning of this year, the other two Xiaopeng and Ideal of "Wei Xiaoli" have participated in the industry price war to varying degrees.
In June, Xpeng Motors launched the G6 model, priced at 209,900 to 276,900 yuan, which is lower than the industry average, marking the return to the cost-effective route after the G9 model explores the high-end market;
In addition, in the second half of this year, Leapmotor, Nezha Automobile, Zeekr, Tesla and other car companies have announced price cuts, among which the relevant models of Nezha Automobile have dropped by up to 49,000 yuan.
As a representative of the new car-making forces, NIO naturally cannot stay out of the matter.
On the occasion of the launch of new cars in June, Weilai announced that the starting price of all new cars would be reduced by 30,000 yuan, and the rights of battery swapping would be untied from the purchase of the whole vehicle, that is, new car buyers would no longer enjoy the free battery swap rights in the past, but would need to pay for battery swaps.
"NIO is long overdue for a price cut. A person from China Automotive Technology and Research Center Co., Ltd. said that NIO mainly promotes pure electric products of more than 300,000 yuan, and there were fewer models in this price range in the past, but at present, brands such as ZEEKR, AVATAR, Zhiji, and Denza have entered this field, and NIO is facing more intensive competition challenges.
In addition to the price of external volume, NIO also deals with internal management.
According to information from Geelan Road, an automotive data company, since July, NIO has included the order conversion rate in the assessment, stepped up efforts to motivate front-line sales personnel, and adjusted the sales commission for each new car scheduled from 800 yuan to 2,000 yuan, and the sales commission for inventory cars and show cars increased from 800 yuan to 4,000 yuan.
In addition, NIO has cancelled the position of product expert in the store, and the sales staff will receive the whole process, and introduced the last elimination system. At the beginning of August, there was news in the market that the monthly income of some NIO store sales staff exceeded 100,000 yuan.
The effect of price reductions and increased internal stimulus was immediate. On August 1, NIO released its July delivery data, with sales reaching 20,444 units, which is the first time that NIO's monthly deliveries have exceeded 20,000 units in the past ten years, of which the new ES6 has exceeded 10,000 deliveries.
This means that Li Bin once took off the hat of Weilai's "Wei 10,000", which has been popular in the market since the second half of last year, because Weilai's monthly delivery volume has been maintained at more than 10,000 vehicles.
At the beginning of April 2023, Li Bin joked that if the sales volume was still about 10,000 units per month, he would have to go out with Qin Lihong (co-founder and president of Weilai) to find a job, but in the following April and May, due to factors such as product replacement, the monthly delivery volume of Weilai Automobile fell instead of rising and plummeting to more than 6,000 vehicles.
It is worth noting that in the second month after taking off the "Wei 10,000" hat, Weilai's sales quickly fell to only 19,300 units, and from September to November, they hovered around 16,000 units.
A senior member of an automotive supply chain company pointed out that if the positioning remains unchanged, it will be difficult for NIO to grow in the future: "Its business model is positioned as an early adopter of high-end consumers, such as the top 5% of consumers when the new energy vehicle market first emerged, once it expands to 10%-15% of consumers or beyond, the consumption concept is very different." ”
Li Bin once called NIO a "user-oriented enterprise", and a group of early car owners are willing to accompany the company to grow, tolerate product defects, and share weal and woe with the company.
A classic story is that in August 2019, a NIO owner placed LED large-screen advertisements for NIO on the streets of Qingdao at his own expense, which was a difficult time when NIO was close to bankruptcy.
However, analysts believe that at this stage, many new users do not have a deep emotional connection with the NIO brand, and what they consider is whether the configuration is complete and whether the price is in place. NIO's rollercoaster sales performance this year also reflects that the company's price cuts are not enough to attract the market.
At present, China's new energy vehicle market has entered a cruel knockout round. Whether NIO can grow from a pioneer concept brand to a large-scale mature brand may need to continue to invest and burn money to maintain the expansion of the business blueprint and increase the price war.
Resources:
Caixin "Abu Dhabi Institution Invests $2.2 Billion in NIO"
Caixin "NIO Variations"