The price war of new energy vehicles is resuming, can the "injured" NIO break through?

Image source: Du Ge

Photo taken at the Guangzhou Auto Show in November 2023

"I think price wars are a very normal thing, a normal business process. A few days ago, Li Bin, founder, chairman and CEO of NIO, said at the China Electric Vehicle 100 Forum (2024), "The price war will eventually return to the essence of business, that is, value creation." ”

However, under the invasion of the "price war", the future of NIO is hardly sunny, and its growth logic may change. According to NIO's previous financial report, the company is still losing money and has failed to fulfill the promise of "achieving breakeven in the fourth quarter of 2023" as Li Bin said.

For NIO, if it wants to achieve profitability, it must maintain a certain level of sales, but in order to protect sales, the price must not be too high. For Li Bin, who insists on "not reducing prices", it seems that he has entered an unsolvable cycle.

Li Bin and NIO, it's time for a change of thinking.

1

It's time to save money ●

As for how to deal with the impact of the "price war", Li Bin's answer is to "maintain concentration". In the face of huge losses, it is very difficult for any company to maintain concentration.

According to the financial report data released by NIO, for the whole year of 2023, NIO's total revenue will be 55.62 billion yuan, a year-on-year increase of 12.9%. But at the same time, its losses have not stopped, and the net loss attributable to shareholders last year was as high as 20.7 billion yuan, an increase of 43.50% year-on-year.

Counting the previous losses, in the past 6 years, NIO has lost a total of 86.63 billion yuan, which is indeed not a small amount.

In terms of sales volume, NIO delivered a total of 160038 new vehicles in 2023, a year-on-year increase of 30.7%. This means that every time NIO sells a car last year, it will lose nearly 130,000 yuan.

This may be different from everyone's intuitive feeling of NIO, after all, the cars sold by NIO are not cheap, why do they lose money when the price is high?

The reason is that compared with its competitors, NIO is the best way to spend money. Building mobile phones, batteries, chips, battery swap stations, etc., each requires a large amount of expenditure, which seems to be the kind of effort that NIO must make if it wants to maintain the tonality of its high-end brand.

Take the battery swap station as an example, the cost of building a second-generation battery swap station for NIO is about 1.5 million ~ 2 million yuan. In the whole of last year, NIO built 1,011 battery swap stations, which is equivalent to spending about 1.5 billion ~ 2 billion yuan a year on the construction of battery swap stations alone.

As for the mobile phones made by NIO, it seems that the outside world is more skeptical. After all, the mobile phone market has long been a "red sea", all major manufacturers are very volatile, and from the configuration of NIO phone from NIO's 6499 yuan, the second-generation Snapdragon 8 leading version, 2K resolution 6.81-inch curved screen, 1-120Hz variable refresh rate and main camera, ultra-wide angle and periscope telephoto are all 50 million pixels, 5200mAh battery, and it has not formed a very amazing selling point, and it is difficult to open the gap with friends.

It can be seen that the biggest role of NIO's mobile phone is to match the functions of the car, such as replacing the car key to achieve unlocking without electricity, and realizing 30 interconnection functions through the NIO Link car control key of the mobile phone, including functions such as quickly checking the vehicle status and parking location, and conveniently completing the vehicle unlocking and locking, and window lifting.

However, these functions that could have been achieved through an APP, whether it is necessary for NIO to make a special mobile phone is also what many investors question.

NIO's self-made battery project also requires a lot of money, just including a laboratory, a lithium-ion cell trial production line and a battery pack line, a new R&D project in Anting Town, Jiading District, Shanghai, which requires an investment of more than 200 million yuan in the early stage, not counting the 400-person battery business line team established by NIO.

Eventually, at the end of last year, NIO spun off the battery self-made project and turned to manufacturing batteries through commissioned production to reduce costs because the battery self-made project was assessed as not being able to improve gross profit margin within three years.

Not to mention the chip project, self-developed chips have always been regarded as a bottomless project that burns money, as OPPO once boasted to invest 10 billion yuan to set up Zheku's self-developed chips, but it can't withstand the huge financial pressure brought about by changes in the market environment, which is why car companies usually use third-party procurement to pull together chip configurations.

These have become the reasons for NIO's high costs. In 2023, NIO's annual cost of sales has reached 52.566 billion yuan, a year-on-year increase of 19.1%. The annual R&D expenses reached 13.431 billion yuan, a year-on-year increase of 23.9%. Selling, general and administrative expenses amounted to RMB12.885 billion, representing a year-on-year increase of 22.3%.

NIO, it's time to learn to save money.

2

I have to make a profit in a hurry ●

At the end of the fourth quarter of 2023, NIO's cash reserves reached 57.3 billion yuan, a significant increase of 12.1 billion yuan from the end of the third quarter. However, according to the rate of 20.7 billion yuan of losses last year, it is difficult to say how long it can be maintained.

Compared with NIO's competitors, Xpeng Motors had cash reserves of about 36.5 billion yuan as of the end of the third quarter of last year, and although the cash reserves were not as good as NIO, the loss was nearly half less than that of NIO. Ideal's cash reserves at the end of 2023 were 103.67 billion yuan, nearly double that of NIO, and Ideal has achieved profitability.

In terms of liabilities, NIO's liabilities increased from 68.62 billion yuan in 2022 to 87.787 billion yuan in 2023, and the asset-liability ratio increased from 71.28% in 2022 to 74.79% at the end of last year. Looking at friends again, the ideal asset-liability ratio was 57.78% at the end of last year, and Xpeng's asset-liability ratio was 59.18% at the end of the third quarter of last year.

Therefore, reducing the degree of loss, or speeding up the speed of profitability, will become a top priority for NIO in the next period of time.

In 2023, Li Bin pointed out on the earnings call that NIO's sales target for 2023 is about 240,000 units, and it can break even in the fourth quarter.

According to the assumptions at that time, the annual sales of 240,000 units basically meant that the sales volume in 2023 would be doubled at a rate of doubling compared with 2022, and NIO's revenue in 2022 would be 49.3 billion yuan, and according to the doubling of revenue to 100 billion yuan, then the gross profit margin only needed to increase to about 15% to achieve breakeven.

Today, NIO's revenue has not reached the level of 100 billion, and the overall gross profit margin for the whole year of 2023 is only 5.5%, compared with 10.4% in 2022 and 18.9% in 2021.

In order to continue to tell the story of NIO, Li Bin has also made a lot of efforts and made some changes.

Last year, Li Bin issued an internal all-staff letter to "Organizational Optimization and Two-Year Priorities", mentioning that NIO will carry out adjustments involving the direction of organization and resource investment, which means that NIO, which has been a big spender before, will start to "shrink clothes and diet".

In the all-staff letter, Li Bin said that according to the company's organizational and business optimization plan, the company will reduce about 10% of the positions, the specific adjustment will be completed in November, and will carry out the "three guarantees" and "two efficiency improvements", to ensure that the long-term investment in core key technologies, sales and service capabilities can cope with fierce market competition, 3 brands and 9 core products listed on schedule, merger and duplicate construction of departments and positions, change inefficient internal work processes and division of labor, Postponement and reduction of investment in projects that cannot improve the company's financial performance for three years.

In addition, Li Bin has also worked harder on financing. Since its establishment, NIO has raised more than 115 billion yuan. Even in 2023, when the financing environment is generally not good, NIO still received more than 20 billion yuan of investment from the Middle East.

But then again, layoffs and financing are not long-term solutions for a company after all. If NIO wants to continue to be recognized by the capital market, it also needs to increase sales on a large scale as soon as possible and achieve breakeven.

3

The growth logic has changed ●

NIO has always pinned its hopes on achieving overall profitability by selling cars at high prices. At a media communication conference, Li Bin directly revealed that "ET5 will be the lowest-priced product of NIO, and there will be no NIO products with a lower price than this car, and the NIO brand will not sink to the market of 200,000-300,000 yuan, and we can't roll it with others." ”

However, looking at it today, NIO's high-end logic is becoming more and more untenable.

At the beginning of this year, the auto circle once again started a "price war". Different from the past, the scope of this price war is significantly larger, not only involving new energy models, but also joint venture brands, and the price reduction is more obvious.

For example, BYD Han, which has a good sales of high-end pure electric vehicles, has directly dropped the price of the Honor version to 169,800 yuan this year, the price range of the new Zeekrypton 001 is 269,000-329,000 yuan, and the starting price is 31,000 yuan lower than that of the 2023 entry-level model, and Volkswagen has also joined the price war, and the ID.4 has been reduced by 64,000 yuan.

"Rim Visibility" believes that in this round of price cuts in the auto industry, the most seriously injured are the car companies that have been focusing on high-end brands to win product premiums. After all, in the past, the reason why many joint venture brands were able to have a premium in China was inseparable from a specific historical background.

In the past 20 years of vigorous development of China's auto industry, it has clearly shown a pattern between a huge market and a limited supply imbalance, especially in the field of high-end products, there is a gap in domestic brands, which makes the domestic price of many models significantly higher than the local price abroad.

Nowadays, in the era of new energy vehicles, there are no three major barriers, so that the era of scientific and technological equality can come. In fact, cutting-edge technology has never been the root of brand premium, in the case of limited consumer purchasing power, car companies will stimulate consumers' nerves by accelerating the iteration frequency of technology in the car, win and other markets, but it is difficult to rely solely on technology to form a brand premium, which is also the inspiration brought to us by the long development of the automobile industry in Western countries.

Observing the development of the Western auto industry, only models such as Rolls-Royce that need to manually draw the car line, as well as limited edition sports cars, can maintain a high product premium, but for the new power car companies that rely on technology and services to maintain a high price, they may not be able to adhere to it for a long time.

Last year, under multiple pressures, the starting price of all NIO models was reduced by 30,000 yuan. Now at the beginning of this year, the tide of car price reductions is coming again, and NIO does not seem to plan to participate in this price war throughout the whole process, but relies on the second brand to base itself on the family market and become the main force participating in the market competition this year.

On March 14, NIO released a new BaaS battery rental service price plan, which not only adjusted the standard battery pack and long-range battery pack rental service fees from 980 yuan and 1,680 yuan per month to 728 yuan and 1,128 yuan per month, respectively, but also launched a number of superimposed preferential policies.

This is considered to be a "disguised price cut" for NIO. Qin Lihong, co-founder of NIO, said that although our intention was not to reduce prices, in today's market environment, this is a little more ruthless than general price reductions, and this Bass adjustment is very cost-effective for new car users.

On the same day, Li Bin revealed the latest information of NIO's second brand, which is named "Ledao" and will be released in mid to early May for the mainstream market.

Previously, NIO's internal sales forecast for the second brand was to sell more than 50,000 units per month for a single model. However, now the starting price of BYD Han has dropped to about 170,000 yuan, which shows that if the starting price of Ledao is set at more than 200,000 yuan, it is not easy to stand out from the encirclement.

In the era of technological equality, it is difficult to form a product premium by stacking technology itself. For NIO, the most important thing is to make the product and price truly match, so as to win more markets under the increasingly fierce competition. The return of value mentioned by Li Bin may make NIO stand out from the encirclement.

Author | Ancient Moon

来源 | 车圈能见度（CarVisibility）