"Every time NIO gains momentum, there is always a voice jumping out to sing bad news," said a senior automotive media person, describing NIO's current public opinion environment.
This is also another state of internal competition in the Chinese automotive market. The public opinion battle between automotive companies is becoming increasingly fierce.
Along with the recent submission of this year's first quarter report, NIO also provided a "explosive" second quarter performance guide: the revenue guide for the second quarter was 16.59 billion to 17.14 billion yuan, a year-on-year increase of 89.1% to 95.3%. This is more than 60% higher than NIO's best Q2 2022 revenue of 10.292 billion yuan.
Some pundits have carefully found another perspective and used the rise and fall of stocks to sing about the decline of NIO. In fact, Chinese concept car companies are all falling, and the rise and fall of stocks themselves are short-term fluctuations in the capital market, not the basis for judging a company's long-term trend. This logic of using a single point to guide the wind is a typical example of public opinion attack and defense.
After filtering out the colored glasses of attack and defense, and carefully analyzing NIO's business situation, it is still worth looking forward to. Sales are increasing, cost reduction is accelerating, technology dividends and battery swapping alliances are emerging, as well as the support of multiple brands. NIO's turning point in business may have emerged.
High probability events of innovation in the second quarter
What has been the recent popularity of orders? Chairman Li Bin even admitted, "The delivery volume in May is the maximum production volume that can be produced that month, which is a happy worry for us."
In fact, NIO's recent momentum has been strong: after NIO's brand has established a foothold in the high-end market, it has launched a second brand called Le Dao, while the third brand is also on its way; Continuously digging deeper "moats", more and more car companies are joining the battery swapping alliance; Its battery swapping model has been favored by capital, and financing channels are constantly expanding
In the first quarter of this year, the domestic car market can be described as "tragic". Many car companies have stopped installing and directly entered a state of price competition by going shirtless. But in this state, what is most tested is actually the profitability of the car companies themselves. In the first quarter, almost all car companies experienced varying degrees of decline in gross profit.
NIO's revenue in the first quarter was 9.909 billion yuan, a year-on-year decrease of 7.2%. Among them, NIO's automobile sales in the quarter were 8.381 billion yuan, a year-on-year decrease of 9.1%.
However, it should be noted that the most intense price war ranges from within 100000 yuan to between 100000 and 200000 yuan. In contrast, the average price of NIO brand models is above 300000 yuan (non BaaS solution), which also avoids the most brutal price war range.
From the profit situation in the first quarter, although NIO's gross profit margin has decreased to some extent (with a vehicle gross profit margin of 9.2%), its net profit loss has actually narrowed. The data shows that its adjusted operating loss in the first quarter was 5.113 billion yuan, a decrease of 15.6% compared to the previous quarter.
In NIO's first quarter financial report, both R&D and sales management expenses decreased, directly releasing the important signal of "cost reduction".
Reducing costs and increasing efficiency has been a priority that NIO has been continuously promoting in the past period of time. In his internal letter from the company in November last year, Li Bin clearly mentioned the company's priorities for the next two years, including ensuring long-term investment in core key technologies, ensuring sales and service capabilities can cope with fierce market competition, ensuring the timely launch of 9 core products from 3 brands, improving organizational efficiency, and enhancing resource efficiency.
NIO's research and development expenses in the first quarter were RMB 2.864 billion, a decrease of 27.9% compared to the previous quarter, but still showing a stable trend. This indicates that NIO's technology investment has reached a stable stage, and there is no longer a need to invest excessive research and development expenses to maintain a high level of product strength. Since 2016, NIO has invested over 46 billion yuan in research and development, leading new energy vehicle companies. Meanwhile, NIO's sales, general, and administrative expenses in the first quarter were 2.997 billion yuan, a decrease of 24.6% from the previous quarter, indicating that NIO's cost control measures were in effect.
The changes in the above key indicators also indicate that NIO's R&D has achieved considerable results through large-scale investment, and this achievement will also be reflected in the second brand Ledao and the third brand Firefly (code name), continuously exerting dividend effects and forming high-precision returns.
Unlike other car companies, NIO, Ledo, and Firefly adopt a strategy of "starting from high and hitting low". The multi brand strategy of "high-end+mainstream Volkswagen+boutique cars" can not only ensure the high-end brand value of NIO, but also expand the mainstream market layout, quickly improve revenue scale, amplify systematic advantages, and release the efficiency dividend of NIO's early technology research and development and infrastructure investment.
The R&D organizational structure, system capabilities, R&D achievements, as well as the manufacturing, quality, and supply chain management system that NIO has established can directly lay the foundation for the large-scale and high-quality production of Ledo and Firefly. After the second and third brands deliver a large quantity, they can also directly support NIO's previous investment and stimulate NIO's upward development.
Li Bin also mentioned during the financial report conference call that NIO will accelerate software iteration and product experience optimization, focus on improving systematic capabilities and operational efficiency, and further enhance market share. From January to May this year, NIO delivered a total of 66217 new cars, a year-on-year increase of 51%. So far, NIO has become the first high-end pure electric brand in the industry to deliver over 500000 units. According to statistics, in May this year, NIO ranked first in sales in markets with an average transaction price of over 300000 yuan in Shanghai, including all energy models.
In fact, to some extent, NIO's first quarter is more like a "squat" before taking off.
Because in the following April and May, NIO's delivery volume experienced explosive growth. In these two months, NIO delivered 15620 and 20544 new cars respectively, and the delivery volume even exceeded NIO's entire first quarter of 30053 vehicles.
Figure: NIO delivery volume
NIO's delivery volume has rapidly increased in the short term, supported by two factors: firstly, NIO has completed product switching, and after switching to the 2024 model, the competitiveness of the entire product has increased. Secondly, the adjustment of BaaS strategy and policy is very important. NIO released its long-life battery strategy in March, while also adjusting the monthly battery rental price.
However, it should be noted that NIO's promotional policies are more "clever", and the increase in delivery volume is not simply based on price concessions, but is achieved through flexible sales policies.
In other words, even during the peak of the car market, NIO still did not "reduce prices and increase volume". Li Bin also revealed, "The monthly rent for BaaS has been reduced from 980 yuan to 728 yuan, and currently has no significant impact on NIO's income and gross profit."
Due to the outbreak in April and May, NIO provided a "explosive" delivery guide for the second quarter: approximately 54000 to 56000 vehicles, a year-on-year increase of 129.6% to 138.1%. Based on this calculation, NIO's delivery volume in June is expected to remain at the level of nearly 20000 vehicles.
As Li Bin once admitted in a conference call, the happy worry of "the demand for orders in May has exceeded production capacity". This fully reflects NIO's current state of full production capacity.
Looking at it over time, the highest delivery record for NIO in a single quarter in the past was 55432 vehicles in the third quarter of 2023, mainly due to the replacement of NIO's main models and the release of previous backlog of orders. Looking at it now, the delivery volume in the second quarter of this year is expected to surpass this number and reach a new high.
This also sets the tone for the explosive growth of performance in the second quarter. The revenue guidance for the second quarter jointly provided by NIO was 16.59 billion to 17.14 billion yuan, a year-on-year increase of 89.1% to 95.3%. This revenue level is also expected to surpass its 17.103 billion yuan in the fourth quarter of last year, or become the second highest quarterly revenue in history.
Several important supports for turning points
At present, the first quarter has become a turning point for NIO's performance, and starting from the second quarter, NIO is likely to take a "leap", which is a high probability event. Moreover, there may be a possibility of jumping higher in the future.
As is well known, NIO has a "long-term" label, and behind its "long-term" label, there is a long industrial chain, which is also NIO's long-term layout. Here, let's summarize several iconic events of NIO in recent times.
The release of the first and second brand, Le Dao, has officially landed NIO's multi brand strategy. In the industry's view, the significant significance of the release of Le Dao lies in, on the one hand, bringing NIO into the mainstream price range. Although this range is highly competitive, it has a larger market capacity and is a path that NIO must take to achieve scale. On the other hand, the Ledao brand will share NIO's battery swapping stations to further improve their utilization rate, thereby diluting the initial investment cost.
In a research report, China Post Securities analyzed that using its second-generation station as an example, the equipment investment is about 1.5 million yuan, the battery investment is 1 million yuan (13 75kWh or 100kWh batteries), the electricity cost (assuming 30 daily services), rental cost, and labor cost totaling 1 million yuan. The total cost of the above is about 3.5 million yuan (the cost of the first generation station is about 3.46 million yuan).
NIO once calculated that as long as a battery swapping station provides about 60 services per day, it can basically break even. Now we have nearly 100000 battery swapping services per day, with a total of over 2400 battery swapping stations, which means each battery swapping station provides around 30-40 orders per day.
Moreover, NIO will further explore the price range of 100000 to 200000 yuan, and its third-party brand Firefly (code name) that supports battery swapping will also be delivered in 2025. This means that within the mainstream price range, models that support battery swapping will continue to rapidly increase in quantity.
Secondly, the battery swapping mode frequently brings benefits, which involves NIO's moat. Since Changan first teamed up with NIO in the field of battery swapping, car companies including Geely, JAC, Chery, Lotus, and GAC have followed suit. The latest mainstream car company is FAW.
More and more car companies are joining NIO's battery swapping alliance, which means that the battery swapping ecosystem is becoming increasingly prosperous, and NIO's early isolated battle in the battery swapping field no longer exists.
In fact, NIO is not the only player who favors battery swapping mode. Recently, Aian and CATL have also started cooperation on battery swapping. Dongfang Securities predicts that in the future, the proportion of domestic electric vehicle models is expected to reach 30%, and it is expected that more and more car companies will launch electric vehicle models.
However, in the industry, there are not many car companies that truly have the ability to form battery swapping alliances. As of now, NIO has accumulated over 2400 battery swapping stations worldwide, providing users with over 45 million battery swapping services.
Recently, NIO's fourth generation battery swapping station was officially launched, which not only supports battery swapping for NIO models, but also supports LeDao and is compatible with battery swapping alliance members. NIO is already preparing.
More noteworthy is that NIO Energy recently achieved its first financing and secured a financing of 1.5 billion yuan from Hubei state-owned assets. In the industry's view, on the one hand, the battery swapping model has been further recognized by capital, and on the other hand, it has opened the door for continuous financing of battery swapping business.
According to NIO, "Since NIO Energy has initiated an independent financing plan, we will be open to other car companies and investors in the future."
Thirdly, NIO frequently extends "olive branches" to the power grid. Currently, NIO Power Exchange Station has successfully started providing frequency regulation services to the power grid, and has entered the field of vehicle network integration and interaction for peak shaving and frequency regulation on a large scale in the form of aggregated virtual power plants. In addition, NIO's battery swapping station has a large amount of battery assets, and after the retirement of power batteries, they can be used for energy storage cascading.
At present, NIO has cooperated with energy and power enterprises such as Sinopec, CNOOC, Shell, State Grid, Southern Power Grid, Wanneng Group, and Zhongan Energy.
Taking NIO's cooperation with Southern Power Grid and State Grid as an example, the direction of cooperation is to select suitable locations to jointly build charging and swapping stations, promote the construction of new power systems, and promote the commercial application of swapping stations as distributed energy storage. In addition, in the cooperation framework agreement signed between NIO and Nanwang Energy Storage, the cooperation content of both parties includes battery hierarchy and recycling cooperation. All kinds of cooperation, rain and dew are evenly shared.
At this year's Beijing Auto Show, 360 Chairman Zhou Hongyi once commented, "From a business perspective, battery swapping is an energy service, and NIO will also become a new energy company and energy storage company."
What will happen when crossing the turning point
Overall, the closed-loop planning of NIO in the early stage is gradually closing, and NIO is gradually connecting new energy vehicles, battery swapping stations, grid energy storage, and battery cascading utilization. That is to say, NIO's series of strategic investments in the early stages should have a relatively certain upward curve in business performance after crossing the critical turning point of the first quarter of this year.
But ultimately, NIO's ultimate goal in achieving the aforementioned closed-loop is to serve the purpose of achieving scale and profitability.
Li Bin also emphasized that the goal of NIO brand is to achieve a monthly delivery volume of 30000 vehicles, a 20% gross profit margin, and the profitability of NIO brand's core business in China in the NT3 era.
The above goals are actually not unattainable. Once automotive companies achieve scale, achieving a gross profit margin of 20% is not difficult. Li Bin had predicted during a conference call that the gross profit margin of NIO vehicles would return to double digits in the second quarter of this year and continue to grow in the third and fourth quarters.
Ledo brand may become an important "booster" for NIO to achieve scale. Bank of Communications International predicts in a research report that LeDao will become the main driving factor for NIO in the second half of this year. The institution predicts that the monthly sales of NIO+Ledo are expected to maintain a stable level of 25000 to 30000 vehicles next year.
But Li Bin seems to have higher expectations, "From a breakeven perspective, LeDao can achieve breakeven by selling around 20000 to 30000 vehicles in a month."
In the long run, maintaining a gross profit margin of over 15% for the Ledo brand is NIO's business goal. As a comparison, Tesla's gross profit margin ranges from 16% to 17%. According to NIO's plan, although the price range in which Ledo operates is highly competitive, it will not sacrifice gross profit margin for sales.
After the launch of the first LeEco model, L60, NIO has sent a positive signal to the public: the number of orders for L60 far exceeds expectations. Everbright Securities believes that the focus of future attention will be on the lock up performance of L60 after its listing and delivery, as well as the pace of delivery ramp up.
At the first quarter report conference call, Li Bin also revealed for the first time the progress of the third brand: the development of the third brand with the code name "Firefly" is currently smooth. The brand is positioned as a boutique small car, priced at 100000 yuan, serving the needs of the second family car. The plan is to share the sales network with the NIO brand, and the first car is scheduled to be officially delivered in the first half of next year.
With the penetration rate of new energy exceeding 50%, which is a key milestone in the transition from oil to electricity, NIO's hot sales in the second quarter are expected to continue. This will also directly drive the growth of core financial indicators such as revenue and gross profit in the second quarter, and keep NIO's operating curve upward while R&D and sales management expenses remain relatively stable.
Li Bin also revealed in the financial report conference call that starting from June, NIO will focus on adjusting its product structure, increasing the proportion of high gross profit margin products in the first tier, and narrowing the policy of short-term promotions. Continuously optimize gross profit margin while ensuring steady increase in sales.
The recent hot sales of NIO are driven by multiple factors: currently, NIO has completed product renewal, switching from the previous old model to the 2024 model, bringing stronger competitiveness in areas such as intelligence. Meanwhile, the BaaS battery rental plan adjusted by NIO in March this year has also achieved certain results, with over 80% of new users adopting this plan. In addition, NIO is increasing its efforts in sales capacity construction, including expanding its sales network and improving its overall sales and service capabilities.
By next year, NIO's second and third brands will gradually launch high-volume models, further enriching the company's product matrix and covering a wider market. If everything develops according to plan, it is expected to drive the continuous increase in sales and revenue of the entire company. At that time, when we look back at the significant investment made by NIO today, its output results will be even more evident.
At that time, more people will remember Li Bin's voice a year ago: "Let's roll up a roll first, and then we'll lift the table."
