Layoff 10%, NIO’s “self-rescue” problem

Survive and pass the coldness to everyone.

In August last year, Ren Zhengfei said this in a conversation with Huawei internals.

▲ Picture from: Bloomberg News

"Cold Air Theory" In the past year, this cold air has finally reached the rims. According to exclusive reports from Auto, Chery Jaguar Land Rover has started a new round of layoffs in October. The proportion of layoffs is about 15%-20%. The job changes affect product engineering, quality management, production and manufacturing, logistics and shipping management, etc. department.

When the cold wave passes, all living beings are equal.

Joint venture car companies are shivering in the cold wind, and new forces are also "unable to escape". A few days ago, Li Bin issued a serious letter to all employees within NIO, stating that the company had conducted more than 30 analysis and discussions on the two-year business plan, and finally decided to optimize the organization, reduce costs and increase efficiency. Weilai will reduce department positions by about 10%.

▲Li Bin pictures from: Bloomberg

In this wave of layoffs, NIO’s mobile phone and battery departments have been most affected. NIO Phone is on the edge of its car-making business, and layoffs and changes are reasonable. There are also early signs of adjustments in the battery department. Since preparations for self-made batteries began last year, NIO's battery R&D team has exceeded 800 people, and annual R&D investment is expected to exceed 1 billion yuan.

The difficulty of battery self-research exceeds NIO's internal expectations. After encountering multiple obstacles in production lines and technology, the huge expenditure on battery self-research business has become one of NIO's heavy burdens. In September this year, NIO began to explore a new model of battery self-research. NIO established a joint venture with Honeycomb Energy to jointly develop large cylindrical batteries to reduce the operating costs of the battery business.

Second quarter financial report data shows that NIO’s R&D expenditure in a single quarter reached 3.34 billion yuan, and R&D expenditure exceeded 3 billion for three consecutive quarters. On the other side of high R&D investment, NIO’s net loss in a single quarter increased by 27.8% quarter-on-quarter. Reached 6.056 billion yuan. In fact, NIO, which has suffered serious "blood loss", has not struggled for sales recovery.

In order to "stop the bleeding" in time, Weilai began to slow down its future new car plans and began to spread more sales resources. Li Bin admitted in the financial report meeting that NIO's sales staff are far behind market competitors in terms of quantity and ability. By the end of September, NIO is expected to initially achieve the sales recruitment target of 5,000 people, which will not only improve sales competitiveness but also Seize the opportunity to sink channels and continue the trend of unbundling power swap rights to activate sales.

What is obvious is that after deploying more sales resources, Weilai’s monthly sales of around 20,000 are still a drop in the bucket. There is no immediate effect, and going to the step of layoffs is enough to show Weilai's anxiety.

internal and external troubles

NIO is like the elephant in the room.

The brand line of "lift high and fight high" has shaped NIO. However, the high-end luxury that everyone talks about is now becoming an indelible gown of NIO. In order to tell high-end stories, NIO has touched upon a large number of supporting businesses in recent years, including expansion of battery swap station resources, investment in battery self-research, entry into smartphones, self-research of chips, and even overseas deployment.

From Weilai's perspective, these "money-burning" businesses are value investments that can be held firmly. However, just like the unpredictable stock market, long-term holding is not just a flat and graceful upward curve. The upward trend is often accompanied by violent shocks. In addition to being unable to see clearly the upward and downward direction, no one can guarantee that they will not be buried in the next shock "pit".

To pay for its own large-scale expansion, NIO is now in another "deep pit" of shock. In the financial report for the first half of the year, NIO’s net loss for the first half of the year expanded by 139.7% year-on-year, with cumulative losses reaching 10.79 billion yuan. Layoffs and business contraction are just one step in "reducing expenditures." To achieve a healthy "increase in revenue and reduce expenditures," Weilai also needs to find new growth points.

▲Picture from: Bloomberg

Finding new growth points is never easy, and Weilai also has its own "internal and external troubles."

In the letter to all employees, Li Bin revealed that Weilai has delivered 5 new products this year and has gained more than 40% of the market share in the pure electric market with a transaction price of more than 300,000 yuan. The 40% share data is enough to scare people. On paper, NIO holds close to half of the market share of more than 300,000 pure electric vehicles. However, such a strong market performance seems a bit "strong on the outside but weak on the inside". This has nothing to do with Weilai's own products. A large part of the reason is that it is on the track where Weilai is working hard.

The domestic pure electric market with more than 300,000 units is special. We once mentioned in the article "Xiaomi, which wants to build an extended-range vehicle, is taking emergency shelter" that the domestic pure electric market is falling into a dilemma of sluggish growth. In 2021, domestic pure electric sales will grow by 158.68% year-on-year. However, starting from 2022, the pure electric market will begin to "hit the wall". The overall expectation is to experience a large-scale downward contraction, with the year-on-year growth slowing to 68.4%; and in the past 2023 In the first half of this year, the growth rate of pure electric sales dropped sharply to single digits, only 2.5%.

The overall market is declining, and prices have become a key factor in downward fluctuations. As of April this year, in the price range of RMB 200,000 to RMB 300,000, the share of pure electric models was about 25%; once the price exceeded the red line of RMB 300,000 and fell into NIO’s main range, the penetration rate of pure electric models dropped sharply. to 14%.

It seems that in the price range where the brand share is excellent, the basic sales volume is actually not large. In this price range, NIO's new user growth is extremely limited. In contrast, plug-in hybrids are the “version answer” to the main new energy market at this stage.

On the one hand, the potential for pure electric sales has peaked. On the other hand, the pure electric market with more than 300,000 units is still an "insensitive" market.

In the second quarter of this year, Weilai announced a price reduction of 30,000 yuan for all series without bundled power swap rights. The entry-level model ET5 began to really dip into the pure electric market below 300,000 yuan. The rare "straightforward pricing reduction" quickly activated Weilai coming sales. In the following July and August, NIO’s monthly deliveries were 20,462 units and 19,329 units respectively.

However, the combined effect of "price reduction + ES6" did not continue. From September to October, NIO's monthly sales fell back to 15,641 units and 16,074 units. Compared with Xpeng and Ideal, which had year-on-year growth of 292% and 302.1%, NIO's October delivery volume fell to the bottom of the three new forces for the first time.

There are differences in the world, and the two markets of 300,000 and above are completely different ecological models. Weilai officially announced a price reduction of 30,000 yuan, and only the entry-level ET5 can barely touch the edge of less than 300,000 yuan. Most of the car models are in the price range of 300,000 yuan. For this group of price users, the price reduction discounts that loosen the power swap rights are not sensitive enough. NIO’s price reduction radiation is actually not strong. It is also unrealistic to rely on entry-level models to achieve ideal sales performance. NIO's price cuts have a bit of a "drinking dove to quench thirst" flavor.

The domestic pure electric market has reached "stagnation", and NIO has also set its sights overseas, hoping to walk on "two legs". NIO should be regarded as one of the first new forces to explore overseas growth.

▲NIO overseas version EL6

However, NIO’s European overseas business is not exactly outstanding. NIO is building NIO Houses in Europe regardless of cost. However, in the first half of the past year, NIO's sales in Europe were only more than 800 units. The sales return cycle in overseas markets is measured in "years", and NIO's high operating costs are disproportionate in the long run. According to Reuters, NIO is exploring a new sales system in the European market, abandoning its original single direct operation model and turning to a dealer model.

"Internal and external troubles" in domestic and foreign markets have put NIO in an awkward period of growth.

Good cards, late

Temporarily giving up the attitude of "holding high and fighting high", grounding is the key to NIO's breakthrough. Alps is the "good card" that NIO has not yet played.

With the help of sub-brands, Weilai has thoroughly explored the 200,000-volume market and created additional product growth points without affecting the original brand tone. This is a great plan. However, despite the seemingly beautiful plan, the Alps actually came too late.

▲ Alpine road test drive

Towards the end of 2023, we found that the domestic automobile market was not only dominated by the "blowout" MPV models, but the market for pure electric cars priced at 200,000 yuan also showed an obvious trend of crowding. Leaving aside "locals" like Xpeng, in the fourth quarter of the year alone, the Zhijie S7 jointly built by Chery and Huawei and the 007, Jikrypton's first pure electric sedan, were released one after another. In mid-2024, Xiaomi The first pure electric sedan with the same price will also join the battlefield, and the number of players in the pure electric sedan market in the 200,000 range has increased sharply. In Weilai’s plan, Alps, which will be released only at the end of 2024, is obviously a “late event.”

▲Zeekr 007

It is worth noting that with these emerging pure electric car products, we have also seen dramatic changes in the ecological rules of the 200,000 pure electric market. Whether it is Xpeng P7i, Zhijie S7 or the upcoming Xiaomi "Modena", they all have obvious "intelligent" characteristics. In the order structure of Xpeng G6, the proportion of orders for Max intelligent driving models even accounts for more than 70%. Intelligent driving has evolved from "civilianization" led by Xpeng, to "popularization" launched by Huawei, and finally evolved to today's " "Standard configuration", smart driving has become a key requirement for the 200,000 pure electric track, and this is where Weilai and Alps are unlikely to take advantage.

On the track of 200,000 pure electric cars that are "both necessary and necessary", high-voltage architecture + battery swap may no longer be the "moat" of the product. Intelligent driving capabilities occupy the high ground and become a new technical threshold in this price range. The belated arrival of Alps may ultimately face a situation no different from that of the mainline NIO.

Weilai, which has difficulty finding growth points, is still solving the current "self-rescue" problem.

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