NIO builds cars independently, and the road ahead is still difficult

Zebra consumption, Fan Jian

With all kinds of good news, hedging the three-quarter report of huge losses. On December 6, NIO-SW, which had been at the bottom, finally closed up 4.87%.

No matter whether a traditional car company joins the "Power Exchange Alliance", or the company obtains a car manufacturing qualification, and simultaneously acquires Jianghuai automobile assets to establish its own production capacity, in the final analysis, NIO still needs to use products to speak, sales to speak, and operations to convince investors.

However, NIO’s sales and performance this year have always worried the market.

After building a car independently, Li Bin and NIO need to provide investors with an explanation of how to proceed.

　

Selling a car 140,000

The newly disclosed Q3 results further demonstrate the urgency of NIO’s internal operations.

From July to September this year, NIO-SW (09866.HK) delivered a total of 55,400 vehicles, including 37,600 smart electric SUVs and 17,800 smart cars.

In the current period, the company’s total revenue was 19.067 billion yuan, an increase of 46.6% and 117.4% year-on-year and month-on-month respectively, and the comprehensive gross profit margin was 8.0%.

Due to the growth of automobile deliveries during the period, the company’s automobile sales revenue in the current period increased significantly year-on-year and month-on-month, reaching 17.409 billion yuan.

Even so, the company was still unable to get rid of the fate of huge losses. Q3, net loss of 4.557 billion yuan, loss increased by 10.8% over the same period last year, adjusted net loss of 3.953 billion yuan.

In the first three quarters of this year, NIO delivered a total of nearly 110,000 cars. During the same period, the total net loss was about 15.40 billion yuan, and the average loss was 140,000 yuan for each car sold.

At the beginning of this year, NIO’s market performance was not satisfactory. A total of 54,500 vehicles were delivered in the first half of the year, with an average of less than 10,000 vehicles per month. In the face of severe market competition, NIO, which had previously refused to reduce prices, did not hesitate to hurt the feelings of old users, and finally played a price reduction card – announced that from June 12, the price of all products will be reduced by 30,000 yuan.

There is no car that cannot be bought, only the price that cannot be bought. The price reduction has an immediate impact on sales. In July, NIO sales exceeded 20,000, achieving a historic breakthrough.

However, this strong momentum did not continue. From August to November, NIO delivered 19,300, 15,600, 16,100 and 16,000 vehicles respectively.

At this year’s interim results meeting, NIO founder Li Bin revealed to the outside world that the company is selling 30,000 vehicles per month to configure its sales staff and sales network. According to the current trend, it may be difficult to achieve this sales target in the short term.

In the face of the pressure on operations and performance, Li Bin had to reluctantly start internally. In November, the company announced that it would cut 10% of its jobs for the month, and thousands of NIO employees were facing re-employment.

The Eve of Independent Car Building

It’s not all good news for NIO.

Recently, some authoritative media published that NIO has appeared in the credit information management system of MIIT vehicle manufacturers, which means that the company has obtained the car production qualification and can build cars independently in the next step. However, as of now, NIO officials have not taken the initiative to disclose this information.

In 2016, NIO signed a strategic cooperation agreement with Jianghuai Automobile, and the two parties integrated their respective advantages to jointly build the Jianghuai NIO advanced manufacturing base. Since then, NIO’s cars have been OEM produced by Jianghuai Automobile, and the tail of the vehicle has always been hung with the words Jianghuai Automobile.

According to relevant national regulations, new energy vehicle companies need to obtain "double certificates" from the National Development and Reform Commission and MIIT in order to obtain a birth permit. Due to the overall regulation of the automobile industry’s production capacity at the national level, the issuance of new certificates is more cautious, which has also become a major obstacle in the face of new car-making forces.

In the early days, most of the new car companies had the experience of seeking OEM from traditional car companies. For example, Xiaopeng was OEM by Haima Automobile; ideally, it chose to cooperate with Lifan.

At the beginning of the development of the brand, with the help of the OEM model, the product can be brought to the market as soon as possible with a small investment in fixed assets. But as the brand gradually matures and sales grow, the production capacity problem caused by OEM becomes more and more obvious.

Therefore, most of the new car-making forces chose to buy the "birth permits" in the market through acquisitions.

In 2018, Ideal invested 650 million yuan to acquire 100% equity of Lifan Automobile Co., Ltd.; in 2020, XPeng Motors bought 100% equity of Guangdong Fudi Automobile for 1.25 billion yuan. It has taken an important step in independent car manufacturing.

In comparison, NIO is a big step behind, but fortunately it is catching up quickly.

In October this year, Jianghuai Automobile listed and transferred three asset packages of its passenger car company. The latest news, NIO became the transferee of two of the asset packages, with a total transaction price of 3.158 billion yuan. Through these two asset acquisitions, NIO will simultaneously solve the problem of its own production capacity.

Large blood transfusions are still needed

In a short period of time, NIO had won the qualifications and production lines one after another, and it seemed that everything was ready, but it was just about to run away.

However, how to boost sales is still the biggest problem facing NIO and Li Bin. In the past 11 months of this year, NIO has delivered a total of 142,000 vehicles, which is far from the annual target of 250,000 vehicles. After the implementation of its own production capacity, if it cannot share the cost of fixed assets by increasing sales, it will be a huge burden for NIO.

Among the new car-making forces, NIO has been the one with the most serious losses. The company originally planned to achieve break-even in the fourth quarter of this year, but in the face of an unfavorable start, the company has realized in advance that this goal is difficult to achieve. In the first quarter earnings call, Li Bin announced that the target time for break-even will be pushed back by less than one year.

For many years in a row, NIO’s capital pool has also seen a significant decline.

This year’s Q2 results report shows that the company’s cash and equivalents, restricted cash, short-term investments and long-term time deposits as of the end of June totaled 31.50 billion yuan, of which cash and equivalents were about 13.724 billion yuan, while a year ago, the two sets of figures were 54.40 billion yuan and 24.514 billion yuan.

According to this rate of gold swallowing, NIO’s funds cannot be maintained for too long.

The company can only continue to speed up the money. In June, Abu Dhabi investment institutions through the subscription of private placement of new shares and the transfer of old shares, a total of 1.10 billion US dollars, strategic investment in NIO, of which 350 million US dollars for Tencent transfer of old shares cash.

In September and October, NIO completed the issuance of convertible senior debt rights with a total principal amount of 1.15 billion US dollars, of which 500 million US dollars was used to repay the past convertible bonds and the rest to supplement daily operations. However, the company’s financing costs have increased significantly. The interest rate of the first two convertible bonds was 0% and 0.5% respectively, and the new two have increased to 3.875% and 4.625%.

As new financing has been in place, NIO’s capital reserves have rebounded. As of the end of September, cash and equivalents, restricted cash, short-term investments and long-term time deposits totaled 45.20 billion yuan, of which cash and equivalents were 24.085 billion yuan. In terms of capital reserves, it surpassed XPeng Motors (36.48 billion yuan) in one fell swoop, and there is still a big gap compared with the ideal of deep-pocketed wealth (88.52 billion yuan). The bigger gap is that the ideal has been fully profitable through the improvement of sales scale and realized its self-hematopoietic ability.