NIO's Li Bin: Selling 50,000 vehicles per month in Q4 is not a pipe dream | Exclusive interview by 36Kr

Text | Li Anqi

Editor | Li Qin

“We believe that the lowest point was in the first quarter of this year, and since the second quarter, we have entered an upward trajectory,” said Li Bin, CEO of NIO, at a communication meeting on June 4th.

The night before, NIO released a less - than - outstanding financial report. In the first quarter of this year, NIO delivered 42,000 vehicles, a year - on - year increase of 4.1%. Among them, the NIO brand delivered 27,000 vehicles, and the LeDao brand delivered 14,700 vehicles. The average price per vehicle was 236,000 yuan.

In comparison, Li Auto and XPeng both delivered over 90,000 vehicles in the first quarter, with average vehicle prices of 266,000 yuan and 153,000 yuan respectively. Although XPeng had a quarterly loss of 660 million yuan, it is not far from the break - even point; although Li Auto's net profit declined significantly, it still had a net profit of 647 million yuan.

Xiaomi Auto sold over 75,000 vehicles in the first quarter, with an average vehicle price of 238,000 yuan, and its quarterly loss was narrowed to 500 million yuan.

NIO, on the other hand, had a net loss of over 6.7 billion yuan in the first quarter, and its cash on hand decreased from 41.9 billion yuan in the fourth quarter of last year to 26 billion yuan. However, in April, NIO completed a lightning placement in Hong Kong, raising over HK$4 billion.

Despite the “bleak” financial report, NIO's management has given an expectation of “climbing out of the trough” in the second quarter. NIO's sales guidance for the second quarter is between 72,000 and 75,000 vehicles, a year - on - year increase of 25% - 37%.

Li Bin said that the sales volume in the second quarter is expected to set a new record for single - quarter deliveries. Qin Lihong, co - founder of NIO, said that the sales volume in the second quarter will increase by more than 70% compared with the first quarter.

The confidence comes from NIO's recent performance. In April and May this year, NIO's sales volumes were 23,900 and 23,200 vehicles respectively. In other words, NIO only needs to deliver between 24,900 and 27,900 vehicles in June to meet the guidance expectations.

Among them, in the May sales volume, the NIO brand delivered 13,270 vehicles; the LeDao brand delivered 6,281 vehicles; and the Firefly brand delivered 3,680 vehicles in its first full - delivery month. For the first time, the three brands jointly supported the monthly sales volume.

But NIO's expectations are more aggressive. At the earnings conference call on the evening of the 3rd, Li Bin set a goal of selling 50,000 vehicles per month in the fourth quarter: the NIO brand is expected to sell 25,000 vehicles, and the LeDao brand is also expected to reach 25,000 vehicles.

“A monthly sales volume of 50,000 vehicles is not a fantasy,” Li Bin said at the communication meeting.

All these figures ultimately point to the goal of achieving profitability in the fourth quarter.

Li Bin said at the communication meeting that for the company to achieve profitability is actually very simple, which is sales volume × gross profit margin - expenses.

For example, in terms of expenses, Li Bin said that projects that are not necessary for R & D and projects with a relatively low ROI should be cancelled to improve the company's operational efficiency; in terms of R & D expenses, NIO's previous quarterly R & D expenses will be reduced from over 3 billion yuan to 2 - 2.5 billion yuan.

But the most important thing is how to achieve the sales volume of 50,000 in the fourth quarter. NIO's management has also made more detailed plans.

For the NIO brand, in May this year, NIO's four main - selling models “5566”, namely ET5/ET5T/ES6/EC6, were launched, and June is the full - delivery month. Li Bin said that by then, the gross profit margin of the ES6 can exceed 20%, that of the EC6 is even higher, and the gross profit of the ET5 and ET5T can also be increased by 10%, which will overall boost the gross profit margin of the NIO brand.

In the fourth quarter, NIO will also deliver a new generation of the ES8 model. Li Bin said that when designing the second - generation ES8, more considerations were given to the global market, so the size and space of the vehicle were relatively conservative. “The third - generation vehicle will be more innovative.”

The other half of the sales volume in the fourth quarter will come from the LeDao brand. Last year, after the launch of LeDao's first vehicle, the L60, its sales never took off. However, after a leadership change in April this year, LeDao achieved a monthly sales volume of over 6,000 in May. “The number of employees at LeDao was reduced by 40%, and the sales volume increased by 40%,” Li Bin said.

Li Bin further told 36Kr Auto that by the end of the year, the LeDao brand will have three models on sale: the L90/L80/L60. The monthly sales volume of the L60 is expected to reach a stable 10,000 vehicles, and the combined sales volume of the L90 and L80 will be 15,000 vehicles.

Regarding the further penetration of LeDao cars into the lower - tier markets, Qin Lihong said that there will be two methods: “positional warfare” and “guerilla warfare”. The former is to open new stores, which requires a high short - term investment; the latter is more lightweight, that is, in the lower - tier markets, vehicle demonstrations and experiences will be provided through NIO's battery - swapping stations.

The first - quarter financial report is already in the past. NIO's management has mainly shown confidence and expectations, but whether the sales volume will develop as NIO expects remains unknown.

After all, Chinese automakers are currently in fierce competition, and the battle is extremely intense. It is foreseeable that after the launch of Xiaomi's second vehicle, the YU 7, Li Auto's pure - electric i8/i6, and XPeng's G7, which have generated a lot of pre - launch buzz, in the second half of this year, they will stir up quite a storm in the industry.

According to 36Kr Auto, Xiaomi's YU 7 is already in inventory production to ensure a large - scale delivery upon launch.

After continuously narrowing their losses, other automakers have also set a time frame for achieving profitability. XPeng said that it expects to achieve profitability in the fourth quarter, and Xiaomi is expected to reach the goal even earlier, in the third or fourth quarter.

NIO needs to achieve profitability within half a year while having a loss of 6.7 billion yuan, and the pressure and risks it faces far exceed those of its peers. “We have the mentality of a chaser and need to catch up in terms of operations.”

At the communication meeting, Li Bin recalled the “darkest moment” in 2019 and said that the crisis in 2019 was overcome with external “blood transfusions” and help. This time, NIO needs to rely on its own management to get out of the crisis. “This time, we need to generate our own 'blood'.”

The following is an edited exchange between 36Kr Auto and Li Bin, CEO of NIO, and Qin Lihong, co - founder of NIO:

Question: If you want to find incremental sales in the lower - tier markets, do you have any new plans for the sales channels? For example, a model similar to the 'partner program'.

Qin Lihong: We have been entering lower - tier markets in two ways, which can be understood as a combination of “positional warfare” and “guerilla warfare”.

Opening stores in some places. The short - term investment in the direct - sales system is relatively high, which poses a short - term challenge to quickly optimizing the financial indicators this year, but it will definitely be better in the long run. The second way is to quickly enter the market by relying on battery - swapping stations + on - site sales teams to interact with local potential customers. The battery - swapping stations provide demonstration and experience support. Currently, we are implementing this on a large scale, and the results are good.

Many people think that direct sales and direct operation mean doing everything on your own, but in fact, direct sales also require cooperation with others. Currently, the sales teams of NIO and LeDao are cooperating with over 400 dealer stores across the country.

Question: LeDao needs to achieve a monthly sales volume of 25,000 in the fourth quarter. What will be the sales volume ratio of the three models, the L60, L80, and L90?

Li Bin: The L60 has the opportunity to return to a stable monthly sales volume of 10,000 vehicles. With a reasonable expectation, the combined monthly sales volume of the L90 and L80 will be around 15,000 vehicles. This is our goal. One of these two models is a large five - seat SUV, and the other is a three - row six - seat SUV. They are very competitive products.

Question: NIO was still in a state of huge losses in the first quarter. Can you talk about the current reform measures, including actual and specific changes in the operation process and financial situation? Also, what will happen if the monthly sales volume of 50,000 cannot be achieved? Do you have a Plan B?

Li Bin: This adjustment aims to establish a bottom - up awareness of full - staff operation. It's not just Li Bin and Qin Lihong who are responsible for the company's overall operating results; everyone should be responsible for the operating results of the things they are in charge of. Everyone should bear the responsibility for profit and loss.

Since May, each employee can clearly know how much the company has spent on them and how much they have earned for the company. We regard each employee as a basic operating unit. In the past, when evaluating employees for elimination, we simply looked at the number of vehicles sold. Now, it's different. Now we look at the costs, expenses, and profits they bring to the company. The same goes for stores. Each store will look at its own operating statement.

The same applies to R & D. Now, does developing a function really have user value? In the past, we thought it did, but now someone must be willing to pay for it. If no one is willing to pay, this department or position should not exist. We will not do things that do not create user value or value for the company. We will squeeze out such “water”.

Actually, for the company to achieve profitability is very simple: sales volume × gross profit margin - expenses. Most of the expenses can be controlled. The gross profit margin depends on your competitive strategy. Don't break through the bottom line of economies of scale. We have a “6P model” internally, which is an effective methodology and tool for selling each model well and working towards certain factors.

Overall, we are still confident. We still have some important models that have not been launched, and the effects of the layout in many aspects such as sales channels are starting to show. Our cars are all the latest models, and we have no reason not to succeed. If we execute well in the following months of this year, a monthly sales volume of 50,000 vehicles is not a fantasy.

Qin Lihong: Only a few days have passed in June, but the sales volume in the second quarter will increase by more than 70% compared with the first quarter. The gross profit margin will definitely improve, and the expenses will further decrease. The actual low point has passed, and now is actually a good time.

Question: The new ES8 this year is highly anticipated. What are its competitive advantages compared with its competitors? What are your expectations for it?

Li Bin: When designing the second - generation vehicles, because we considered the global market more, the size of the ES8 was a bit conservative. At least the third - generation ES8 will be more innovative in terms of space.

Question: NIO plans to control its R & D expenses between 2 - 2.5 billion yuan per quarter. Is this a short - term or long - term strategy?

Li Bin: Currently, the R & D expenses are about 3 billion yuan per quarter. We will reduce them to 2 - 2.5 billion yuan, which can ensure our current R & D intensity. We mainly cancel some projects with a low ROI and concentrate more people on high - output projects, which will not affect our competitiveness in R & D.

Question: NIO was a bit weak in terms of supply - chain commonality and reuse before. After the third - generation platform, how much can the reuse rate of the supply chain among the three brands be improved?

Li Bin: We sorted out our system capabilities last year. In terms of the supply chain, it's called hierarchical decoupling and atomic cost management. The supply - chain reuse rate of the NIO brand is still very high. Each generation of vehicles uses the same operating system and battery pack, and 60% - 70% of the vehicle costs are the same.

In terms of cross - brand cooperation, we definitely need to conduct hierarchical decoupling at a smaller atomic level. For example, can all connectors be unified? Can the specifications of all wiring harnesses be unified? Even how to unify the motors. We were the first to implement the hierarchical decoupling logic for seats, and the results are good.

Originally, LeDao's supply - chain team was relatively small. Now it has been completely merged. Currently, the supply chain of the three brands is managed by one supply - chain team.

Question: You said that you need to rely on management to get out of the trough. What do you think is the most effective management method in this process?

Li Bin: The most important thing is to establish a positive mechanism to make everyone focus on one goal. This year, we have clearly set the goal of achieving profitability in the fourth quarter as the company's top priority. Through the full - staff operation mechanism, everyone should know that they are working towards this goal. How to make every department and every position integrate the CBU mechanism into their daily work to form a new management and operation paradigm. I think this set of methods has basically been put into operation, and we have already seen the results.