Has Li Bin finally turned the corner?

Author | Chai Xuchen

Editor | Zhou Zhiyu

Just before the National Day, Nio officially announced another 3.3 billion yuan in financing, which came from "existing shareholders".

On September 29th, Nio announced that it had signed a strategic investment agreement with three existing state-owned shareholders (Hefei Jianheng New Energy Automobile Investment Fund, Anhui Provincial High-Tech Industry Investment Limited Company, Guotou Merchants Investment Management Limited Company), who will jointly invest 3.3 billion yuan to subscribe for additional shares of Nio's subsidiary "Nio Holdings"; at the same time, Nio will also invest 10 billion yuan to subscribe for new shares.

After the transaction is completed, Nio's stake in Nio Holdings will decrease from 92.1% to 88.3%, with the remaining 11.7% held jointly by this round of strategic investors and other shareholders. Based on this rough estimate, Nio Holdings' pre-investment valuation is 46.6 billion yuan, and post-investment valuation is close to 60 billion yuan.

Hefei's additional investment is precisely because it sees the possibility of Nio achieving "transformation" under a series of changes this year.

In mid-March, Nio adjusted its BaaS service, attracting more consumers by lowering the rental price of batteries, and then stimulated sales through promotional policies. Two months later, Nio returned to the "20,000 units per month" mark and has maintained it ever since. With the increase in sales, economies of scale followed, and Nio's vehicle gross profit margin doubled year-on-year to 12.2% in the second quarter of this year.

On the other hand, Nio's nearly 50 billion yuan investment in technology and battery swapping has turned its sub-brand, LeDao's first SUV, into a hit product. After the L60 launch event, Li Bin's excitement was evident when he exclaimed "sold out". This model, aimed at the mainstream market for "volume", carries his expectation of selling 20,000 units per month.

This means that Nio, gradually moving away from the questioning of being "left behind", is beginning to see the dawn of profitability. Li Bin once mentioned that if Nio's brand can achieve monthly sales of 30,000 units and a gross profit margin of 20%, and LeDao can achieve monthly sales of 20,000-30,000 units, it will achieve positive profitability.

After many years of setbacks and countless roller coaster rides, Li Bin seems to have finally turned the corner. The capital market quickly voted with its feet, with Nio's Hong Kong stock rising nearly 20% at the opening on September 30th.

However, this financing itself has also sparked some discussion. Many people are puzzled as to why Nio still needs to rely on "external blood"; why Li Bin continues to endure the pressure of deficits and insists on strong investments of 3 to 4 billion yuan in a single quarter.

He is trying to make the market believe that Nio's "long-termism" will pay off, which will definitely be a compelling story.

According to the plan, next year, with Nio as the center, a third brand "Firefly" (code name) will be launched, and LeDao still has 2-3 new models in the pipeline. They will form a encirclement strategy, covering the 140,000-800,000 yuan market, expanding to the 100,000-700,000 yuan range under BaaS services, further penetrating the territory of joint venture gasoline vehicles.

Li Bin's self-developed technology system is connecting the Nio automotive legion; the "county-wide connectivity" network is paving the way for its penetration into a broader sinking market. In the background, Nio is also preparing for a sprint in the coming years. Li Bin revealed that the F3 factory with an annual capacity of 600,000 units will be completed and put into operation in the third quarter of next year, when the entire Nio will have at least three factories simultaneously outputting, with a total capacity reaching the million-unit level The expected has been fulfilled. If Nio's technology and battery swapping moat continue to thicken, and the sub-brands of Leda and "Firefly" can successfully take root in the market, the entire Nio Group may have the opportunity to obtain a pass to enter the million-unit "club" and snowball to absorb more resources.

And this is the script that Tesla has played before.

In February 2018, Tesla's annual report with a huge loss of $2.2 billion shocked the market. At that time, the Model 3 production capacity issue was not resolved, and Musk burned $1.4 billion in developing the electric truck Semi and Model Y. Subsequently, market doubts, short attacks, and continuous stock price declines... but this became a watershed moment for Tesla.

After surviving the hellish times, Tesla's market value exceeded $1 trillion, and Musk became the world's richest man. The "Wood Sister" who bottomed out several times bet and won because she deeply understood the core value of new forces - using technological innovation to subvert the traditional automotive industry. To successfully achieve this, continuous research and development investment are necessary, as Li Bin also stated, "There is no quick victory in the automotive industry."

However, this road to advancement is full of obstacles, and Nio needs strong financial support. Just as Tesla had investors like the "Wood Sister" accompanying its rebirth, Nio also hopes to deepen its ties with shareholders to grow into a giant in its own right.

A fund industry insider familiar with Nio told Wall Street News that with the macroeconomic easing, whether it is government funds or industrial capital, companies with innovative technological characteristics are relatively favored. Nio can take advantage of this to obtain more ammunition and is expected to turn losses into profits.

It is worth mentioning that four years ago, it was the joint efforts of the three state-owned enterprises mentioned above that pulled the struggling Nio out of the ICU with a 7 billion yuan investment. They also received substantial returns from this investment.

Li Bin revealed, "Nio only did one RMB financing, which was Hefei, Anhui, and Guotou investing in Nio, and quickly returned five times to them." Nio then returned the favor, continuously expanding its investment territory in Hefei.

Perhaps to further enhance market confidence, in addition to announcing a self-investment of 10 billion yuan this time, Nio also mentioned that before the end of next year, it has the right to further increase its capital by no more than 20 billion yuan at the price and conditions of this transaction.

Nio's winning strategy is gradually becoming clear. In the game, Li Bin and the state-owned shareholders have more confidence and greater expectations with their increased investment, believing that as long as Nio can persevere, it truly has the hope of becoming an important force in changing the Chinese auto market