Li Bin has no way out

Author | Chai Xuchen

Editor | Zhou Zhiyu

Six months ago, Nio made a big splash by promoting the advantages of battery swapping and battery life, and subsequently lowered the price of its battery-as-a-service (BaaS). "Nio One Million" was soon rebranded, and from May onwards, it stabilized in the 20,000 monthly sales club.

However, the high-end pure electric "curse" struck again, with Nio's brand sales fluctuating in the fourth quarter, falling below 20,000 units for two consecutive months; and the profit promise made by Li Bin two years ago has now turned into a bubble again with losses.

Nio's stock price in Hong Kong has also dropped more than 40% from its peak in the past two months. Rumors of Nio being acquired are rampant in the market. The capital market is voting with its feet; as the growth of the new energy market slows and the elimination race accelerates, investors are more cautious about the ROI of new energy vehicle companies. The current market capitalization ranking of "Li Xiaowei" reflects the market's attitude.

Recently, in an internal letter for the tenth anniversary, Li Bin used descriptions like "the most brutal stage," "increasingly fierce competition," and "a significant gap" to sound the alarm again. Li Bin knows that he cannot fall back into the abyss in the final sprint, or else the investment of over 100 billion will be in vain.

He and Nio have no way out.

Test

In November, Nio's brand sales once again fell below the "20,000 line," sliding from 16,600 in October to 15,500 units.

Earlier this year, the market generally believed that Nio had emerged from the sales slump, with its high-end brand image and battery swapping service model gaining market recognition in the competitive landscape, entering a positive cycle of simultaneous revenue and profit growth.

However, after maintaining this for five months, Nio has reversed course in sales and seems to have fallen back into the vicious cycle of "selling more but losing more."

The recently concluded third quarter was unexpectedly below expectations for Li Bin. Initially, Nio had provided guidance for maintaining year-on-year revenue growth in the third quarter. The actual situation was that overall revenue for the quarter fell 2.1% year-on-year to 18.7 billion yuan; adjusted net loss was 4.413 billion yuan, an increase of 11.6% year-on-year.

The third-quarter report hinted at a weakening demand for Nio's main brand.

In this quarter, despite the fact that the ET5 had not yet been massively released, Nio's overall average vehicle price continued to decline, with an average price of 274,000 yuan, lower than the implied guidance of 282,000 yuan from the previous quarter. In comparison, this figure was as high as 314,000 yuan in the same period last year.

Originally, to maintain the gross margin of the main brand, Nio attempted to retract some discount policies in early October, leading to a drop in monthly sales of the Nio brand from a stable 20,000 units in October and November.

This is a dangerous signal, indicating that the high-end brand moat that Nio has built with significant investment seems to have not provided much buffer in the face of fierce competition, and price stimulation remains the key driver for sales growth, which does not fundamentally differentiate it from other car companies Last year, Nio produced smartphones and obtained independent vehicle manufacturing qualifications, but at the cost of a record-breaking loss of 20.7 billion yuan. This year, the peak investment period for Nio seems not to have passed, and the "strengthening foundation" continues.

The flagship ET9 is ready to launch, and the sub-brands LeDao and Firefly are set to embark on their journeys. The self-developed vehicle operating system SkyOS, the successfully taped automotive-grade intelligent driving chip, the ambitious layout of the "county-to-county" charging infrastructure, and the overseas expansion of self-operated stores... each of these represents significant expenditures.

In the first three quarters of this year, Nio invested approximately 10.9 billion yuan in market, sales, and management expenses, a year-on-year increase of 22%; the cumulative amount for research and development reached 9.4 billion yuan.

Li Bin is gradually approaching his ultimate vision for vehicle manufacturing, but the market and consumers seem not to resonate with him on a larger scale.

Having established a vast charging and service network, it is difficult for Nio to abandon its high-end and pure electric "faith" halfway. While Li Bin's persistence is commendable, in the current fierce competition, the long-termism he adheres to must also face the test of real-world fluctuations.

As of now, Nio's stock price in Hong Kong has dropped by about 40% since October, with a cumulative decline of over 50% this year. In the current market capitalization rankings, XPeng and Li Auto are valued at 1.36 and 2.4 times that of Nio, respectively. There are even rumors in the market that Nio may be acquired.

Regarding the rumors, Li Bin can vehemently denounce them as "nonsense," but he can only confront reality. Because what the market truly cares about is whether the flywheel that Li Bin has meticulously laid out can start rapidly next year and help Nio emerge from the high-end pure electric dilemma.

Breaking the Deadlock

Over the past decade, Nio has been a promoter of new energy vehicle manufacturing, enjoying the spotlight as the leader among new forces. However, now that competitors like Avita, Leapmotor, and XPeng have all compromised with reality, lowering their products and launching extended-range models to reap sales rewards, Li Bin, who insists on full self-research, pure electric, and high-end, appears quite unconventional.

Industry insiders believe that Nio has fallen into a certain "paradox." Its brand power is still in the process of improvement, and it has not yet mastered the pricing power in niche markets. Without a large-scale ecological construction, it is difficult to escape the brutal homogenization.

However, the reality is that such dreams require a positive cycle of scale and financial data to support them. Li Bin's vision has now turned into an expensive gamble, and investors' patience is gradually wearing thin.

Fortunately, Li Bin remains optimistic about this. In his eyes, Nio is still the king among high-end car manufacturers. He stated that in the first three quarters of this year, the Nio brand ranked first in China's pure electric vehicle market priced above 300,000 yuan, holding over 40% market share.

But he also knows that the most intense competition in the new energy vehicle market is in the 100,000 to 300,000 yuan range, where the market share exceeds 70%, while Nio's main focus on the 300,000 to 500,000 yuan range seems somewhat niche.

Li Bin has entrusted the burden of scaling to the sub-brands.

In the first half of the year, Nio launched the new brand LeDao, and the Firefly, which is positioned similarly to BMW's MINI, is set to debut at the end of the year, with formal deliveries in the first half of next year. This means that the sub-brands can reuse part of the supply chain and start "monetizing" and "supporting families" while standing on Nio's shoulders In Li Bin's plan, the three major brands will each have their own responsibilities, with NIO focusing on improving gross profit, while LeDao and Firefly are responsible for volume.

He stated that currently, LeDao L60 is ramping up production, aiming to reach 10,000 units per month by December, with a delivery target of 20,000 units per month by March next year. Next, two family SUVs will be positioned against Li Auto L7 and L8, and preparations for mass production are already underway. Li Bin "Versailles" stated that their costs and prices will be more competitive than those of Li Auto; coupled with the expansion of battery swap facilities, he is not worried about demand.

If the planned models in the brand matrix can be launched on schedule, NIO is likely to usher in a rapid and strong product cycle in 2025. Li Bin also vowed at the earnings conference on November 20: "We will double our sales in 2025 and achieve profitability in 2026."

This will be NIO's last opportunity to prove itself. Previously, he promised that NIO would achieve profitability by the end of 2024, but the harsh reality has led him to break that promise.

On November 25, NIO celebrated its tenth anniversary, and Li Bin emphasized in a letter to all employees that "achieving profitability in 2026" must not fail. Li Bin candidly stated that NIO is currently in the most brutal stage of the qualifying rounds, and in two to three years, only a few outstanding companies will survive.

The road ahead for this company is even more rugged. Over the past 10 years, while NIO has grown, its competitors have also become stronger: BYD has achieved exponential growth, the Huawei system is "technologically strong," and Xiaomi Auto has massive traffic.

Industry insiders point out that the supply side of the current new energy vehicle market is approaching saturation, and once it becomes overly saturated, it means a brutal zero-sum game. In the second decade of NIO's lifecycle, the battles it will fight will be much tougher and harder than in the first decade.

Li Bin has always used Amazon founder Jeff Bezos as a model to tell the story of long-termism. Although NIO has achieved positive free cash flow, whether it can successfully follow Amazon's script and continue its story of rapid growth will depend on finding more supporters to sustain its breakout in the grand finale.

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