The Internet attribute of new energy vehicles is accelerating, and the characteristics of industrial products have begun to permeate the industry.
First of all, the new car-making forces that have been in the limelight in the past few years have become more and more blurred at the product level with traditional car companies. At the same time, the profit level of new energy vehicles is also falling sharply, approaching that of fuel vehicles.
The overall style switch of the industry immediately brought about changes in the market structure. Leading companies such as Tesla set off a wave of price cuts. New entrants such as Xiaomi and Baidu continued to enter the game, and the pressure on old players increased sharply.
Recently, NIO released its unaudited financial results for the first quarter ended March 31, 2023. Although some data failed to meet market expectations, the steady progress in globalization and high-end brand building has been recognized by the market, and the stock price has also followed suit. As a result of the rise, when the market closed on the 13th, Weilai rose by 5.12% in the US stock market and 5.78% in the Hong Kong stock market. With NIO’s announcement on the 12th to cut the prices of all products, new energy car companies began to aim at the commanding heights of a new round of competition, and the price war in the auto market has gradually become “white-hot”.
Under the subsidy ebb and competing product prices, NIO has highlighted its business resilience?
The financial report shows that Weilai achieved revenue of 10.68 billion yuan in the first quarter, a year-on-year increase of 7.7%. Among them, automobile sales were 9.2245 billion yuan, a year-on-year decrease of 0.2% and a month-on-month decrease of 37.5%. Also, gross margin was 1.5% in the first quarter, compared to 14.6% in the same period in 2022. In this regard, NIO CFO Qu Yu said that with the delivery of new models on the second-generation platform, the gross profit margin is expected to return to double digits in the third quarter and exceed 15% in the fourth quarter.
In fact, Weilai has profit pressure, which is inseparable from changes in the overall industry environment. Entering 2023, two major events that have changed the industry structure have occurred in the field of new energy vehicles. The first is that the 13-year-old "national subsidy" policy for new energy vehicles has officially withdrawn from the stage of history. The increase in consumers' car purchase costs may affect the purchase decision on the demand side. At the same time, leading companies Tesla and BYD set off a wave of price cuts at the beginning of the year, further depressing the industry's profit level.
The industry is fully market-oriented and the profit level has fallen, which has caused major car companies to face a huge test, and the pressure has also been fed back to their performance. For example, in the first quarter, Xiaopeng Motors’ revenue was 4.03 billion yuan, a year-on-year decrease of 45.9%; SAIC’s sales of new energy vehicles reached 142,100 units, a year-on-year decrease of 26%; Great Wall Motor’s revenue was 29.039 billion yuan, a year-on-year decrease of 13.63%. Under such a background, the year-on-year growth in revenue can be achieved, which to a certain extent highlights NIO's operational resilience.
The business model of car companies has always been simple and easy to understand. Delivery volume may not necessarily bring profits, but it will definitely bring revenue. Weilai was able to achieve a year-on-year increase in revenue of 7.7%, the direct reason being that the delivery volume increased by 20.5% year-on-year. According to the financial report, in the first quarter, NIO delivered 31,041 vehicles, including 10,430 high-end smart electric SUVs and 20,611 high-end smart electric cars. No. 1 on the market.
From this point of view, Weilai already has a leading edge in the domestic high-end market of new energy vehicles, but there are not few brands impacting the high-end market. Why is Weilai the first to stand firm?
Long-termism dominates user experience improvement, how sustainable is NIO?
For car companies, high-end means higher profit margins, and it also helps companies cultivate brand loyalty, increase brand voice, and further empower overall development. Based on this, many independent brands such as BYD and Geely have also successively released mid-to-high-end new energy products this year, accelerating their expansion into the high-end market. For example, BYD released a new high-end car brand "Looking Up" and its core technology "Easy Square" on January 5; Geely Automobile announced on February 16 that its mid-to-high-end new energy series was officially named "Geely Galaxy".
However, making high-end new energy vehicles is not simply a matter of making them larger in size, full of configurations, and pushing up prices. Brand awareness and other aspects are still difficult. How to make consumers willing to pay for the high price of the product? It is necessary for domestic car companies to focus on long-term consumer value recognition, and word of mouth is always the only way to take the high-end route.
This is why Weilai adheres to long-termism and continues to increase investment in product research and development. The financial report shows that in the first quarter of 2023, the company's research and development expenses will be 3.07 billion yuan, a year-on-year increase of 74.6%. According to QUICK FactSet statistics and data released by various companies, the research and development expenses of 17 major global car companies in 2023 will increase by 13% year-on-year, reaching 603.4 billion yuan. Judging from the data, Weilai's growth rate leads the industry, but if the R&D investment is to be further transformed into product competitiveness, the most important thing is to gain market recognition.
NIO's approach is to use the product as an entrance to a lifestyle platform. After purchasing a vehicle, users can interact with the company in the community and share product feelings and life experiences, such as novelty designs and food exploration. At the same time, through the community to understand user feedback in an all-round way, iterative vehicle OTA upgrade and other services, users can also strengthen the sense of belonging to the product through high-density contact with the company.
According to the financial report, NIO currently has 365 NIO Centers and NIO Spaces, covering 136 cities; it has 359 service centers and delivery centers, covering 196 cities. It has also deployed a total of 1,474 battery swap stations around the world, providing users with more than 23 million battery swap services. Based on this, Weilai's style of play has received positive feedback from the market. According to the 2023 China New Energy Vehicle Charm Index released by JD Power, ET7 ranks first in the luxury pure electric vehicle market.
Yingda Securities believes that the current layout of new models of many car companies shows the trend of pursuing brand improvement and deploying high-end smart electric vehicles. In this endurance run, Weilai is leading the improvement of the purchase experience and the continuous optimization of the product level with a long-term approach, which is a sustainable development direction.
However, this also means that Weilai's investment will continue for a period of time. The current industry has entered a "knockout" competition in terms of delivery volume and profit margin. How to balance input and output under pressure to achieve a sales boost is the key The problem facing Weilai, after all, for any enterprise, survival is the foundation of everything.
Can Weilai achieve the goal of delivering 20,000 vehicles per month in the second half of the year?
For the development of the second half of the year, NIO seems to be quite confident. Its delivery guidance for the second quarter is 23,000-25,000 vehicles, and its revenue is expected to be 8.742-9.37 billion yuan. Li Bin, chairman of Weilai, also stated at the earnings conference call for the first quarter of 2023 that he is confident in achieving the sales target of 20,000 new car deliveries per month in the second half of this year.
Although NIO will maintain a stable pace of product releases in the second half of the year. For example, the ET5 travel version will be released on June 15 and will be delivered in the same month. Eight models based on the second-generation technology platform have also been developed and are planned to be fully launched in the near future. market, but simply pinning the sales target on the big sales of new products, the risk is actually a bit high, because the appearance of popular products often has a certain degree of chance. To be on the safe side, it is still necessary to decompose the sales task into a specific corporate strategy level, and this time NIO chose to seek stability.
On June 12, Weilai announced that the price of all new cars will be reduced by 30,000 yuan. At the same time, the rights and interests of the first car owner will be adjusted, including the cancellation of free battery replacement for life, and the warranty period of the whole car will be adjusted from 10 years with unlimited mileage to 6 years. Or 150,000 kilometers, etc., but for users who have already picked up the car, the rights and interests of the first car owner, including free battery replacement for life, remain unchanged.
After Tesla and BYD announced price cuts at the beginning of the year, Weilai also stepped on the waves of this wave of price cuts. However, the difference is that Weilai's previous position can be summarized as "insist on not lowering prices." So, how to understand Weilai's price cut this time? Will this damage NIO's long-standing brand image and service philosophy?
In fact, the price war in the industry has not yet "stopped". In March of this year, the prices of Tesla Model 3, Model Y, Model S and Model X were lowered by 20,000 to 48,000 yuan respectively. After BYD cut the price of the "Qin PLUS" sedan at the beginning of the year, it announced a price cut for the Song pro DM-i SUV in May. This move also brought about an increase in sales. BYD's sales of electric vehicles in May reached about 240,000. It can be seen that consumers prefer products with high cost performance.
At the same time, the cost reduction on the material side and the supply side is also transmitted to the production side and the consumption side. In February this year, Ningde era launched a "lithium mine rebate" plan to some car companies. In the next three years, the price of lithium carbonate for some power batteries will be settled at a price of 200,000 yuan/ton. Battery suppliers followed up one after another, such as Great Wall's Hive Energy, which randomly announced a 10% price cut. Qi Haishen, president of Beijing Teyi Sunshine New Energy, believes that the profit margins of upstream enterprises such as lithium salt factories are still relatively large, and further price drops cannot be ruled out.
Therefore, it is also a rational decision for NIO to choose to cut prices at this time. From the perspective of maintaining users and enhancing product competitiveness, price reduction is also a manifestation of its long-termism.
In addition to price cuts, the expansion of overseas markets may also contribute new growth to NIO. According to data from the Passenger Passenger Association, the export of new energy passenger vehicles in May was 92,000 units, a year-on-year increase of 135.7% and a month-on-month increase of 1.2%, showing continuous growth. good situation. In April this year, e-Drivers.com, the largest electric travel platform in the Netherlands and Belgium, selected the NIO ET7 as the "Best Electric Vehicle of 2023". The results of this selection were all voted by electric vehicle users, and NIO is in the leading position in occupying the minds of overseas consumers.
Today, the market has more considerations for the profitability of new energy vehicle companies, but it also pays more attention to the long-term growth of the company. Past performance does not represent future performance. Under the guidance of long-termism, NIO may be able to give the market new expectations by virtue of measures such as price cuts and overseas deployment.
Author: Good blue is not good
Source: US Stock Research Institute