Li Bin did not listen to the advice

A decisive stance in technology investment may deepen NIO’s moat, but also increase NIO’s risk factor in the short term.

Text | “Chinese Entrepreneur” reporter Ren Yafei

Editor｜Ma Jiying

In order to fit the new status of CTO, Li Bin specially wore a black T-shirt and blue jeans.

At the first “NIO IN 2023 NIO Innovation and Technology Day” on September 21, he and his team spent 3 hours systematically describing the full-stack layout of NIO technology, the technological progress of intelligent driving, and the release of the new NIO Phone .

“We always say that our service is good, but it feels like NIO’s technology investment is not enough.” This makes NIO’s founder, chairman, and CEO Li Bin a little “unconvinced.” Li Bin not only wants to change his identity, “Weilai does not have a CTO. The CTO of Weilai is me. I am the person in charge of R&D of the company.” He also wants to urgently label Weilai as a “technology”.

“Technology Weilai” was obtained by spending a lot of money. The financial report shows that NIO’s net loss in the second quarter of 2023 was 6.056 billion yuan, a year-on-year expansion of 119.6% and a month-on-month expansion of 27.8%; the net loss in the first half of the year was 10.926 billion yuan, a year-on-year expansion of 139.07%. As of June 30, 2023, NIO recorded cash and cash equivalents, restricted cash (including non-current restricted cash) and short-term investments totaling 29.6 billion yuan.

In the opinion of many people, NIO should live a tight life, and Li Bin should also save some money and make reductions appropriately. But judging from Li Bin’s public response, he did not listen to the advice. “Actually, I have a lot more information than you, and I have different references when making decisions.” Li Bin said.

Although Weilai is still experiencing losses, the company’s intensity of R&D investment will not decrease. It will basically maintain R&D investment accounting for 20% of revenue every quarter, which is about 3 billion yuan.

“This scale of R&D investment is within NIO’s affordability, and it is also the basic guarantee for us to participate in the increasingly fierce competition in smart electric vehicles in the next stage. So far, NIO has more than 11,000 R&D personnel around the world. NIO will Under the premise of such R&D investment and personnel scale, we will continue to improve efficiency and maintain pace.” Li Bin said that Weilai is willing to exchange high investment in R&D in exchange for long-term gross profits.

Can Li Bin, who refuses to listen to persuasion, lead NIO to finally win the battle for survival among the new car-making forces?

　　NIO has also begun to roll out technology

At the Innovation and Technology Day event, Li Bin announced for the first time the “NIO Technology Full Stack” self-research system, systematically sorting out NIO’s R&D layout and achievements in the past few years. Li Bin summarized his technical thinking into four dimensions: continuous leadership in innovation, starting from the user’s interests, full life cycle user experience, and systematic efficiency, which are specifically reflected in chips and vehicle-mounted intelligent hardware, battery systems, operating systems, 12 technical fields including intelligent driving and global digital operations.

In the field of chips, NIO debuted its self-developed lidar chip NX6031, named “Yang Jian” in Chinese, which was officially mass-produced in October this year. According to reports, the chip uses an 8-core 64-bit processor, plus an 8-channel 9-bit ADC, with a sampling rate of up to 1GHz, reducing power consumption by 50%.

　　Photography: Ren Yafei

When talking about the plan to develop self-developed chips, Li Bin said that the purpose of making his own chips is to exchange recent R&D investment for long-term gross profits. It is understood that this chip can reduce the cost of a single NIO lidar by hundreds of yuan, and the research and development costs can be recovered in about a year. Currently, NIO’s chip R&D team has 800 people, distributed in six cities in two countries.

In the field of batteries, NIO revealed a photo of a battery pack taken half a year ago. The picture shows that NIO’s battery pack uses large cylindrical cells similar to Tesla’s 4680 battery. It has been previously reported that NIO is preparing to establish a joint venture with the power battery company Honeycomb Energy, and the two parties will jointly develop large cylindrical batteries, but NIO has not responded.

In order to demonstrate its underlying technical strength in the field of smart electric vehicles, NIO officially released the global operating system Tianshu SkyOS. According to the plan, full-featured mass production of Tianshu SkyOS will be realized on NT3 platform models. It is worth noting that NIO’s new brand Alps based on the NT3 platform will be launched in the second half of next year.

In the extremely competitive field of high-end smart driving, NIO clarified the time node for NOP+ to enter urban areas from highways at this event. It is expected that by the end of this year, NIO will launch NOP+ in 60,000 kilometers of urban areas, achieve 200,000 kilometers of coverage in the first quarter of next year, and 400,000 kilometers of coverage in the second quarter of next year.

Of course, what attracts the most attention is still NIO’s first mobile phone product, NIO Phone. There are a total of 7 mobile phones including performance version, flagship version and EPedition, with prices ranging from 6,499 yuan to 7,499 yuan.

Different from existing mobile phones on the market, the biggest highlight of the NIO Phone is that it can be seamlessly connected with NIO cars. The body is equipped with a NIO Link car control key pioneered by NIO, which can completely replace the car key and supports 48 hours. There is no power inside to unlock, even if there is no network, it can be unlocked. Therefore, Li Bin positioned the NIO Phone as “a mobile phone designed for NIO car owners.” For non-Nio car owners, the highlights of NIO phones may be flagship configurations, good looks, and refreshing systems because it has no pre-installed commercial software.

As for why NIO makes mobile phones, Li Bin once again explained, “NIO makes mobile phones not because mobile phone companies cross over into the automotive industry, nor because NIO makes money by making mobile phones, but because NIO users need a product that is incompatible with NIO cars. “Seamlessly connected mobile phones.” He emphasized, “We will make many models of cars, but we will only make one type of mobile phone.”

As for whether it is necessary to spend six to seven thousand yuan to buy a NIO mobile phone? “Chinese Entrepreneur” interviewed many NIO car owners and non-NIO users. Most of the consumers who are willing to buy are car owners. Their answers are almost unanimous, “try it early” and “after all, it is the first mobile phone made by a car company.” “. Consumers who are unwilling to buy feel that every time they go out to have an extra mobile phone for no reason, they are “a bit dissuaded”.

How to keep the bottom line?

The level of research and development determines the depth of a company’s technology “moat”, but NIO, which insists on self-research in many fields, also carries a heavy burden.

Since its establishment, NIO has maintained high R&D investment. Data shows that between 2020 and 2022, Weilai’s R&D investment was 2.488 billion yuan, 4.59 billion yuan, and 10.84 billion yuan respectively. The cumulative investment in three years has reached 17.9 billion yuan, while Xpeng Motors and Li Auto’s R&D investment in the past three years has reached 17.9 billion yuan. They are approximately 11 billion yuan and 11.1 billion yuan respectively. The high investment in R&D caused NIO to set a new record loss of 6 billion yuan in the second quarter of this year.

During the interview, the media asked, NIO has a large stall and has to do everything by itself. Does it have enough funds? Li Bin believes that they are still “very focused on building a company, but the boundaries of the business, between trade-offs, between offense and defense, are not completely rational and depend on how long you take to evaluate them.” He emphasized again that NIO’s core business still revolves around smart electric vehicles, and it is impossible to turn mobile phones into its main business.

　Photography: Ren Yafei

However, with such a huge body, Weilai will inevitably continue to burn money. Has Weilai considered making reductions in certain things, such as cutting off less popular models, businesses or personnel?

Li Bin said that Weilai needs to adjust its system, architecture, capabilities, etc., but the essence is to find the real problem. “The problems we found are different from what everyone generally understands. They are very different. For example, are addition, subtraction, and efficiency our real problems? Are our efficiency high or low?” Li Bin pointed out that their shortcomings are The judgment and operational capabilities of some key matters are insufficient. For example, when Weilai exported to Europe last year, it immediately exposed the lack of system capabilities of the entire company. At that point in time, it was not very possible to export. “We underestimated the difficulty of laying infrastructure in Europe.”

But in Li Bin’s view, these technical investments are long-term principles they adhere to. “We need to think clearly about the underlying logic. We must do what should be done and not do what shouldn’t be done. If it is something that is meaningful in the long, medium and short term, we will resolutely invest in it. If it is too long-term and we cannot take into account both, we can only give up.”

However, NIO, which has been walking on the edge of the cliff all year round, has also caused concerns about NIO’s development prospects. In July this year, NIO announced the completion of a US$738.5 million strategic equity investment from CYVN Investments RSC Ltd, an Abu Dhabi investment institution. On September 19, NIO announced that it planned to issue convertible senior bonds with a total principal amount of US$1 billion. On the day the news was released, NIO’s U.S. stock price plummeted, trading at $9.130 per share, down 11.45%. Since then, the stock price has fallen as much as 17%.

How does NIO grasp business risks? What red lines must be kept?

Li Bin told “Chinese Entrepreneur” that there is no doubt that boundaries need to be strictly managed, “divided into several dimensions, such as cash, company profits and losses, gross profit margin, etc.” Li Bin said that the first thing Weilai needs to improve is gross profit margin. , “We hope that the gross profit margin will return to double digits in the third quarter. Secondly, the priority arrangement of R&D projects, including the pace of fixed asset investment, so the bottom line is cash flow management.”

“In general, I still feel confident. After experiencing 2019, we know very well that the boundaries of the company should be kept well.” Li Bin said frankly that although the challenges are still huge, after experiencing twists and turns, Weilai has returned to a normal state. track.

Despite its first-mover advantage, NIO is still in a state of loss, and there is uncertainty about whether it can continue to receive large amounts of financial support from the capital market. NIO still has a long way to go.

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