NIO, a Chinese Car Problem Brand: Losses Have Increased, Can Li Bin’s Profit Target Be Achieved?

NIO, a Chinese Car Problem Brand Losses Have Increased, Can Li Bin's Profit Target Be Achieved

In addition to NIO’s deep losses and slowing sales growth, it is an environment in which the market is becoming more and more involuted.

Not long ago, NIO released last year’s performance report, and its performance loss hit a new high.

In fact, NIO has been struggling with losses for many years, and its revenue growth rate has also declined.

Although Li Bin said that he would achieve breakeven in the fourth quarter and double his annual sales target, it was very difficult to operate in practice, just like last year, in the case of high cost investment, it was not converted into sales, and the final sales volume only completed 80% of the target.

Therefore, although the goal is very attractive, it is unknown whether it can be achieved.

In the case of NIO’s deep losses and low sales growth, the industry competition is gradually intensifying.

The price war opened by Tesla has swept the industry, and the pressure from traditional car companies is also increasing, how NIO will realize its vision for the future is a question worth pondering.

New Nio ET5 electric saloon confirmed for UK in 2023 | Autocar

Losses Widened Again and Set a Profit Target

According to the report, NIO achieved revenue of 49.269 billion yuan last year, a year-on-year increase of 36.3%, exceeding the 40 billion mark for the first time. At the same time, annual deliveries exceeded 100,000 units for the first time.

However, in the face of rising revenue and sales, the company’s profit performance has reversed, recording a net loss of 14.437 billion yuan last year, down 259.4%, a record low.

Perhaps stemming from this, Li Bin wrote in an all-staff letter: “In 2022, we have hard work and merit.” What merit and hard work are, in fact, the correspondence is clear.

Looking ahead, NIO has long been struggling with losses.

In terms of revenue, NIO’s previous annual growth was very high, and since 2018, it has recorded 4.951 billion, 7.825 billion, 16.258 billion, 36.136 billion and 49.269 billion, up 58.05%, 107.77%, 122.27% and 36.34% year-on-year, respectively. It can be seen that with the expansion of scale, the growth rate of revenue is also slowing down.

But in contrast, NIO’s earnings performance is more worrying.

During the same period, the company’s net profit attributable to the parent was -23.328 billion, -11.413 billion, -5.611 billion, -10.572 billion, -14.559 billion, it can be seen that the profit has been in the loss, and finally compressed the loss to less than 10 billion in 2020, and then further expanded in the next two years, directly breaking through the new lower limit of 20 billion loss last year.

In 2022, the most interesting thing is the performance of the fourth quarter.

According to the financial report, NIO’s net loss in the fourth quarter was 5.786 billion yuan, a year-on-year increase of 169.9%. At the same time, gross margin fell to 6.8% from 20.9% in the same period of 2021, a huge decline, compared to 16.4% in the third quarter of last year.

The poor performance in the fourth quarter also shocked the secondary market.

On the second day of the earnings report, NIO’s stock price jumped directly low, falling 13.17% on the day, and closing at HK$69.2 per share.

Who is NIO and are they a true competitor to Tesla? | South China Morning  Post

“the More You Sell, the More You Lose”, and the Cost Input Failed to Turn into Sales

Li Bin said in this year’s earnings call: “The sales target for 2023 is to double compared with last year, which will also help improve gross margin.” “

It further stated: “The current product portfolio can support the sales target of 30,000 units per month. “

However, in comparison, in 2022, NIO’s monthly deliveries will be at most 15,815 vehicles, and NIO will face the challenge of capacity climbing to replace platforms, which means that the pressure in the second half of the year will be very great to achieve the expected goal.

Compared with the sales upgrade of 122,500 units in 2022, NIO has only completed 80% of its target, and it may not be easy to double this year.

However, the most important problem is that NIO is now in a spiral of selling more and more losses.

If calculated according to NIO’s company’s losses and annual sales last year, NIO is equivalent to a loss of 117,800 yuan for every car sold.

A more intuitive manifestation is that NIO’s gross profit margin has declined.

In addition to the sharp decline in gross profit margin in the fourth quarter, NIO’s gross profit margin for the whole year also declined, which was 18.88% in 2021 and directly fell to 10.44% in 2022; Net margin also widened from -11.12% to -29.30%.

Li Bin also said that due to the current product sales are in the transition from the NT1 platform to the NT2 platform, the old “886” model is facing measures such as vehicle clearance, national subsidies and financial discounts, while the current main delivery model is ET5, the gross profit of the bicycle is low, and the F1 factory is in a state of transformation at this stage, the production capacity is low, and the company’s gross profit margin in the first quarter of this year is still under great pressure.

However, the performance of “the more you buy, the more you lose” is only reflected in sales, because a major reason for the company’s losses is cost.

According to the financial report, NIO’s operating costs in 2022 reached 44.12 billion yuan, a difference of only 5 billion yuan between it and 49.27 billion yuan in operating income.

Under such high costs, how much can be left for NIO’s profit margins to be squeezed?

Among them, NIO’s R&D expenses were 10.84 billion, an increase of 136.0% year-on-year; Sales and administrative expenses were 10.54 billion, an increase of 53.2% year-on-year, mainly due to the increase in the number of stores and investment such as station exchanges.

However, a large amount of cost investment has not translated into sales.

From the perspective of its sales performance, NIO’s sales in each year since 2019 are 20,565 units, 43,728 units, 91,429 units and 122486 units, respectively, an increase of 81.2%, 112.6%, 109.1%, 34%, it is obvious that the future growth rate will decline off a cliff.

In this case, Li Bin can only find a way to achieve profitability as soon as possible, shouting by the way: “Tesla took 16 years to make a profit, and you can’t expect a child like NIO to support a family.” But it further threatens that “NIO will take less time to achieve profitability than Tesla.”

Li Bin also confidently said that NIO can break even in Q4 2023 and make a profit in 2024.

But whether the ambition can be achieved is only known by time.

In addition to NIO’s deep losses and slowing sales growth, it is an environment in which the market is becoming more involuted.

Nio is phasing out "older" electric car lines -

Under the Tide of Price Cuts, Industry Competition Has Intensified

In recent years, the development of the new energy vehicle market is very fast, the early market development period of new car manufacturers has gradually entered the end with the withdrawal of new energy vehicle subsidies, and is about to open the final period of competing with strength, which undoubtedly indicates that the competition will become more and more intense.

In this critical period, many car companies have set high sales targets.

In fact, due to Tesla’s prelude to the price reduction war, competitors Xiaopeng and Qianjie chose to quickly follow up the price reduction, which also led to the fact that since 2023, the entire new energy automobile industry has been swept by the price reduction tide, opening a price war, and many car companies have participated in the way of price reduction promotions.

According to incomplete statistics, at present, more than 30 car companies, including BYD, Extreme Krypton, Dongfeng Citroen, and GAC Toyota, have been involved in the tide of price reduction.

In this regard, Li Bin said in the earnings call that in the first quarter of this year, NIO’s pressure was relatively great, and NIO hoped to maintain a stable price strategy and did not launch a plan to reduce the allocation of models.

It can be seen that NIO is unwilling to reduce prices, and there is no profit margin to decrease.

But with it, NIO’s upcoming sub-brand “Alps” has reached a price band of 15~300,000 in order to cover a wider range of consumer groups.

This is undoubtedly worse for NIO, which is already losing money, but if it does not want to lose money and does not follow the trend and reduce prices, it will lose market share.

On the other side of the price reduction tide in the industry, the fuel vehicle market has gradually begun a price war, and the battlefield has further expanded, but the pressure brought by traditional enterprises is not only that, many traditional fuel vehicle companies are gradually increasing their efforts in the context of the transformation to new energy.

Li Bin once mentioned in an interview that before 2019, it was the “team training” stage for NIO, the “qualifying” stage from 2019 to 2024, and the “final” stage in 2024.

At present, NIO is already at the dividing point between the “qualifier” and the “final”, and many car brands are also at this node, and the competition situation is gradually intensifying, how can NIO maintain its advantages and reverse the loss situation?

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 Source: 氢财经

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