Can NIO Achieve 400.000 Annual Sales Amid Limited Production and Betting Pressure?
Only two months into 2022. NIO already feels like it's falling behind in the first tier of new car-making forces. Not only has its sales been overtaken by Neta for two consecutive months, but the external environment is also not optimistic, as if facing another round of "pills". So how many difficulties does NIO face this time, and can it safely get through them?
Production Limited by Supply Chain
Recently, the February sales data released by new car-making forces showed that while Ideal, XPeng, Neta, and Leapmotor all achieved year-on-year doubling of sales, NIO only saw a 9.9% increase year-on-year. Not only has its growth rate further shrunk compared to January, but its sales also did not rank among the top three new forces in February, being overtaken by Neta, a member of the "second tier", for two consecutive months.
The February data shows that NIO delivered 6.131 units that month, a year-on-year increase of 9.9% and a month-on-month decrease of 36.47%. In comparison, Ideal, Neta, XPeng, and Leapmotor delivered 8.414. 7.117. 6.225. and 3.432 units respectively, with Leapmotor achieving a year-on-year growth of 446.97%, and Ideal, Neta, and XPeng all growing by over 180% year-on-year.
NIO's recent delivery slump is mainly due to supply chain limitations. When asked about this year's sales target, NIO's co-founder and president Qin Lihong told the media: "This year's delivery target is not up to me; it's up to the supply chain. We deliver as much as we produce."
It is evident that the impact of the pandemic and war has put enormous pressure on NIO's supply chain. Last year, NIO mentioned plans to further increase the gross profit margin per car this year. However, given the current global situation, raw material prices are unlikely to drop in the short term, making it extremely difficult for NIO to achieve last year's target of increasing the gross profit margin per car. The new models ET5 and ET7 that NIO plans to launch this year also appear to be severely restricted by the supply chain. NIO may be more affected by this year's raw material price hikes than others.
Huge Pressure from Betting Agreement
In addition to the supply chain impact, people’s pessimism about NIO also stems from a betting agreement between NIO and Hefei. In 2019. Li Bin encountered obstacles everywhere for NIO's financing, earning the title of "the most miserable person of 2019". At that time, the Hefei municipal government extended a helping hand, providing NIO with 7 billion yuan in financing and signing a betting agreement: 14.8 billion yuan in revenue in 2020 (with three models listed), 120 billion yuan in revenue in 2024 (with six to eight models listed), a total revenue of 420 billion yuan from 2020 to 2025. total tax revenue of 7.8 billion yuan, and listing on the Science and Technology Innovation Board before 2025.
Not to mention the goal of achieving a total revenue of 420 billion yuan from 2020 to 2025. even reaching 120 billion yuan in revenue in 2024 is very challenging. Even if NIO's average car price reaches 300.000 yuan, it still needs an annual sales volume of over 400.000 units, slightly lower than BBA (BMW, Benz, Audi), and double the current annual sales of Cadillac and Lexus in China. In 2021. NIO sold 91.429 cars. To reach the 2024 goal, sales must increase fourfold. For comparison, Cadillac sold approximately 230.000 units in 2021. making it extremely difficult for NIO to achieve its revenue target.
Moreover, NIO has not yet achieved profitability and has already lost over 30 billion yuan. From 2018 to 2020. NIO’s net losses were 9.638 billion yuan, 11.295 billion yuan, and 5.304 billion yuan respectively. Adding the net loss of 1.873 billion yuan for the first nine months of 2021. NIO lost 28.11 billion yuan in just three years and nine months. Achieving real profitability is NIO's immediate priority. The betting agreement with Hefei is another sword hanging over NIO's head.
NIO's Commercial Goals Unmet
Initially, NIO aimed to follow a high-end luxury route, positioning the brand as a first-tier luxury brand like BBA. However, judging from current sales, NIO has not reached its set goals. Some experts have analyzed that if NIO continues to progress with the positioning of a first-tier luxury car, it will be difficult to achieve the betting goal because the user base in this segment is relatively small and competition is fierce. NIO has already developed its potential customers in this market, making it hard to see significant growth.
This could also explain why NIO launched the ET5. To succeed, NIO needs to enter the mid-market with a large number of consumers and win by volume. This may be the only way to have a chance of winning in the betting agreement. However, mid-range models will lower NIO’s average car price, meaning NIO will need even more sales to achieve the 120 billion yuan revenue target by 2024.
Conclusion
In 2020. the betting agreement with Hefei saved NIO, but now it has become a sharp blade forcing NIO to keep advancing. Currently, NIO faces a supply chain crisis, must strive to achieve the betting agreement targets, and deal with external factors like subsidy declines, putting NIO back in a crisis. Now, NIO needs to increase the profit per car, find new supply chains, and expand its market, making it no surprise that netizens feel NIO is once again in trouble.
