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Dialogue with NIO management: Trends, Strategies and Tactics

Dialogue with NIO management: Trends, Strategies and Tactics

It is learned on February 9 from EV Century that on February 6, NIO held a media conference in Beijing. Qin Lihong, co-founder and president of NIO, and Shen Fei, senior vice president of NIO Energy, communicated with the media and answered questions from the media.

Affected by various factors such as the delivery volumes of many new car-making force manufacturers in January this year, the complete cancellation of new energy vehicle subsidies, Tesla’s big price cut at the beginning of the year, and macroeconomic uncertainty, what will happen to the new energy vehicle market in 2023? How does NIO cope with short-term challenges while adhering to its long-term strategy? Qin Lihong and Shen Fei gave some answers.

NIO’s 2023 Spring Festival Travel Power-up Results

During the Spring Festival this year, NIO’s 348 battery swap stations across the country provided unlimited free battery swaps to all NIO car owners, and the power stations in the highway service areas provided 24-hour service. According to statistics, during the Spring Festival this year, NIO provided a total of 372,324 free battery swaps on expressways across the country. Among them, on January 27 (the sixth day of the first lunar month), the single-day power swap orders of expressways reached a peak of 23,866 times.

In terms of charging, during the Spring Festival this year, the cumulative number of orders for public charging piles built by NIO reached 901,900 times. Among them, 76% of the electricity has served other brand car owners, including BYD, Tesla, Xpeng, Li Auto and so on.

Qin Lihong therefore called on all car companies to participate in the construction of public charging piles, and the charging piles built by car companies should also be open to other brands.

In terms of after-sales service, during the Spring Festival, NIO provided nearly 200,000 service guarantees in seven categories for car owners across the country.

Trends: NEV will continue to grow at a high speed in 2023, and high-end electric vehicles are promising in the long run

In January 2023, NIO delivered only 8,506 vehicles, a year-on-year decrease of 11.9% and a month-on-month decrease of 46.2%.

Compared with the delivery of more than 15,000 Li Auto cars, the decline in NIO’s delivery volume is somewhat alarming.

Qin Lihong said that this is mainly affected by three factors:
First, the epidemic has affected various industries such as consumption and travel, and automobile-related consumption has not yet recovered after the Spring Festival;
The second is that the subsidy for new energy vehicles has been reduced to zero. In December last year, the inventory was eliminated, and a wave of demand was released in a concentrated manner;
Third, excluding the Spring Festival holiday, there were only about 20 effective working days in January.
Combining various factors, the delivery volume in January fluctuated.

From the perspective of the overall auto market, compared with the performance of traditional fuel vehicles and the overall passenger car market, the performance of new energy vehicles is still relatively good. Qin Lihong expected that the overall passenger car market dropped by 30% in January, while new energy vehicles were roughly flat year-on-year.

Qin Lihong believes that the growth rate of the new energy market will continue to increase in 2023. Although January is difficult due to various reasons, the entire industry is currently on the sidelines, and the macro economy is also uncertain. However, as the overall economy continues to recover, things will get better and better in the next few months.

Looking forward to the longer-term future, Qin Lihong believes that the trend of consumption upgrade in the auto market is irreversible. One is to upgrade from low-end brands to high-end brands, and the other is to upgrade from traditional fuel vehicles to new energy vehicles.

In 2022, the average transaction price of passenger cars increased by 30,000 yuan compared with 2019, while the number of fuel vehicles decreased by 2 million units. As a high-end pure electric brand, NIO’s development is fully in line with this trend, and it is undoubtedly on the right path.

However, Qin believes that the ceiling is the current level of 20 million vehicles, which will not reach the level of 25 million or even 30 million vehicles predicted by some people. Therefore, the market share of electric vehicles mainly comes from traditional fuel vehicles. And NIO wants to grab the market from traditional luxury brands.

Statistics show that in 2022, NIO had a market share of 73.9% in the pure electric segment of more than 400,000 yuan. Among them, the second-generation technology platform models ET7 and ES7 accounted for 25.1% and 15.1% respectively.

In the first half of this year, NIO’s product launch will be further accelerated, and it will fully switch to the second-generation platform. In addition to the ET5, ET7, and ES7 based on the second-generation platform currently on sale, it also includes the new ES8, EC7, updated ES6, updated EC6, and ET5 Safari Edition. There will be a total of 8 models on sale, covering more market segments.

Strategy: Insist on building a high-end brand through pleasant experience and service

NIO has been positioned as a high-end brand since its inception. Since its establishment 8 years ago, it has always adhered to the high-end brand positioning and invested a lot of resources. The purpose is to “continue to provide users with a full experience that exceeds expectations”. Although this has cost NIO a lot of money and resources, it has indeed allowed NIO to form a differentiated competitiveness and brand awareness.

— First of all, continue to invest in the swapping and charging system

As of the end of 2022, NIO has built a total of 1,305 battery swap stations. The construction speed of NIO battery swap stations has accelerated significantly.
However, compared with the growth rate of NIO car owners, the construction speed of charging and swapping stations still lags behind. Over the past year or so, especially during holidays, there have been more and more cases of queuing up for swap stations.
This year’s Lunar New Year’s Day (January 27) had the most serious queuing phenomenon. The average waiting time for expressway battery replacement was 13.08 minutes, and a considerable number of users waited for more than 30 minutes, causing a bad experience for some users.

Qin Lihong said that NIO’s swap stations are not too many, but too few. This year, it is considering increasing the layout of swap stations, which is more than the 400 announced on NIO Day at the end of last year.

In addition, in the first quarter of 2023, NIO will deliver the third-generation power station and 500kW ultra-fast charging to further enhance the user experience of power-up.

— Secondly, build more NIO Houses, on the one hand, to strengthen its high-end brand image, and on the other hand, to provide services to more users.

Qin Lihong said that since the second half of 2022, the new offline outlets are dominated by NIO House, and the proportion of NIO Space that only sells cars is not high. Not all of the newly added NIO Houses are as large as the NIO Beijing Oriental Plaza flagship store. The average area of NIO House newly opened in the past year is more than 600 square meters. In comparison, the average area of NIO Space, which only sells cars, is more than 400 square meters, and the area of NIO House in Beijing Oriental Plaza has reached 3,400 square meters.

As of the Spring Festival in 2023, there are around 101 NIO Houses across the country. According to different areas and functions, these NIO Houses are divided into global flagships, city and regional flagships, and community and local service stores. As NIO develops overseas markets, several NIO Houses will open in Europe this year, becoming local landmarks.

Judging from the actual effect, NIO House provides users with more services due to its larger area and more diverse functions. During the Spring Festival this year, all NIO stores held 3,500 events, with nearly 75,000 users participating. These activities are not directly related to selling cars. They are all hand-made activities participated by users such as making Lantern Festival, making dumplings, and cutting spring flowers. Some NIO Houses also provide users with the service of taking family portraits. Obviously, these activities cannot be carried out in NIO Space.

“We think it may be more important to increase the area a little bit and bring the overall offline experience of the NIO brand to everyone, because for NIO, sales volume and average unit price are almost equally important,” Qin Lihong said.

Tactics: Clearing warehouses for first-generation models and increasing service fees for self-built public charging piles

While adhering to the long-term strategy of building a high-end brand and providing a full experience that exceeds user expectations, according to the current market environment, NIO also adopts some short-term tactics that seem to be contrary to its long-term strategy from time to time, such as the recent “price reduction” event.

Recently, it was reported that NIO’s first-generation models ES8, ES6 and EC6 offered discounts as high as 100,000 yuan. Qin Lihong explained that the interpretation of the price reduction of 100,000 yuan is not accurate. The 100,000 yuan includes the 20,000 yuan subsidy in Shanghai Jiading District in the first quarter of this year, but very few users can really enjoy it.

In fact, different cars enjoy different discounts. For example, some cars with a long warehouse age can be discounted more than 10,000 yuan, and some can be discounted more than 20,000 yuan. The car that has been on display for one month is different from the one that has been on display for six months. Therefore, the conclusion of a price reduction of 100,000 yuan is not rigorous.

Qin Lihong said that the recent “clearance” of the first-generation models ES8, ES6 and EC6 is a good opportunity. Even the previous generation of NIO models, its product strength is not weak, and with various preferential measures, it is still very cost-effective to buy.

Regarding the impact of the “price reduction” incident on NIO’s brand image, Qin Lihong said that from the perspective of “strategy”, being a high-end brand cannot be achieved by exchanging price for quantity, but must do a good job in products and services. But at the level of “technique”, there must be phased measures like the “clearing warehouse” of the recent previous-generation models, and they should not be so rigid.

In addition to “clearing the warehouse”, NIO is planning to increase the service fee for other brands of electric vehicles using NIO charging piles, which is also a “technical” measure. Qin Lihong said that NIO has built 13,629 charging piles, which is the car brand with the largest number of charging piles in the Chinese market. Moreover, 76% of the power of NIO charging piles serves other brands.

Compared with Tesla, NIO’s approach is very selfless, but this also affects the charging experience of some NIO car owners. How to strike a balance between opening up to the public and giving priority to serving NIO car owners?

According to Shen Fei, NIO will still respect market rules and adjust demand through price adjustments, such as increasing charging service fees for some charging stations during holidays.
“It is not our goal to use charging service fees to cover the construction cost of power stations. We still hope that the built charging piles and swap stations can be used to the fullest. While serving NIO users well, they can also help improve the power-up experience of more users.”, Shen Fei said.