NIO is a leader in China’s new energy vehicle field, winning the favor of many consumers with its high-end, intelligent, and personalized services. However, NIO is also facing huge difficulties such as continuous losses and tight funds.
After being abandoned by the Shanghai municipality, NIO struck a VAM deal in 2020 with the Hefei municipal government, which invested 7 billion yuan in NIO China projects and held a 24.1% stake. But the investment is not unconditional, and requires NIO to meet a series of difficult performance targets in the coming years:
In 2020, the revenue was 14.8 billion yuan
Revenue of 120 billion yuan in 2024 (6-8 models listed)
From 2020 to 2025, the total revenue will be 420 billion yuan
The total tax revenue is 7.8 billion yuan
It will be listed on the Science and Technology Innovation Board by 2025
If these goals are not met, the Hefei municipal government, as a strategic investor, has the right to require NIO to buy back its 24.1% stake in NIO China at an annual interest rate of 8.5%.
So, can NIO complete these bets? We can analyze the following aspects:
First of all, from the perspective of sales volume and revenue, according to the financial report, although NIO was affected by the epidemic and chip crisis last year, it achieved revenue of 49.269 billion yuan in 2022, a year-on-year increase of 36.3%, exceeding the 40 billion mark for the first time. A total of 122,500 vehicles were delivered, exceeding 100,000 units annually for the first time. The net loss was 14.559 billion yuan, a year-on-year increase of 37.7%, which translates to a loss of more than 100,000 yuan per car sold.
NIO delivered 8,506 units in January 2023 and 12,157 units in February 2023. According to Bloomberg, NIO CFO Feng Wei said that he is confident of doubling electric vehicle sales to 250,000 this year. If the target of 250,000 vehicles can be achieved and the unit price level of about 300,000 yuan can be maintained, the revenue this year is expected to exceed 70 billion yuan.
However, it is not so easy to complete 120 billion in revenue in 2024. Based on the unit price of 300,000 yuan, more than 400,000 units are required. At present, only Audi, BMW, and Mercedes-Benz among domestic luxury brands can achieve this level. Moreover, in the next few years, competitors such as Tesla, Xpeng, and Li will also launch more new products and services and increase market penetration. Therefore, it is not easy to achieve a revenue scale of hundreds of billions of dollars.
Secondly, in terms of listing, NIO has been successfully listed on NASDAQ in the United States and completed its secondary listing in September last year. However, listing on the STAR Board requires more conditions and specifications to be met.
From the data currently publicly available, in 2022, although NIO’s revenue and sales reached record highs, its net loss also reached a record. NIO’s net loss in 2022 was 14.437 billion yuan, a year-on-year increase of 259.4%, far from meeting the profit requirement. And the market share and the proportion of R&D investment need to be improved. Therefore, it will also take great efforts to complete the listing of the STAR Board by 2025.
Finally, in terms of taxation, NIO needs to reach a total tax revenue of 7.8 billion yuan from 2020 to 2025. This goal is easier than $120 billion in revenue, but it should not be taken lightly.
To sum up, NIO’s gamble with Hefei is an extremely challenging task, which requires NIO to make comprehensive improvements in products, services, brands, channels, etc., and seize the opportunities in the new energy vehicle market. If the bet can be completed, NIO is expected to become a leader in the field of luxury electric vehicles in China and even the world; If you fail to complete the gambling contract, you may face pressure from high buybacks and interest expenses.
According to the development of recent times, many media and industry insiders unanimously believe that NIO is very likely to fail the gamble. So will NIO break the cauldron and sprint to the last period?
In fact, as early as a few years ago, NIO has bought back most of its shares, and the Hefei municipal government has also sold some of NIO’s shares, according to insiders, NIO has now occupied nearly 90% of NIO China’s shares. When participating in CCTV’s “Dialogue” program, NIO CEO Li Bin also said that NIO did not have the problem of huge repurchase money if the gambling failed.
It seems that NIO has long been prepared for the failure of the gamble.
