Is Li Bin starting to listen to advice?

Author | Chai Xuchen

Editor | Zhou Zhiyu, Wang Xiaojuan

A "self-reflective" transformation is accelerating within Nio.

Last Friday, Nio Chairman Li Bin delivered a speech internally, further emphasizing and explaining the upcoming "CBU" mechanism that will be implemented company-wide and for all employees. This mechanism is key to rescuing Nio from its current predicament.

The so-called CBU centers on each department establishing its own profit and loss statement, strictly controlling costs and accurately calculating input and output. It aims to pull departmental teams out of their past habits of extravagance, shifting from "burning cash for expansion" to "efficiency first," ensuring that all resources are utilized effectively.

According to Wall Street Insights, this mechanism was initiated at the beginning of the year, followed by rapid changes in frontline organizations. Just two weeks ago, Nio discreetly began reducing staff in departments such as UR Fellow, Nio Energy, and NIO House operations, while the internal mobile team was merged into the cockpit team.

Looking back, while Xiaomi, XPeng, and even Leapmotor have exploded with orders this year, Nio and its brand are still struggling for over ten thousand. "Other kids have already gone to college, and we are still repeating the year!" Li Bin urgently called out in an internal meeting.

Initially, Li Bin believed that Nio was selling not just cars, but also emotional value. However, the emotional value created at a high cost through battery swapping, services, chips, and mobile phones not only failed to bring in more sales as expected but also delayed profitability.

Under the strong market temperature difference, the once "stubborn" Li Bin finally began to heed advice. He resolutely decided to lead Nio in a top-down self-revolution, declaring war on costs. All projects and personnel that could not generate benefits in the short term were quickly integrated or cut, with everyone preparing for this year's QA to turn losses into profits.

Six years ago, Elon Musk saved Tesla from crisis through strict cost control and capacity breakthroughs. Now, Li Bin must also "take action" internally to replicate this miracle for Nio.

Healing Through Pain

Two weeks ago, a wave of rapid layoffs at Nio shocked the domestic automotive industry.

In early March, Nio made various adjustments to multiple departments responsible for after-sales customer service, including UR Fellow, Nio Energy, NIO House operations, and after-sales stores, with some departments seeing layoffs of around 10%. Employees receiving compensation completed the handover process within half an hour.

Nio's iron-fisted action is a concrete manifestation of the CBU system's implementation.

Wall Street Insights learned that since January, Li Bin has initiated the CBU (Cost Settlement Center) operational mechanism internally: each major department establishes an independent cost settlement center to calculate the costs already incurred and to be incurred on different projects, and to clarify ROI indicators and performance reward and punishment systems.

In short, the era of a "big pot" budget system for various departments is over; teams must meticulously allocate operational goals and be responsible for sales and profits. "The entire company must keep accounts; things that cannot be accounted for should not exist," Li Bin stated plainly In fact, Li Bin started preparing for this throughout last year, promoting the business to sort out 15 company-level system capabilities, and based on this, advancing the CBU mechanism. The company's profitability or loss will be summarized through these different dimensions of basic operating units.

The implementation of CBU is swift. Wall Street News learned that, in addition to UR Fellow, one month ago NIO released an organizational announcement stating that NIO and the delivery channels of the Ladao brand began to merge, with some sales managers in remote areas of Ladao also serving as regional general managers of NIO; within the R&D team, the controversial mobile phone business team has also been incorporated into the digital cockpit team, significantly reducing redundant positions.

At the same time, Li Bin has taken decisive action against the supply chain, participating in negotiations over the supply prices of core components such as batteries. Insiders revealed that the generalization and reuse rate of NIO vehicle components will be significantly improved; shortly after, he led a team to visit Luxshare Precision for insights, borrowing its "one million times cost thinking," requiring all cost expenditures at NIO to be multiplied by one million to assess their reasonableness.

Consolidation and focus—this "efficiency success study" slogan that these new forces have been frequently mentioning is finally being thoroughly executed by Li Bin, the boss of "Car Circle Haidilao."

Li Bin provided the execution rhythm for CBU: initiation in the first quarter, full implementation in the second quarter, integration in the third quarter, and achieving profitability in the fourth quarter through this mechanism and management, as well as the sales and gross margin improvements brought by products.

"Surviving is the most important; fighting beautifully with a bayonet is not as good as winning." The "stubborn" Li Bin has heeded advice, admitting internally that "in the past decade, we have done well in terms of direction and vision, but in terms of grounded actions, efficiency, cost control, and lean management, many people have done much better than us."

From the sales performance in the first two months of this year, both NIO and the Ladao brand have not broken ten thousand in monthly sales, with Ladao's sales in February even declining month-on-month, finishing with only 4,049 units.

It is undeniable that the combination of the Spring Festival in the first quarter and users' wait-and-see attitude towards the facelifted 5566 (ES6, ET5T, ET5, EC6) has lowered the average sales, but the key is that the Ladao L60, which is supposed to take on the heavy responsibility of volume, has not performed as expected.

At the beginning of last year, Ladao President Ai Tiecheng had boldly claimed that they would deliver over ten thousand units in December and over twenty thousand units in March this year. Now it seems that such bold claims are difficult to fulfill, putting the 30,000-40,000 unit sales capacity that NIO had prepared in advance in the second half of last year in a "wasteful" situation.

Moreover, NIO's heavy investments in services, mobile phones, community activities, and diversification of vehicle configurations have not translated into tangible sales.

Some NIO employees candidly stated that within the company's vast system, there are many similar resources that have not been fully activated. At this time, if they remain immersed in the long-termism they have created, NIO is likely to once again walk to the edge of a cliff.

Squandering Millions

Li Bin's reform is a correction to the past large-scale ALL IN "long-termism." At present, in the fierce competitive landscape, every company has prioritized survival The industry knows that Nio is willing to spend money. Li Xiang, the founder of Li Auto, once described Li Bin's characteristic as wanting to build a grand vision and validate it through business operations. In Li Bin's vision, he aims to create a lifestyle, hoping to establish a sustainable profit capability through this car-based lifestyle.

Therefore, with the most charging and battery swap stations, the earliest self-developed chips, the best-selling peripherals, the richest community activities, the first to implement highway navigation assistance, and the first to release a smartphone among new forces... Through this series of expansive layouts, Nio maintains its high-end positioning by bringing emotional value to users.

However, sufficient emotional value has never come from thin air; it requires a substantial amount of money behind it. Just from the perspective of R&D investment, Nio's cumulative R&D expenses over ten years reached 53 billion yuan, accounting for more than half of the total losses.

Li Bin once said, "Let everyone compete first, and we will flip the table at the end." However, multiple business lines show that Nio's vast R&D team has achieved results far smaller than the investment, and full-stack self-development has not yet reached the harvest period.

As one of the earliest brands in the domestic new car-making forces to initiate self-research in intelligent driving, Nio's technology was once leading. This lead was broken last year when Li Auto, XPeng, and Huawei completed end-to-end full-scale push ahead of Nio. Last year, Nio's intelligent driving chip successfully taped out, but it still requires time from tape-out, mass production, to being installed in vehicles and converting into cost advantages.

The industry is curious why, after investing such a huge amount in R&D costs and using four Orin-X chips, Nio's experience in intelligent driving still cannot match that of the top-tier brands; why Ledo and Nio do not use a unified solution for compatibility; and why the interfaces of various components within the models have not yet been standardized.

The gap between reality and expectations has become Nio's most pressing issue. In the atmosphere of accelerated clearing in the automotive industry by 2025, Nio is sliding to the edge of the table, and its business model is facing market scrutiny.

Nio cannot afford to wait any longer.

At an internal meeting on March 14, Li Bin reflected on his erroneous decisions, citing examples where he had approved some seemingly correct decisions, only to find that the investment returns were very low, and the entire decision-making chain lacked mechanisms to avoid such waste. "I personally need to improve my business awareness and reflect. In the future, we won't engage in anything that won't take effect within three years."

"Currently, we have 500 R&D projects of various sizes. In the past, project approvals only considered external payment costs, and investment calculations were very lax. Over 10 billion yuan was invested, but it is very difficult to determine how much a single R&D project actually cost." Li Bin candidly stated that Nio did not achieve its business goals from 2022 to 2024, and now needs to spend money and time effectively within the boundaries of available resources.

"If we don't clarify the investment returns, no one will be responsible for the results, and without a closed-loop system, it will cause a lot of waste. With limited company resources, some inefficient projects are wasting money, while some projects that need increased investment are not receiving enough funding." Li Bin told the internal team.

However, unlike the "darkest moment" in 2019, Nio will not fail to pay salaries due to selling a thousand fewer cars Whether during the rapid growth period of infrastructure and delivery volume from 2021 to 2023, or in last year's Q3 financials, NIO's cash and cash equivalents were still effectively covering interest-bearing liabilities. In Q3 of last year, NIO achieved positive free cash flow, driving the company's cash reserves to increase by 600 million quarter-on-quarter, reaching 42.2 billion yuan.

From this perspective, the transformation initiated by Li Bin now lays the foundation for NIO's long-term performance. He views the execution of CBU as a long-term, life-and-death continuous action. "If we can't do it, NIO won't exist. The competition is too fierce now; it's a comprehensive competition, and good management is a basic survival condition."

A Fight to the Death

Li Bin once said that he is the kind of person who can pull himself back from the edge of a cliff. How to further expand sales and reorganize the business to convert most investments into sales returns has become his top priority.

This year, Li Bin set a target to double sales to 440,000 units and established a military order for breakeven in Q4. The outside world continues to evaluate NIO based on this.

Recently, JP Morgan downgraded NIO's stock rating to "neutral" and lowered the target price from the previous $7 to $4.7. JP Morgan pointed out that profitability will be a key factor in NIO's stock performance in 2025.

Clearly, there is a more cautious attitude towards NIO's subsequent revenue and profit potential. Industry insiders believe that Li Bin, who carries some swagger, also needs a strong figure like Wang Fengying, who is decisive and efficient. Wang has played a significant role in helping XPeng surpass Li Auto this year to become the sales champion among new car manufacturers.

Previously, XPeng's steel procurement price was once 25% higher than the industry average, which was just the tip of the iceberg of "internal losses" and inefficiencies, severely damaging XPeng's business model. At the point when new forces began to achieve positive gross margins in Q1 2023, XPeng's gross margin was still negative. Wang Fengying, who was parachuted in two years ago, began anti-corruption efforts and focused on marketing, helping stabilize XPeng's position.

"We will correct our mistakes now, and I must listen to advice when I should." Li Bin also hopes employees will quickly change their mindset, "NIO should have been like this long ago. If XPeng can improve, why can't we?"

Currently, as competitors' sales rapidly increase, NIO's product team has begun to pivot, deeply researching and learning from competitors' strategies. The sales team has also been active recently, including initiatives like 5 years of 0 interest and special purchase subsidies offered by Hefei.

Notably, the sales team has started to "speak human language" in their messaging, for example, changing "giving X battery swap vouchers" to "20,000 kilometers of free battery swaps," thereby reducing the user's understanding cost and making the value more outwardly visible.

It is understood that NIO's service operation team, energy team, and other departments have been operating under the CBU mechanism for over a year, delivering nearly 400,000 new cars last year and the year before, which is double the amount at the end of 2022, while the number of service operation team members has actually decreased by about 20%.

The improvement in the input-output ratio of sales capabilities has laid the groundwork for NIO's volume increase this year.

According to NIO's plan, 2025 will be a big year for products, with four new cars set to be launched successively. The first is the flagship sedan NIO ET9, which will begin deliveries in late March; the second is the third brand Firefly, which will be launched in April; And the two models of the LeDao home SUV delivered in the third and fourth quarters.

Among them, the two LeDao SUVs, which are responsible for volume, are already on the verge of launch, and Nio's main delivery model "5566" is also in the process of preparing for a facelift.

However, from the perspective of the listing schedule, the rhythm of the main force's assembly is still relatively late. Therefore, in balancing profitability and volume, Nio's efforts on the cost side will also be of utmost importance. Nio CFO Qu Yu stated that by 2025, they will increase the gross profit margin to 20% through optimizing market strategies and supply chains.

On the other hand, the charging and battery swapping stations, regarded by the market as "money-eating beasts," are also being accelerated in cooperative construction by Nio, which is preparing for independent financing. At the same time, national policies are gradually responding, with Hefei and Shanghai issuing special subsidies or rewards to promote the battery swapping model.

It is evident that Nio is internally shifting its stance to find a more efficient survival formula. This company is beginning to adopt a manufacturing mindset for accounting and reform. This battle is not only about Nio itself but may also influence the game rules of the entire high-end market.

Next, Li Bin and his Nio have many tough battles to fight, with the key being whether these three steps can be synchronized: internal organizational reform, rapid volume increase of LeDao, and acceleration of battery swapping network commercialization. A war racing against time is about to unfold.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk