Leda welcomes "happy troubles"

Author | Chai Xuchen

Editor | Wang Xiaojun

Before the peak season of "Golden September and Silver October" in the automotive industry arrives, Nio and Lantu have already been struck by a wave of wealth, facing a happy trouble of balancing orders and production capacity.

Within a month, Li Bin's Lantu L90 and Nio's new ES8, both large three-row pure electric SUVs, have seen a sharp rise in popularity, with the former achieving over 10,000 deliveries in its first month of launch. The arrival of these hot-selling models is also spreading the brand's popularity. "The pull of the L90 on the L60 is very obvious, and this month the orders for the L60 have also reached a new high," said Shen Fei, president of Lantu, to Wall Street News.

Shen Fei stated in a somewhat pretentious manner, "According to product strength and the continuously improving team organization capability, the current (sales) level has not yet reached the height it should be."

It can be said that the Lantu brand is experiencing significant changes and turning points alongside Nio. It is almost certain that the L90 and the all-new ES8 have successfully brought Lantu and Nio back into the spotlight, making them the dazzling protagonists once again.

Next, the subsequent deliveries of the L90 and the official launch of the ES8 will carry the expectations of many followers. Having previously suffered from production capacity losses due to hot-selling models, how Nio and Lantu avoid repeating the same mistakes and maintain sustained growth is crucial to Nio's promise of profitability in the fourth quarter of this year.

Firstly, regarding the delivery rhythm of the Lantu brand, there is a consensus internally that the L90 will be the focus in the short term. Qin Lihong revealed that due to many shared components among models of the same brand, the L60 will relatively give way to the L90 in terms of production capacity for a period of time. Additionally, the L80, originally scheduled for launch this year, will be postponed.

Qin Lihong stated that the Lantu L90 is the brand's focus in the short term, and other models must relatively give way. This third quarter is a turning point for Nio, "Nio has now entered a phase of gathering energy and rising again, having crossed the storm cycle."

He pointed out that the hot sales of the L90 exceeded the company's expectations, with total production capacity under pressure in August and September, but expected to ease in October. Shen Fei mentioned that production capacity will see a small increase in October, with further increases in November and December, and any additional enhancements will have to wait until around the Spring Festival. By then, Lantu's challenge will no longer be production capacity, but whether it can secure more orders.

"Production capacity is a minor issue; demand is always the biggest issue," Qin Lihong said. Both he and Shen Fei remain calm about the hot sales of the L90. "It's too early to conclude that it's a hot seller; whether the L90 can maintain its hot sales will be judged based on October's sales. Today's orders have already been scheduled for October."

In the face of soaring orders and skyrocketing stock prices, Qin Lihong soberly stated, "Now is far from the time to pop the champagne."

Indeed, after years of hardship, Nio has just returned to an upward trajectory, but the competition outside is fiercer than ever. Therefore, this year will be a critical window to observe whether Nio can completely emerge from the quagmire and jump up from a deep squat. Li Bin and their teams must go all out for implementation and execution The following is a transcript of the conversation with NIO President Qin Lihong and LeDao President Shen Fei:

Question: What is the user profile of LeDao L90?

Shen Fei: The user profile of L90 is still very typical of family users, who have a strong demand for this large three-row vehicle. There are original L60 users upgrading, those switching from other competitor brands' gasoline vehicles, those transitioning from pure electric, and those moving from extended-range vehicles. They are upgrading from cars that might have cost over 100,000 to the L90, and there are also families that own very expensive and high-end cars.

The L90 really meets the family's need for a large three-row vehicle, and both the elderly and children are very satisfied; it is the best car for a big family.

Question: Since the release of the L90, internal confidence has been high for the pre-sale of the NIO ES8. Have any L90 users found the ES8 better and considered switching their orders?

Shen Fei: The launch of the all-new ES8 will definitely have an impact on the LeDao L90, which is positive and will only help the L90 gain more popularity and sell more. I believe the L90 and the all-new ES8, which range from around 200,000 to 500,000 to 600,000, will mutually influence each other and promote each other, making these two vehicles the best choice for family use.

Qin Lihong: I think the combination of the ES8 and L90 establishes the pure electric route within the large three-row SUV segment. The main user base still comes from those with relevant seating and loading needs, as well as the clear trend of transitioning from other energy power forms to pure electric.

Question: The L90 delivered 10,000 units in its first month. How long can this stable delivery maintain over 10,000 units? How do you view the tags of LeDao and family?

Qin Lihong: The market is always evolving; today’s numbers are meaningless. We believe that for a considerable period, the L90 will have a relatively absolute dominance in its niche market in terms of product strength and cost-effectiveness. We will see how we execute moving forward.

From a brand perspective, many friends say not to limit ourselves to families with the L60; we also have NIO and Firefly, which cater to young individuals who are free-spirited and can be used in multiple scenarios for both business and family. Firefly and NIO have their own missions, and family needs are very common and eternal. Families come in many different forms, and the LeDao brand being closely tied to joyful family life is key to its success. No one can live without family; it’s just that choosing a family positioning places many demands on the brand. For a family vehicle like the L90, there must first be consensus among multiple generations within the family.

You can imagine that if one person in the family wants to buy a Firefly, they can simply say they like it, but for the L90, several generations must fully agree. If one person disagrees, the purchase cannot happen; the requirements are very high. It must be versatile and practical, and it should also have appropriate emotional value for all family uses. The price must be reasonable. Establishing a family-oriented brand is a test of the company's vehicle manufacturing capabilities. The LeDao brand has been launched for over a year, and we have faced some twists and turns on this journey, but overall, we are still quite determined in this direction Shen Fei: The increase in production capacity is not that fast. In August and September, we saw our delivery volume, and October is not a complete relief either. The production capacity of the L60 has also increased; in October, the capacity will rise a little, and in November and December, it will climb another step. The next step will be around the Spring Festival.

Question: What is the underlying logic that the capital market is optimistic about Nio and Ledo?

Qin Lihong: We might as well look at Nio's first quarter report and the upcoming second quarter report along with the sales figures from July and August. Nio has now entered a phase of gathering momentum and rising again, having crossed the storm cycle. The underlying logic that everyone is optimistic about is that there is such a company that adheres to long-termism, invests in research and development day in and day out for ten years, especially in basic research and development, insists on the pure electric path, digs deep into one road, and continues to invest in infrastructure to build its own business model.

This series of colorful and costly endeavors is beginning to yield results; perhaps this harvest is just the beginning of a series of gains. From another perspective, it also proves that Nio's persistence over the past ten years has been justified. For the outside world, this is an objective affirmation of the strategic route, and for us, it is far from the time to pop the champagne. We have endured for a long time and finally see a glimmer of light; we must continue to move forward and recognize that many of our persistences are correct.

Through the story of the Ledo brand, what everyone can see is a team with the ability for self-reflection, self-denial, and growth, but we are still a startup.

Question: Both the ES8 and L90 are large three-row SUVs. What market share do you expect or hope these two models will occupy in this market?

Shen Fei: I have only been with Ledo for 5 months, so it is difficult to say what height the L60 and L90 will reach together in the future. I clearly know that based on the product strength of these two models and the continuous improvement of the entire team's organizational capabilities, the current level has not reached the expected height. We need to focus on improving what we can do now.

Indeed, after the arrival of the L90, whether it is the direct traffic boost or the expansion of the audience, the impact on the L60 is very obvious. This month, the orders for the L60 also reached a new high, which is how the entire Nio group should look.

Qin Lihong: For the Ledo brand, we will prioritize the L90. To be frank, the L60 will relatively give way to the L90 in terms of production capacity this month and for a while to come. The delivery volume of the L60 itself may not represent the order level. In the initial phase after the L90 is launched, we will maintain a monthly sales volume of over 10,000 for a period.

The L80 will not start deliveries this year; we still need to focus on doing a few important things well. Many friends have told us that Nio needs to learn to do subtraction, and we are placing the L90 as the top priority for the Ledo brand in the short term.

Question: Consumers' tastes are becoming increasingly discerning, and Nio's pricing system is very consumer-friendly. How did you achieve this?

Qin Lihong: Nio still needs to learn to do good for everyone while keeping the accounts straight. We should not underestimate the help that research and development provides in cost reduction. Many technological industrial products reduce costs through technological maturity combined with increased production volume, which is the main factor The L90 single motor has strong power because it uses the ET9 motor. If the L90 were to develop an ET9 motor, the cost would be significantly higher. The ET9, L90, and ES8 all share the same rear motor, which distributes the cost of providing the same strong power across different vehicles.

Our self-developed Shenji NX9031 chip has the computing power equivalent to four of the industry flagship chips used in the past, reducing the cost by more than ten thousand yuan per vehicle. With added value-added tax and gross profit reflected in the selling price, it can reach twenty thousand.

NIO established an in-house seat development team four years ago. At that time, many people questioned why they needed to develop seats themselves when they could just source them externally. If seats were not self-developed, there would be no VIP comfort experience today. The physical feel of the seats from Lido and NIO is essentially no different; Lido has created a more spacious front trunk, while the ES8 features a more comprehensive walk-in cloakroom. Everyone has their own needs, and the progress in underlying research and development has a significant impact on cost distribution.

In recent years, NIO has been working on buybacks and collaborating with Jianghuai on factories. Now, four factories are operating simultaneously, and in August, monthly deliveries are expected to exceed thirty thousand. Once the volume increases, the manufacturing cost savings will reflect several thousand yuan per vehicle. Additionally, our company has made improvements in management over the past year, and increased efficiency will also play a role. Ultimately, if all of you are concerned about the market.

Q: Will the Shenji chip and the Tianying seat hardware architecture be considered for the Lido brand to enhance product strength?

Qin Lihong: The Shenji chip just entered mass production this year with the delivery of the ET9, and the initial output is relatively limited. We will prioritize NIO before Lido, and Lido's models are gradually planned to use their own Shenji chips. This year, the initial path will still be handed over to NIO.

Currently, Lido is still following a purely visual route, and there needs to be a distinction between the two brands; they cannot be identical. As mentioned earlier, the L90 and ES8 have a price difference of over one hundred thousand yuan, which is often overlooked. For NIO users, it is necessary to explain where this difference lies. For Lido users, we need to clarify that even with a price difference of over one hundred thousand yuan, the vehicle is still good. This is a significant challenge for us and a reality we must face.

Q: Why does NIO not have short-term plans for an MPV?

Qin Lihong: Users are only willing to pay for experiences. When users say they need an MPV, what exactly are they referring to? This question is crucial. They are talking about space—headroom, legroom, and the balance of space in the third row, which the L90 and ES8 have already achieved, and even better.

They might also be referring to the space for luggage when the vehicle is full. I believe the L90 and ES8 perform better than an MPV in this regard. They mention the convenience of getting in and out, the height of the step, the ease of accessing the third row, the width of the passage, and whether the floor is flat. We break down user needs to their most fundamental and original requirements, and the L90 and ES8 have perfectly replaced certain needs for users who want an MPV As a category, SUVs outperform MPVs in aspects such as high-speed handling, safety, power, and wind resistance; MPVs are vehicles that can run better. There is also a small issue: some MPVs are too luxurious, which can lead to misunderstandings about whether the driver is a family member. For family-oriented MPVs, it should be clear to both the driver and passengers that they are indeed a family. Families should be together, and from all aspects, we try to use large three-row SUVs to meet some of the functional needs provided by MPVs. Of course, there are some needs that cannot be met, and the MPV market will still exist for a long time.

In the past few years, the penetration rate of MPVs in the Chinese passenger car market has remained around four percent, neither increasing nor decreasing. The SUV category has been growing, and since last year, SUVs have become the largest category of passenger cars. As a company, we certainly consider these aspects comprehensively when planning products. Some users have a strong demand for MPVs, which must be reasonable needs, but Nio cannot meet all of them at this time.

Q: How does Leida maintain its current good state?

Qin Lihong: As a young company, the most important thing is to learn to withstand pressure and grow. We never expected the world to be so beautiful, and we will encounter new setbacks in the future, but I hope we do not stumble in the same place twice.

In the past, there have been some disappointments, mainly because it seems we have stumbled in the same place more than once, such as the new product production ramp-up issue. The ET5 had objective reasons; the delivery coincided with the most difficult time of the pandemic in China, making it hard for factories to operate. Workers had to live in tents at the factory, and parts could not be delivered. Last year's L60 incident woke us up; did we give up on truly reflecting on this issue because of the objective reasons of the ET5? Sometimes, having objective reasons is unfortunate, and we may overlook the subjective aspects that could be improved.

Next, we will produce two large three-row SUVs, the ES8 and L90, which are more complex with more parts. Everyone will give each product 100 days to see if production ramp-up, delivery, and execution have improved. Today, talking about it is useless; after 100 days, everyone will naturally feel the difference.

I think whether the L90 can continue to sell well will be judged by the total sales in October. Today's orders have already been scheduled for October. Performing well in August and September does not mean much; it will depend on what happens after October. The performance of the ES8 mainly depends on the sales in December.

We will also give ourselves a more objective, higher standard, and calmer observation window. We often encourage the team and partners; celebrations should be held, but we know in our hearts that the competition is at a critical stage, and it is not time to determine the outcome or even to give evaluations.

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