The stock price has nearly halved, the market value has dropped by more than 10 billion, and it has just been laid off by 3%! Does NIO have a future？

China Fund News reporter, Wu Yu

NIO, which went public last year, has not had a good time this year, especially in March.

At the beginning of the month, NIO released its first financial report since its listing, and the huge loss of up to 9.64 billion yuan made investors vote with their feet, and the stock price plummeted by more than 20%.

At the same time as the release of the financial report, NIO announced that it would suspend the self-built factory project in Jiading, Shanghai; subsequently, it was exposed that the number of deliveries was tricky, and the company was laying off a large number of employees and other negative news. Although NIO responded to this, in less than a month, NIO’s share price has nearly halved, and its market value has evaporated by 4.63 billion US dollars (about 10.36 billion yuan).

In addition, it has also been hit by Tesla’s price cuts and the opening of a factory in Shanghai.

Recently, NIO CEO Li Bin issued an internal letter acknowledging that NIO has experienced staff redundancy and will optimize the existing team by 3% in the first half of this year.

Losing nearly 10 billion a year!

NIO’s share price nearly halved

At the beginning of the month (after hours on March 5, Eastern Time), NIO released its first financial report since going public.

According to the financial report, in 2018, NIO is still in a huge loss, and the loss range is still expanding. According to the financial report, in 2018, NIO’s total revenue was 4.95 billion yuan, and the net loss was 9.64 billion yuan, an increase of 92% from 2017.

At the same time as the earnings release, it announced that it would suspend its self-built factory project in Jiading, Shanghai.

The reason behind NIO is explained as, on the one hand, the government’s approval and recognition of the "OEM" model in the new industrial investment management policy; secondly, from the perspective of investment efficiency, the existing partner production capacity can meet NIO’s product demand within 2 to 3 years. At the press conference, NIO said that the third car will also be expected to be produced in Jianghuai. In the release, Li Bin also said that based on the above strategy adjustment, NIO will have medium and long-term expenditure savings, which can make the company’s entire business cash flow richer.

Investors voted with their feet. After the company released its financial report, its share price plunged 21.16% on March 6, fell another 11.5% the next day, and then continued to decline. As of the evening of March 22, in 13 working days, NIO has fallen by 44.7%, the stock price has nearly halved, and the market value has evaporated by 4.63 billion US dollars (about 10.36 billion yuan).

Suspected by large-scale layoffs, sales fraud, etc

NIO says it’s a fabrication

The house leak happened to rain overnight. Subsequently, suspected NIO employees posted in Zhihu to expose NIO’s large-scale layoffs, sales fraud, and employee rebates.

An online user claiming to be a former NIO employee, "Paper Child", broke the news on Zhihu that NIO claimed that the delivery of 10,000 cars was the result of "self-directed and self-performed", and most of the 10,000 orders were purchased by NIO internal employees.

According to Paper Child, NIO introduced an internal policy whereby employees bought the ES8, a NIO production car, and the company leased the car back for 15,000 yuan a month for the first three years, for a total rent of 540,000 yuan for the three years. For employees, this is equivalent to the company giving themselves a free car, plus 80,000 yuan in cash.

"Paper Child" also broke the news that NIO is laying off a lot of staff, and pointed out that there is a problem with NIO’s credit review and car purchase process, and Chen Rui, the head of NIO’s financial department, is suspected of eating kickbacks.

At present, the leaks of "Paper Child" have been deleted on the grounds of "infringing on corporate interests".

On March 22, NIO officials issued a statement saying that the so-called "sales fraud" and "significant layoffs" were purely fabricated. The statement of NIO employees’ misconduct is purely subjective and lacks factual basis.

Regarding the above revelations, NIO said that as of the end of February 2019, NIO had delivered a total of 13,964 ES8s, of which only 2% were ES8s purchased by employees and shared with the company after purchase. At the same time, as a start-up, NIO has entered the stage of refined operation and systematic efficiency improvement, and will adjust its business structure and respond to the optimization of its personnel structure according to its development strategy. At the same time, it will continue to attract outstanding talents to join.

NIO said that the publisher’s statement about the misconduct of NIO employees is purely subjective and lacks factual basis. It strongly condemns such malicious slander of NIO employees. NIO reserves the right to pursue legal action against the publisher of the rumor if the employee involved in the rumor.

The following is the full text of NIO’s official statement:

However, netizens are still not convinced by NIO.

Tesla’s impact: price cuts + domestic production

As an electric vehicle manufacturer with a high-end market positioning, NIO is often benchmarked against Tesla. In recent days, Tesla has made frequent moves and launched a fierce attack on the Chinese market: the Shanghai Super Factory has been opened, Model 3 has been launched in the Chinese market, and major price cuts have become the focus of the market. Industry insiders believe that this will have an impact on domestic electric vehicle manufacturers.

In January 2019, Tesla’s Shanghai Super Factory broke ground and is expected to be completed and put into production by the end of this year. Elon Musk said that the factory is mainly used to produce Tesla Model 3 entry-level models, and will also take on the production capacity of Model Y and electric trucks in the future, so as to achieve local production in China.

On February 22, Tesla’s entry-level model Model 3 officially landed in the Chinese market. Then Tesla announced that the price of all models has been continuously reduced. Mainly looking at the Model 3, which is similar to the ES8 price range, the long-life rear-drive version of the Model 3 sold in China has dropped from 433,000 yuan to 407,000 yuan. The long-life four-wheel drive version has dropped from 499,000 yuan to 455,000 yuan. The long-life high-performance version has dropped from 550,000 yuan to 516,000 yuan.

This price range coincides with the ES8 and will also dilute some ES8 user requests.

However, in the face of Tesla’s drastic price cuts, Li Bin, founder and chairperson of NIO, said that NIO will not use price cuts to expand the market. "We have seen that our competitors have recently reduced prices several times. We think it may be the pressure of competition. In fact, continuously lowering prices is a great harm to the brand and consumer loyalty. In the long run, price cuts are not our strategy to expand the market. We will increase user loyalty and satisfaction through service innovation."

Li Xiang, CEO of Che Hejia, regards Tesla’s entry into China as a threat to the current domestic "vaunted" electric vehicle brand. Li Xiang bluntly stated that the cruising range of domestic electric vehicles is "false" propaganda, and also said that with Tesla’s domestic production, the domestic electric vehicle "good days will soon come to an end".

On March 15, Tesla held a new model Model Y conference, starting at only 260,000 yuan! By 2020, Tesla is about to achieve domestic production, and will sweep the Chinese electric vehicle market at a lower price. Many voices in the industry believe that for domestic cars, this is "wolf".

Li Bin acknowledges NIO staff redundancy

Will optimize to 3%

On March 22, Li Bin, founder, chairperson and CEO of NIO, issued an internal letter confirming the company’s goals and key actions for this year and the next three years. Li Bin said that the company has passed the team training stage and entered the second stage of qualification. The three highest priority work goals are: user satisfaction, improving operational efficiency, and developing the second-generation platform.

In his internal letter, Li Bin acknowledged that NIO has experienced some staff redundancy during its four years of rapid development, and said that in the first half of this year, the total number of people will be controlled within 9,500, which is 3% better than the current situation. In addition to staff redundancy, it is also necessary to improve the efficiency of budget and investment, which is reflected in the efficient use of already invested facilities, such as energy service networks, NIO centers, and test drives.

Li Bin mentioned that there have been many voices of skepticism about NIO recently, some of which are false rumors based entirely on speculation. "The world does not owe us an understanding. In today’s era where everyone can speak out, doubts and even rumors will be a reality we need to face on the way forward for a long time in the future. We need to be objective and calm about doubts and criticisms. If there are any, we will take necessary measures to correct them."

The following is the full text of Li Bin’s internal letter:

Dear colleagues,

At the annual meeting in January, I said that the company had passed the team training stage and entered the second stage, which is the qualification stage. In the next three years, we need to go all out to win the qualification to participate in the future competition. During the qualification stage, our top three priorities are: user satisfaction, improving operational efficiency, and developing the second-generation platform.

When the goal is clear, we need to focus on action. Just like our logo means, Vision, Action, with goals and actions, we can achieve the vision. Starting this year, we will implement the working method of VAU, which is the working method of "Vision Goal-Action-Upgrade".

Last weekend, the company’s management team held two days of intensive discussions to clarify the company’s goals and key actions for the year.

Goal 1: Complete the annual user relationship development plan

The user relationship development plan is relevant to everyone, not just the task on the UE side.

Action 1: Enhance user satisfaction

Satisfied users are the cornerstone of NIO. Delivering promised product functions and services on time, maintaining close and sincere communication with users, and solving problems in the process of car purchase and use from the user’s perspective are the awareness and ability that every colleague needs to have.

Action 2: Deliver ES6 on time and in quantity

ES6 is a strategic product for NIO and will enter a larger market segment. Mass production of ES6 is currently on schedule. Please work closely with engineering, software, supply chain, XPT, manufacturing, quality, service operations, and regional teams to ensure smooth delivery of high-quality ES6 starting in June and ensure that subsequent production deliveries can meet market demand in a timely manner.

Action 3: Take the initiative to communicate with the outside world, so that more people can understand the real NIO

Take the test drive as the core experience, let more people know about NIO products; take offline activities as the main scene, let more people accept the NIO brand. Please communicate with everyone who comes into contact with us based on the values of sincerity and care, and become a reliable friend of users.

Objective 2: Significantly improve operational efficiency

In the past four years, we have achieved a lot of achievements that we are proud of, seizing the fleeting time window to complete the first phase of the strategic goals, but also the organizational structure and operation management are not detailed enough. From this year, we will not only do a good job in strategic execution, but also significantly improve operational efficiency to ensure that the company can continue to grow.

Action 1: Organizational Efficiency Optimization

After four years of rapid development, we have established a global organization. After rapid development, there have also been some repetitive department settings, unclear work tasks, unclear responsibilities, and insufficient workload for some positions. These are the management efficiency optimization tasks that we need to solve this year. After completing the above work, the total number of people will be controlled within 9,500 in the first half of this year, which is about 3% better than the current situation.

We also need to strengthen collaboration and communication among various departments, and use VAU as a working method to ensure that departments work efficiently based on consensus.

Action 2: Increase the efficiency of the use of budgets and investments

We need to optimize the budget and usage rhythm of each project, and resolutely not spend unnecessary money to ensure the efficient use of funds. For changes to the project plan, we must communicate and inform relevant parties in a timely manner to avoid unnecessary waste of investment. For facilities that have already been invested, such as energy service networks, NIO centers, and test drives, we must ensure efficient use.

Action 3: Significantly increase gross margin

Gross profit margin enhances the long-term competitiveness of the company, and relevant colleagues need to have cost awareness based on systematic efficiency.

Objective 3: Complete the launch of the second-generation platform NP2

2019 is a crucial year for NP2, and the quality of our execution is directly related to the competitiveness of the "final stage".

Action 1: Formation of the definition and development plan for the second-generation platform and its first product.

Action 2: Complete the cooperation layout between autonomous driving technology and the supply chain.

Action 3: Establish a certain-scale autonomous driving test fleet.

The above are the main goals and action plans of the company this year. In the near future, each department head will formulate annual and quarterly target action plans based on this, and they will be improved and updated quarterly. VAU will become the main efficiency improvement method of NIO, and I encourage each colleague to improve their own work effectiveness accordingly.

Dear colleagues, there have been many voices of skepticism about NIO recently, some of which are false rumors based solely on speculation. The world does not owe us an understanding. In today’s era where everyone can speak out, doubts and even rumors will be a reality we need to face on the way forward for a long time to come. For doubts and criticisms, we need to treat them objectively and calmly, and if we do, we will take necessary measures to correct them. The most important thing is that we need to focus on goals and actions, and constantly improve ourselves with unremitting efforts. We must not only look up at the stars, but also be down-to-earth. Improving the efficiency of enterprise operations, optimizing personnel and business structure, working hard, and reasonably controlling the rhythm of Strategy and Development will be important themes in the next stage. We will use this to repay the trust and expectations of users, partners, investors and all friends who care about NIO.

All predictable difficulties are work tasks, and we continue to work hard!