The automotive sector is currently witnessing an escalating competition marked by price wars and technological innovations, forcing manufacturers to adapt rapidly in pursuit of increased salesMany electric vehicle (EV) producers have begun abandoning their longstanding commitments to pure electric powertrains, opting instead for hybrid or plug-in hybrid technologies that show greater momentum in terms of growthAmidst this shifting landscape, however, there exists a notable exception: NIO Inc., which remains steadfast in its devotion to purely electric technology.

At a media event to celebrate the tenth anniversary of NIO, company founder and CEO, Li Bin, elaborated on the company’s distinctive operational philosophy“NIO operates differently from others; we don’t do U-turns, nor do we flip 180 degrees from one strategy to anotherThat’s not our way of doing things, hence you haven’t seen a dramatic shift in what we aim to achieve,” Li remarked on November 12. This approach illustrates the company’s commitment to maintaining its course amid a rapidly changing automotive environment.

When juxtaposed with industry peers, NIO's sales growth over the past two to three years appears tepid

In 2022, NIO recorded sales of 122,500 vehicles, which increased to 160,000 in 2023. By November 2024, the cumulative sales had risen to 190,800 unitsWhile a consistent annual growth rate of approximately 30% might seem commendable, Li Bin conveys dissatisfaction, noting that these figures lag far behind behemoths like BYD, which has outpaced NIO in terms of growthAs a result, he expressed his discontent with the current performance levels of the company.

Despite the pressures from the market, and the enticement of participating in price competition or diverting to hybrid solutions, Li Bin held a firm stance against such strategiesNIO stands out as one of the few manufacturers focused solely on electric products, maintaining a commitment to avoid engaging in price warsFor him, the integrity of the brand is non-negotiable, emphasizing that competition based on price does not align with the company’s long-term vision.

What bolsters Li’s confidence is NIO’s unique market positioning

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It is the only new car manufacturer that has developed three distinct sub-brands: NIO itself, Ladao, and FireflyEach brand holds a clear market target: the NIO brand aims at the premium market, Ladao focuses on mainstream consumers, and Firefly is dedicated to the small car segmentThis strategic segmentation underscores NIO's ambition to cater to a wide range of consumer needs across different price points.

Looking ahead, Li Bin is not merely content with maintaining the status quo; he has set audacious goals for NIO’s futureThe company aims to double its sales by 2025 and achieve profitability by 2026. Such ambitions, however, are no simple feat in a competitive landscape where many automotive firms are recalibrating their strategies to cope with technological evolution and market demands.

Between 2022 and the present, NIO has consistently recorded year-on-year sales increases fluctuating between 30% and 40%. Nonetheless, an ambitious target of doubling sales in 2025 begs the question: how does the company plan to achieve this growth? “The goal isn’t far-fetched,” Li asserted, grounding his beliefs in NIO’s multi-brand strategy

With Ladao launched this year and Firefly slated for debut in 2025, NIO’s product offerings will cover a market range from 100,000 to 800,000 yuan.

According to Li’s calculations, the combined sales for the NIO and Ladao brands this year are expected to reach around 220,000 unitsShould Ladao achieve a monthly sales target of 20,000 vehicles, it could mean more than 200,000 units over the course of a yearCoupled with steady growth from NIO and a few thousand units monthly from Firefly, achieving total sales exceeding 400,000 units is "a reasonable goal."

As the second brand under NIO, Ladao is positioned within the mainstream marketIts inaugural model, Ladao L60, entered the market in September, although its delivery ramp-up has faced delaysLi Bin remains optimistic, however, vowing that Ladao’s deliveries will reach 10,000 units by December this year, maintaining that it’s not unusual for a new brand to take time to gain traction.

The anticipated third brand, Firefly, is set for an official launch during December's 2024 NIO Day event

Firefly has been anticipated to target price points in the range of hundreds of thousands of yuanLi offered more insights into Firefly, describing it as a high-end small car brand akin to BMW's MINI or Mercedes-Benz's smart carsAlthough the prospective model lineup for Firefly will initially be limited to a single vehicle in the Chinese market, there are plans for continuous upgrades and iterations.

Managing multiple brands is not an innovative concept in the automotive industry; however, ensuring distinctiveness amongst them is critical for successFor instance, Li Bin skirted around the inquiry on whether Firefly owners could access NIO House, stating, “Sometimes, it’s not just NIO car owners that get invited to NIO House.”

Furthermore, the launch of Firefly represents not solely an entry point into deeper market segments but also a vital mechanism for NIO to strengthen its presence in international markets

Li acknowledged significant potential in overseas markets, citing Europe, where the demand for small cars priced between 20,000 to 30,000 euros is substantialWith aspirations to penetrate at least 25 global markets by 2025, the contributions from both Ladao and Firefly are viewed as instrumental to achieving this target.

Another cornerstone of NIO's strategy is its expansive charging and battery-swapping networksTheir commitment to a pure electric trajectory has exposed them to market dynamics affecting electric vehicle salesAccording to the China Association of Automobile Manufacturers, from January to November this year, the sales of new energy vehicles increased by 35.6% year-on-yearWhile plug-in hybrid models surged by 85.2%, pure electric vehicle sales increased at a marginal rate of only 15%.

For NIO, between January and November, it reported the delivery of 190,800 vehicles, reflecting a year-on-year growth of 34.4%, although the pace of growth has somewhat diminished

In November alone, 20,500 units were delivered, marking a year-on-year increase of 28.9%. Despite the slowing momentum, Li maintains that NIO will not engage in price competition and will keep pricing stableAcknowledging that price stability may impose some short-term pressure on sales, he remains optimistic as early indications in December show a notable rise in market performance, with a record high order volume in the first 11 days of the month.

When asked about the shift of numerous EV companies towards plug-in or range-extended hybrids, Li acknowledged that while both extensions hold value, NIO firmly believes in its path of continuously upgrading pure electric vehicles that can be charged and swapped“We certainly will not indulge in plug-in hybrids,” he declared.

A renowned aspect of NIO’s strategy is its aggressive expansion into battery-swap technology

The company has established a substantial network of battery swapping stations, totaling 2,785 – including 909 along highways, to facilitate ease for long-distance travelThey have initiated collaborations with other manufacturers to foster a battery-swapping alliance which furthers the development of this technology as a distinctive competitive edge for NIO in the marketplace.

Li shared plans that by the end of 2025, NIO would aim to achieve county-level reach for both charging and battery-swapping stations across 27 provincial regions in ChinaBy this coming year’s end, Ladao is expected to have access to 1,000 battery swapping stations and will increase to 2,000 by April 2025. The strategic deployment of battery swapping stations serves not only as infrastructure but as a catalyst for enhancing customer experience and adoption of NIO’s electric vehicles.

As new players enter the battery-swapping field, including leading battery manufacturer CATL, Li expresses confidence in the competitive landscape, indicating that the proliferation of players ultimately benefits the market

He acknowledges the longstanding experience of CATL in battery swapping and even notes potential collaboration avenues since CATL has shares in NIO’s battery assets company.

Firefly, as NIO's third brand, will also ensure battery swapping support, albeit with a more compact design necessitating a dedicated battery swap network as their battery systems will not be compatible with existing NIO stations“Building the Firefly’s battery swapping infrastructure will incur lower costs, as its smaller batteries can be packed efficiently into a single container, easing deployment processesThis was one of the initial goals we set out to achieve,” Li elaborated.

In pursuit of profitability by 2026, NIO faces scrutiny, especially given that many firms within the industry are grappling with declining profits or outright losses amidst increasingly fierce competition

“While we've postponed profit timelines in the past, I believe 2026 is a hard line we must not cross,” Li emphasized.

At its peak in 2021, NIO realized a gross margin exceeding 20%, yet by the third quarter of the current year, losses persisted, with the gross margin dropping to 10.7% and the gross margin from vehicles at 13.1%. In discussing pathways to enhance product gross margins, Li outlined three essential strategies: increasing production volume, bolstering R&D capabilities, and leveraging negotiations with the supply chain for better terms.

NIO’s significant investment in research and development, which exceeds 10 billion yuan annually, is set to be maintainedLi is optimistic that the fruits of these investments will materialize in the coming yearsIf sales increase in tandem with improved margins, profitability could be an achievable target.

A major strategy for NIO's path toward profitability is by tapping into the high-end market segment

The flagship model, ET9, unveiled in 2023, is emblematic of this strategy, with a pre-sale price of 800,000 yuan, making it the brand's most expensive car to dateScheduled for launch on December 21 of this year, with deliveries projected for the first quarter of 2025, the ET9 reflects NIO's objectives to enter the high-end executive market.

Li forecasts that ET9's sales will surpass those of competitors like the Audi A8 and BMW 7 Series, potentially delivering substantial profit margins“Selling one ET9 is equivalent to many ET5s,” he remarked, indicating that the margins from ET9 will substantially mitigate development costs and manufacturing investments through shared technologies across future models.

When discussing competition in the high-end executive vehicle space, Li conceded that while their current models like the ES6 and EC6 engage with competitors such as the BMW X3 and X5 and the Audi Q5, NIO still faces challenges in penetrating the truly elite segment

The introduction of ET9 holds promise to break through this market ceiling.

In addition to establishing a foothold in the lucrative high-end segment, achieving profitability will also rely on optimizing the financial performance of charging and battery-swapping infrastructureGiven the significant costs associated with setting up this infrastructure and the slow pace of cost recovery, Li revealed that only 20% of NIO's battery-swapping stations are currently profitable, indicating that 80% of their stations are part of an anticipatory strategy.

To expedite the profitability of the battery-swapping facilities, NIO launched a ‘Charging Partner Program’ earlier in the year, inviting external partnerships to invest in the infrastructure’s developmentThis program aspires to ‘aggregate societal capital to build and share the benefits of these stations,’ thus distributing initial capital outlay among outside investors to improve the financial viability of NIO’s charging and battery-swapping business.