Globally, the most controversial car manufacturer is Tesla, and in China, it is NIO. In any automotive media office, the media teachers who are optimistic about them and those who are negative about them are probably sitting at the next table. The same values ??do not affect their different judgments. The moment when the controversy breaks out is often when the above-mentioned car companies reveal major news.

For example, Weilai recently released its unaudited financial performance report for Q4 and full year 2019.

Specifically, in Q4 last year, Weilai’s total revenue reached 2.85 billion yuan, a month-on-month increase of 55.1%, a year-on-year decrease of 17.1%; in the automotive business, it delivered 8,224 vehicles, with sales revenue of 2.68 billion yuan, a month-on-month decrease of 17.1%. It rose 54.8% and fell 20.6% year-on-year. The adjusted net loss reached 2.813 billion yuan, an increase of 14.8% month-on-month.

Last year, the total delivery volume was 20,565 vehicles, a year-on-year increase of 82.1%, and the total revenue was 7.825 billion yuan, a year-on-year increase of 58.0%. The adjusted net loss was 10.962 billion yuan, a year-on-year expansion of 22.4%.

Sold more and suffered worse losses, which greatly affected Weilai's gross profit in 2019. Its gross profit margin and car sales gross profit margin were -15.3% and -9.9% respectively, both far lower than level last year. Even after deducting the impact of battery recalls, the above figures did not change significantly, being -10.9% and -6.0% respectively.

Nio’s response was also very simple. It stated that the increase in vehicle production and delivery was the main reason for the increase in its sales and cost of sales.

This explanation made the author think about it for a long time. I always felt that something was strange, and finally realized that it was nonsense. To explain it in other words, it may be easier for the public to understand the situation of NIO, "Sell one, lose one."

Some good people once calculated that in 2018, for every unit sold by NIO Car losses were 850,000, and in 2019, this number shrank to 550,000. With the increase in sales, large-scale production has reduced the loss of bicycles, but the loss diluted by the large increase in sales is limited.

The essence of "sell one, lose one" is that marketing costs remain high. In Q4 of 2019, NIO has no new cars on the market and does not incur new product promotion and other expenses. The delivery volume and cost of sales of existing products increased by 42% and 35% respectively from the previous quarter. For every car sold, Weilai needs to pay 188,000 in marketing expenses.

Faced with record-low gross profit margins, Li Bin still showed good hope for tomorrow. He regarded increasing gross profit margins as one of this year's core goals. Q2 achieved positive gross profit margins, and the gross profit margins at the end of the year were up to double digits.

For Weilai, this goal is very radical, but for the automobile industry, this goal is very common. The gross profit margins of mainstream car companies in the industry are basically in double digits. Geely's gross profit margin is 20.2%, BYD is 19.78%, SAIC is 11.45%, and GAC is 15.33%.

To achieve positive gross profit margins and even catch up with mainstream car companies, the most important thing is to expand the sales base, thereby achieving cost dilution, building market confidence, and improving financing capabilities, which in turn will support sales and Research and development form a positive cycle.

In addition, Li Bin also mentioned measures to reduce the manufacturing cost per vehicle and increase gross profit by optimizing the supply chain, continuously reducing battery pack costs, increasing production scale, and optimizing management.

When the customer base is superior to the new forces, but is less than a fraction of the mainstream car companies, NIO’s investment in the construction of NIO Power/NIO House, huge marketing expenses, and poor service to users Expenditures have eroded a large amount of NIO’s profits.

Of course, it is impossible to stop burning money in these aspects. This is the key to Weilai's ability to compete with Tesla. Before the breakthrough of battery technology, new energy vehicles can only take the high-end route.

There are only three ways to build high-end brands. One is to compare Mercedes-Benz, BMW, and Jaguar Land Rover. They have been in the automobile industry for one or two hundred years and are high-end due to historical accumulation. Domestic examples are Hongqi and Borgward. ; The second is to compare with Lexus, Acura, and Infiniti, relying on the technology and product accumulation of multinational car companies to move towards high-end, the domestic example is Lynk & Co; the third is to compare with Tesla, using the background of the founder, new products, new Technology and new services stimulate consumers' demand for social, symbolic and participatory aspects of automobile products. A domestic example is NIO.

Unfortunately, compared with Tesla and Musk, who have their own traffic, the halo of NIO and Li Bin is not dazzling enough. There is no other way but to invest heavily in user services, selecting sales store locations, and investing heavily in NIO?DAY to create the look and feel of a high-end brand.

This is contrary to the conventional strategy of the automobile industry, but it is feasible in terms of business logic. The Internet strategy of burning out the market and initial users by burning money is new in the automobile industry, but it still gives Wei a It has left a huge space for imagination and provided convenience for financing, cooperation, etc.

Some people have once wondered why NIO is always the one who calls for help. In fact, if you think about it from another angle, it seems that NIO is the only one who responds every time you call for help. According to online rumors, if Li Bin had not requested to guarantee the controlling stake, it would have been acquired by one of the covetous companies such as Geely, SAIC, GAC, and Changan. What they are looking for is the initial success of burning money, the accumulated loyal users, brand reputation, and a possible future of high-end brands.

Of course, having a story to raise funds does not mean that Weilai has abundant cash flow. As of December 31, 2019, NIO's cash and cash equivalents (as well as restricted monetary funds and short-term investments) were only 1.056 billion yuan.

The financial report clearly states that this amount of cash is insufficient to support the working capital and liquidity required for continued operations in the next 12 months. Due to various uncertainties, according to management's assessment, "there are still significant doubts about the company's ability to continue operating."

Nio has increased the frequency of convertible bond financing since the beginning of this year. Employees are also encouraged to exchange their thirteenth salary into restricted stock units (RSUs). Including this year's US$430 million, the convertible bonds issued by Weilai since its listing have accumulated to US$1.35 billion.

According to the framework agreement signed between Weilai and Hefei City, Weilai will establish its Chinese headquarters in Hefei, and Hefei City will provide resources and financial support for the operation and development of Weilai Automobile China. According to the official Hefei Municipal People's Government According to Weibo, the project plans to raise more than 10 billion yuan. When Li Bin mentioned the Hefei Municipal Government's investment, he also clearly mentioned: "The Hefei Municipal Government will support NIO's business in China through RMB investment. (Currently) the final agreement has not yet been signed." The final agreement between the two parties The signing is expected to be completed before the end of April.

This money is not so easy to get. After the convertible bond financing matures, it will either be converted into shares or redeemed. NIO must either make money or increase the company's value to avoid equity dilution. The framework agreement signed with the government may come with conditions such as tax payments. If there is a problem with the implementation, everything will be in vain.

In general, 2019 has passed and 20 will continue. This year the car market has encountered a black swan of the new crown, and in the new energy market, Tesla has officially entered the market. The challenges facing NIO will not become easier as time continues to flow. It is foreseeable that as Weilai and Li Bin run, boos and applause will always accompany them until they fall or succeed. No matter what the outcome of Weilai is, its existence itself is meaningful.

Bless Li Bin, and also bless my heavy position in NIO stocks, Amen.

Text/Qin Zhicong

This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.