Nio previously did its strategic planning based on a five-year length of time, but now that the market is changing so fast, the company has shifted to developing 2-year strategies, William Li said.
(Image credit: CnEVPost)
A day before the November 21 announcement of the partnership with Changan Automobile, Nio founder, chairman and CEO William Li gave an internal address to all employees on November 20 and answered employee questions.
CnEVPost shared a portion of Li's remarks on November 20, and now local media outlet Yicai has shared more.
Li's speech, which was aimed at celebrating Nio's ninth anniversary, touched on the company's strategy, his views on competition, and on the opening of the battery swap network.
Nio had previously based its strategic planning on a five-year timeframe, but now that the market is changing so fast, the company has moved to two-year strategies.
Starting from July-August this year, every department of Nio has been working on very detailed two-year business plans, Li said.
Nio is more focused on return on investment, and projects that don't help the company improve its financial performance within three years are either canceled or delayed, he said.
Despite Nio's layoffs in November, many of its key technology divisions instead increased headcount, such as its chip and self-driving teams.
Here are the key takeaways from Li's speech and employee Q&A shared by Yicai and translated by CnEVPost.
5-year strategic plans becomes 2-year plans
The very real challenge we are currently facing is that the transition from fuel to electrification in the premium market is slower than we thought.
Behind this fact, many things need to be summarized and reflected. The next competition will be more intense than imagined.
In fact, we can already feel it this year, with many of our peers cutting prices by as much as RMB 70,000 or RMB 100,000. Many of them have negative gross margins, especially those that only offer battery electric vehicle (BEV) models.
The qualifying round for the EV race is in its final stages, and our current layout and direction needs to ensure that we have subsequent cards to play in the two most competitive years.
Starting in July-August this year, each division of the company has been working on very detailed two-year business plans.
We used to develop five-year strategic plans that covered a longer period of time. But now the market fluctuates too much and changes too fast, so if we look at things from a five-year perspective again, it may be easy to lead to unclear goals.
Now we only do two years of business planning, and think things through for two years.
The R&D cycle of many products and the input cycle of resources are about two years, and it is very important to think things through with a time dimension of two years.
This is a consensus reached by the company's management team, and we have carefully analyzed which things are high priorities and must be supported with resources.
First, long-term investment in key technologies needs to be assured.
Surviving is not our goal; living well and being competitive is our goal.
Many key technology departments, instead of reducing headcount, have increased it, such as the chip and autonomous driving teams. We are very certain in this regard.
Secondly, our sales and service capabilities need to ensure that we can cope with the fierce competition in the market.
We started to build the capacity to be able to support monthly sales of 30,000 units from July-August this year, and we need to ensure sufficient investment.
On this basis, we need to be resolute in improving efficiency and converting sales capacity into sales.
Third, we need to make every effort to prepare for new products.
From another perspective, things that do not help the company improve its financial performance within three years will either be canceled or delayed.
There are still a lot of things across the company that remain at the theoretical level, and systematic capabilities are not fully established. If we don't address this, we won't be able to adapt to the next stage of competitive intensity.
My personal and very important work direction this year is to promote the establishment of systematic capabilities in all departments.
If this goal is realized, the competitiveness of the whole company will be greatly improved, so that we can have the opportunity to cross the most competitive stage of the qualifying round and win the qualification to participate in the final round of the race.
Organizational efficiency
Q: In addition to the recent organizational optimization, what other measures will we take next to improve efficiency and enhance execution?
William Li: Enhancing efficiency is something that must be done in the long term, not on a temporary basis. We need to enhance execution in three areas next.
First, we need to increase resources for key businesses, such as the sales and service system and the core technology department. Where we need to increase manpower, we will resolutely increase it, and last week we have more than 100 new colleagues on board.
Second, every department and every employee should have a strong sense of purpose and set more specific goals.
We need to increase our awareness of ROI, and we need to care about what kind of value we can create for the company and our users for every penny and every hour of work.
We need to have a very strong sense of return on investment, results-oriented, goal-driven, and I hope we can form such a culture.
Third, horizontal communication and coordination is very important. We need to set clear common goals to reduce duplication of work and departmental walls.
About competition
Q: Competition has intensified this year, and the market has seen a crazy price war. How do you see the industry trend in the next few years? Can we make it to the finals?
William Li: In the next few years, the intensity of competition will only increase rather than decrease, and we must be mentally prepared.
We need to give up a lot of illusions, for example, we originally always thought that high-end cars and electric vehicles should be more expensive than fuel cars.
But now, the situation is the opposite, for example, the price of the Mercedes-Benz EQE has dropped by more than RMB 100,000, which is a very scary thing.
Over the next two to three years, this is likely to become the norm. Everyone wants higher sales and will use price cuts as the most important tool, and this will definitely happen.
Looking at the data, our share of the market for pure-play EVs priced above RMB 300,000 is very high, above 40 percent, higher than a lot of other brands that people know.
In October, in the market where the price is higher than RMB 300,000 in Shanghai, we outperformed all other brands in all forms of power, including fuel cars.
I was in Jiaxing, Zhejiang yesterday for the fifth anniversary of the local car club. This year, we will deliver almost 3,000 cars in Jiaxing.
In some of the more economically developed areas, we've generally gone from being an all-electric brand to being a mainstream premium brand. This is a very profound change that has taken place in the last one or two years.
As our channels sink further to lower-tier cities and our marketing and service system, charging and battery swap facilities become better, we need to push this trend to extend further to other regions.
We will launch a second brand next year and a third brand the year after that to cover a wider user base.
What are the benefits of this? This can bring a very substantial product base for our upfront investment in intelligence and electrification, which is very important.
We are confident to embrace the fierce competition in the future, and we still have enough cards in hand to play in the next two years, and the competitiveness of the next generation of products will be even stronger.
The lessons we learned from the second-generation platform will help us realize significant improvements for the third-generation platform.
Sales capacity
Q: We have been working hard since the third quarter to build a capability that can support 30,000 monthly sales, but the improvement in sales has not been significant so far. Besides increasing the number of Fellows, do we have other initiatives to boost sales?
William Li: It takes a gradual process to turn sales capability into sales.
Our ability to support 30,000 monthly sales is not fully realized today, and we need to accelerate the building of this ability while improving the efficiency of the existing sales ability.
As you can see from the data, Fellows who have been on board for more than six months have different capabilities than those who have been on board for two or three months. It takes time for them to understand the products and services, and it takes time for potential users to be acquired.
We need to improve our capability as soon as possible in order to let it reflect in the increase of sales, and I am confident about that.
We can't expect miracles, what's really important is to build the systematic ability to sell cars one by one.
If each sales colleague sells half a unit more each month, then we will be able to increase sales by two to three thousand units per month.
Everyone has to improve their efficiency. It's a very delicate job, but it has to be done in order to reach our goals.
My first job during college was selling office supplies, and I did it the simplest way possible, by riding my bicycle around the Haidian district of Beijing and knocking on people's doors. It's the same thing with selling cars.
Battery swap vs supercharging
Q: Now that other EV makers are advancing ultra-fast charging technology, some say that the advantage of battery swap will be significantly reduced in the face of 800 V. What do you think about this?
William Li: There is a cognitive misunderstanding here, are charging and battery swap opposites? Actually, not in Nio.
Not only do we offer battery swap, but we are actually the car brand with the most chargers, with more than 20,000 charging piles already.
In many places where people rarely go, only Nio has built charging piles. And we released our 500-kW liquid-cooled ultra-fast charging piles earlier this year.
Since our first day, we've been characterized as rechargeable, swapable, and upgradeable. However, what many people forget these days is that we have a strong charging service along with our battery swap service.
It's similar to a student in a class who excels in math and others assume by default that he's bad at languages. That's not how it works.
Nowadays, social media discussions are prone to confrontation and we fall victim to this thinking.
When our battery swap service is praised, many people assume that our charging service is bad. That's not the case.
The adoption of 800 V is the next trend, there is no doubt about it. Our next generation of cars will also use the 800 V platform, even higher than 800 V. It's definitely ahead of the curve.
At the same time, the availability of 800 V doesn't mean that the advantages of battery swap are reduced.
We often mention that battery swap has 9 advantages, I won't go into detail here, just a few highlights.
First of all, the biggest advantage of battery swap is that it's fast, and charging, no matter how fast it is, can't get a fully charged battery faster than battery swap.
Battery swap stations are energy storage facilities, which are very good at solving the problem of declining rates brought about by multiple people charging at the same time.
Secondly, the social benefits of battery swaps and the degree of benefit they bring to the user are very large.
Technological advances come at a cost. An increase in the charging rate means additional costs, especially for batteries.
In addition, if the user has been using ultra-fast charging, this will undoubtedly have an impact on the life of the battery, which will become a cost that the user needs to bear.
Thirdly, one of the very big advantages of battery swap is that the driver doesn't have to get out of the car.
If you go to the Northeast in the wind, rain, or winter, you can immediately appreciate how big this advantage is. This is something that charging can't replace, no matter how fast they are.
Battery swap network open to industry
Q：About battery swapping, people always ask me one question: If battery swap is really so good, why are you the only one doing it in the whole industry? What should I answer?
William Li: We're not the only one in the industry providing battery swap services, there are seven companies that are doing it seriously.
It's a tough road to take, but it's the right thing to do. So far, we have provided more than 32 million battery swaps to our users.
If we imagine battery swap as the cloud service that Amazon was trying to do in 2003, we will find that they are very similar in a few points:
First, the network effect is strong.
Battery swap and cloud services are very similar, battery swap network is equivalent to the cloud service infrastructure of the energy Internet.
It certainly won't work without a reliable national or even global network.
At present, many companies are providing battery swap services, but they are not able to establish a national network.
Second, the scale of the investment is large and the investment cycle is long.
Amazon, Google invested more than ten million dollars in plant and equipment.
Of course, our investments in battery swap stations are not as large as their magnitude, but the time period is very long. Battery swap station's investment efficiency is very high.
Third, from serving ourselves to serving external customers, once this is done, the bar is very high.
At the beginning, others do not believe that we can do it, but when the development comes to a certain stage, others will find that the threshold of investment and operation is very high, because this is the infrastructure construction.
Overall, the battery swap network is equivalent to the cloud service infrastructure of the energy Internet.
If you look at today's Alibaba, Tencent, Amazon and Microsoft, a large part of their market value is contributed by cloud services.
Without cloud services, their market capitalization would all be discounted. And these companies lost money for many years in building their cloud services before finally realizing the success they have now.
Our battery swap business has reached a point where it is ready to be opened to the public, and we will be sharing our standard for the next generation of battery packs, the 800 V high-voltage, fast battery swap platform, with the entire industry.
We will announce our first partnership tomorrow, and are still in talks with 4-5 companies.
We are not the only company in the industry providing battery swap services, but we are the only one that is the earliest and most determined to do so, and we already have a first-mover advantage.
We welcome other companies to join us.
The value of the battery swap network is immense, and its value cannot be overemphasized from an energy internet perspective.
About negative comments
Q: Everyone loves the company and users recognize us. However, I always see negative comments on social media that give the impression that everything we do is wrong. Will your mind break down when you see these negative comments?
William Li: First of all, we have to realize that there are a lot of things we can do better, and Nio is certainly not a perfect company.
We can't think that others are always trying to harm us, we ourselves need to reflect more on what we need to improve if there are things we are not doing well.
Behind every negative comment, there is a lot we need to think about. The world does not owe us an understanding.
Of course, we will strongly oppose attacks that break the bottom line, things that are fabricated and don't exist, especially for comments that discredit our users.
We have to adapt to such a complex public opinion environment, but the most crucial thing is to do our own job.
This may sound a bit inactive, but it is actually a choice.
Strategy
Q: We always emphasize long-termism, but the short-term pressure is very strong now. Shouldn't we focus more on how to do the current things right and well? How do you see the relationship between long-term and short-term?
William Li: This is a particularly good question, the whole market is really very volatile now, the uncertainty is much higher than before, and it is changing very fast.
In a volatile, uncertain environment, long-termism is more risky and less rewarding, and that's something we need to be aware of.
We need to stick to the long-term stuff, but we also need to be proactive in responding to current market changes and not fool ourselves.
Sticking to long-termism is not an excuse for doing a poor job of short-term execution; when running a marathon, every step needs to be done well.
We can't use long-termism as an excuse in everything and not do a good job in the present.
When I used to work at Yiche, I had a painting on my office wall given to me by a friend that said Step by Step to a Thousand Miles. I especially liked that quote.
We often talk about Vision, Action, it's not good to have Vision without Action, we have to live first.
We can't respond with long-termism when we're faced with accusations that things aren't getting done. No one cares whether you are long-termism or not, you perform well, you do the right thing.
Of course, we don't just want to pursue short-term success, but also sustained, long-term competitiveness. We have to think things through, but we have to execute them well.
We can't pit long-termism against short-term action. Long-termism is more about a company's mission and values.
But, commercially, we need to deliver on our commitments day by day, month by month, quarter by quarter.
I don't want to be in a situation where the direction is right, the theory works, but there is no action.
The really strong ones get it right every step of the way and are able to execute their strategy from start to finish. I think our entire company is a long way from getting it right on this one.
Long-termism requires us to think through the underlying logic of things, our long-term goals, and we need to accomplish them step by step.
You can't just look at the big picture when doing things, and in the midst of such fierce competition, we have no room for mistakes.
Long-termism is based on good short-term execution, otherwise it is self-indulgence and self-deception.
If people are now telling us that Nio is doing things based on long-termism considerations, beware, it means we are not doing a lot of things well in terms of execution.
Values
Q: I'm an employee who has been with Nio since 2015, when I joined because I resonated with Nio's values and vision. Now, we are under a lot of competitive pressure, plagued by poor sales and turbulence, and have made a lot of adjustments.
There are times when I worry, in the face of all these pressures and shocks, will Nio still be able to hold on to its original vision? Will it become a company that I don't agree with?
William Li: We are facing some internal and external pressures today, but I think it's because our current performance falls short of our expectations.
If we look closely at these issues, we will find that many times it is because our values and principles are not being fully implemented.
In the face of these pressures and shocks, we need to think back to the beginning.
You chose to join a company like Nio because you believe in what we believe in together.
The starting point for many of our perspectives and decisions today is the kind of company we want Nio to be.
So I would say that you don't have to worry, Nio won't become a company that you don't recognize or agree with.
But I would still say that if we don't succeed, all these things will be much less meaningful.
The first thing we need to do is to execute everything well based on our long-term vision, our values, so that we can prove that we are going in the right direction and that we have made the right choices.
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