- In its May model updates, Nio's new strategy avoided additional costs from material waste, according to a local media report.
- Nio will release its unaudited first-quarter 2025 financial results later today, with management holding a conference call afterward.
Nio (NYSE: NIO) is working on cutting costs and aims to achieve profitability in the fourth quarter of this year, which is no secret to everyone.
As for how the electric vehicle (EV) maker is cutting costs, there has been little discussion. Now, a new report has uncovered some interesting details.
Material waste resulting from product transitions is one of the key factors contributing to unnecessary additional vehicle production costs. In the latest product transition, Nio's new strategy has played a significant role in cost savings, according to a report by local media outlet 21jingji today.
In the latest updates to the ES6 SUV (sport utility vehicle), EC6 coupe SUV, ET5 sedan, and ET5T wagon, many existing materials cannot be reused, such as the vertically mounted central screen, the report noted.
During the transition phase of the four models, after deducting after-sales spare parts, Nio had over 1,000 sets of vertical screens remaining. Along with matching wiring harnesses and other materials, these would constitute a significant waste as sunk costs, according to the report.
As background, Nio launched the updated ES6 and EC6 on May 16, and the updated ET5 sedan and ET5T wagon on May 25, with the central screen now positioned horizontally instead of vertically.
At the end of last year, Nio decided to place an additional order for 1,000 vehicles based on the remaining inventory of vertical screens and cleared out these older models through promotions, the 21jingji report noted.
Compared to scrapping these remaining materials, using them in vehicles still yields a gross margin, even after accounting for discounts, according to the report.
Therefore, the material wastage Nio encountered during this product transition for the four models was significantly less than in previous transitions, the report said.
This not only reduced Nio's own losses but also those of its supply chain partners, with overall loss control outperforming industry standards by nearly 50 percent, according to 21jingji.
This is primarily attributed to the CBU (Cell Business Unit) management mechanism, which resolves coordination issues between different teams, according to the report.
Nio began piloting the CBU mechanism last year and rolled it out to all teams this year, according to previous reports by multiple domestic media outlets.
Under the CBU mechanism, each car model has an operational report covering design and R&D, production, and sales, according to 21jingji's report.
Different teams aim to maximize the company's overall ROI (return on investment), enabling better coordination between production and sales teams and reducing cost losses, according to the report.
Since last year, Nio has also established a weekly joint production and sales meeting mechanism, with the company's founder, chairman, and CEO William Li attending every week, according to 21jingji.
Recently, Nio has been holding a biweekly operational organization transformation meeting on weekends, where the core leaders of each CBU report progress to Li, according to the report.
Meanwhile, multiple departments across Nio's business clusters have undergone ongoing team mergers and personnel reductions based on annual operational goals and resource boundaries, the report said.
Many senior managers and business experts whose roles no longer align with business development needs have left the company as part of these personnel reductions, according to the report.
On Nio's internal forum Speakout, there are multiple new posts daily from departing employees, but surprisingly, many of these posts express support for Nio, according to 21jingji.
Nio will release its unaudited first-quarter 2025 financial report later today, with management holding a conference call afterward.
The company delivered 23,231 vehicles in May, up 13.08 percent from 20,544 in the same period last year, but down 2.80 percent from 23,900 in April.
In the first five months of the year, it delivered 89,225 vehicles, up 34.75 percent year-on-year.
