The core of Internet car companies is still car manufacturing. NIO may have missed the point.

On August 14, NIO officially submitted its IPO documents to the US Securities and Exchange Commission. NIO plans to raise US$1.8 billion this time.

The IPO documents indicate that NIO has raised a total of $2.4 billion (about 16.5 billion yuan) so far. In the first half of 2018, the company's net loss was $502.6 million, and its operating income was less than $7 million. In the past two and a half years, the company's cumulative net loss has reached 10.9 billion yuan.

As of the end of June 2018, the company's cash and cash equivalents and restricted cash totaled RMB 4.48 billion.

If the losses continue at this rate and if there is no new source of funds, NIO's cash flow will almost dry up by the end of this year.

It seems that the money raised by NIO through this IPO is life-saving money.

However, judging from the performance of many technology companies listed in the United States recently, now is not a good time to go public. The United States already has Tesla, which has been burning money for a long time and has not made a profit. Recently, Musk is planning to delist in order to avoid short-selling attacks. Whether American investors are still willing to pay for Weilai's dream is still unknown.

Where did the money go?

NIO can be said to be inhumane when it comes to spending money.

On December 16 last year, NIO held a press conference costing 80 million yuan. For the press conference, NIO booked the entire Wukesong venue, 8 planes, 60 high-speed rail carriages, 19 five-star hotels, and invited Imagine Dragons, whose appearance fee was as high as 1.5 million US dollars.

Of course, this has won enough attention for NIO and also labeled NIO as high-end and wealthy.

As a new car manufacturer, Xiaopeng Motors is much more frugal. He Xiaopeng once said that Xiaopeng Motors spent so little money last year that he was "embarrassed to say it out loud" and the rent for its new headquarters was very cheap, at only 1 yuan per square meter per day.

In the first half of this year, NIO spent 1.45 billion yuan on R&D and 1.72 billion yuan on sales and management. As a start-up car company, it is reasonable for NIO to invest a lot of money in R&D. At the same time, NIO also spent a considerable amount of money on marketing, hoping to create a high-end brand image.

In 2016 and 2017, NIO invested 1.13 billion yuan and 2.35 billion yuan in sales and management respectively. In the same period, NIO invested 1.46 billion yuan and 2.6 billion yuan in research and development respectively. In 2016, 2017 and the first half of this year, NIO's investment in sales and management accounted for 77.3%, 90.3% and 118.6% of its research and development investment respectively.

NIO is investing more and more in marketing and management.

NIO has opened seven sales experience stores in the CBDs of core cities such as Beijing, Shanghai, Guangzhou and Hangzhou. NIO still plans to deploy 15 NIO centers in 13 cities this year. It should be noted that the annual comprehensive operating cost of each NIO House in first-tier cities is more than 50 million RMB.

As the number of offline experience stores gradually increases, NIO's investment in stores is likely to exceed its investment in research and development.

The purpose of NIO doing this is to provide users with a better service experience. NIO House provides services for elite car owners, such as children's playground, NIO coffee, and Internet celebrity food. NIO wants to enhance its brand value and expand its profit scenarios by opening offline stores.

However, ideals are beautiful and reality is cruel.

The establishment of a car brand certainly requires efforts in marketing, and it is understandable that NIO, as a new brand, promotes and builds momentum for its brand. However, the high premium of traditional car brands stems from excellent product quality and long history. NIO wants to rely on spending money to build its reputation and brand, but it is likely that it will not be able to eat hot tofu in a hurry.

The Internet industry pursues disruption, excels at innovation, and especially likes to make huge profits by changing business models. But even smart cars, Internet-made cars, are still essentially manufacturing, or at least centered on manufacturing.

Moreover, the revenue per vehicle in the automotive aftermarket is actually insignificant compared to the profit from selling vehicles.

For new car manufacturers, it is common to burn money on a large scale and have poor cost control. In this case, it is actually unwise to blindly pursue more and more in the business model. Adjustment of the business model can bring progress to the automotive industry, but betting on sales model innovation and the automotive aftermarket is a bit of a waste of time.

Mass production problems and unpopular battery swapping

Now everyone is used to NIO's delayed delivery. There is no way to complain about NIO's mass production capabilities. For NIO owners, it would be better to keep a Buddhist mentality.

As of July 31, NIO has received more than 17,000 orders for the ES8, with a total of 1,300 ES8s produced. NIO previously promised to deliver 10,000 ES8s this year, and made a bet with Xiaopeng Motors that if it fails to meet that target, it will give He Xiaopeng an ES8. However, August is almost over, and Li Bin may not be able to save this ES8.

In addition, NIO will produce 60,000 ES6s next year.

NIO's current cash flow is only over 4 billion yuan. Considering the huge cost of car manufacturing, let alone on-time delivery, if NIO does not go public for financing, whether it will have enough funds to build the car is a matter of concern.

The mass production problem is a common problem for new car manufacturers. In China, NIO has a stronger presence and has received more criticism. Even Tesla, which has been fighting for more than ten years, still cannot solve the production capacity problem.

It usually takes about five years for a car to be designed and delivered. As a car company that was established less than four years ago, Weilai has already started delivering cars, and the brand of PPT car manufacturing has finally been smashed.

Compared with the mass production issue, the battery swap model that NIO has always insisted on may be the biggest hidden danger.

The advantages of battery swapping are obvious and very attractive. It can replenish energy quickly, comparable to the refueling speed of fuel vehicles. Even fast charging currently takes at least half an hour. If battery swapping can be achieved, it will solve an important pain point of electric vehicles.

But battery swapping looks good, but it is difficult to implement. To put it bluntly, the biggest problem is that it is expensive, and it is so expensive that it is unacceptable.

It’s not that no one has tried before. In 2007, Israeli company Better Place launched a battery swap model, but after burning millions of dollars a year, it still couldn’t escape the fate of being eliminated and eventually declared bankruptcy.

Tesla also adopted the battery replacement route in the early days, and the battery replacement speed during the demonstration amazed many people. But Tesla finally chose charging, and the main reason for giving up battery replacement was cost.

If a single car manufacturer wants to establish a battery swap system for its own brand, the cost is very high. If the battery swap station can only serve a few of its own models, it will be difficult to make a profit.

BAIC said that the earliest cost of a battery swap station was 8 million yuan, and now the cost of the station and the battery is close to 5 million yuan. The construction and operation of the station will incur high costs. Without strong capital support, it is difficult to operate in the long term. The cost of battery swapping is very expensive for consumers and enterprises.

Battery swapping also requires the battery model and interface to be consistent, which also caused trouble for NIO.

ES8 is the highest-level product among NIO's mass-produced cars. Considering the low-end models in the future, ES8 is only equipped with a 70KWh battery. This makes the battery life a shortcoming of ES8.

There is no sign that NIO will abandon the battery-swap route. In fact, NIO is already in a dilemma.

If we give up battery swapping, the initial investment will be in vain and the product planning will be disrupted. If we don’t give up and insist on it, it will be a gamble. After all, in China, only BAIC and NIO are insisting on the path of battery swapping. BAIC focuses on low-end electric vehicles, which are easy to sell in large quantities and are more likely to spread the cost of battery swapping.

The embarrassing ES8 and high-end brand positioning

Weilai has been benchmarking Tesla from the beginning, using a dimensionality reduction approach and positioning its brand as high-end. Since it is high-end, the price cannot be too low.

In China, if you want to buy a domestic car at a high price, a sedan is definitely not a good choice. Therefore, NIO's earliest mass-produced model chose the positioning of a high-end SUV.

SUVs have higher requirements for battery life. The ES8 is limited by the battery swap mode. In order to take care of low-end models, it cannot use batteries with too high energy density. This causes problems with the ES8's battery life.

Although NIO is positioned as high-end, due to its limited brand appeal, it actually takes the route of high cost-effectiveness.

Weilai's supply chain has been internationalized since the beginning, and it has adopted a similar supply system as foreign brands. Weilai's parts suppliers include Bosch, Continental, Panasonic Brake, Brembo, ThyssenKrupp and other manufacturers. It has to be admitted that the materials and configuration of ES8 are still very affordable compared to its price.

However, in the process of mass production of ES8, NIO has adopted a "money for time" model, and the final stage R&D cost of this product will be much higher than that of its competitors.

The ES8 is positioned at the high end, but cannot be sold in large quantities; it is a cost-effective model, but its cost control is rough. The gross profit margin of the ES8 will be very bad.

China's high-end electric vehicle market is actually in a relatively vacant state. There are not many competitors to ES8 at present, but this situation will not last long. BBA and Tesla have already confirmed their plans to build electric vehicle factories in China, and NIO will have more and more competitors in the future.

Car manufacturing is a process of gradual progress, continuous accumulation and continuous improvement. Spending money can create cost-effectiveness and speed up mass production, but quality and brand require a long time of accumulation.

New energy vehicles are a good opportunity for Chinese independent brands to overtake others and increase their brand premium. However, Weilai seems to be taking a big step.

Considering the overall level of automobile manufacturing in China, the 200,000 yuan threshold is still a big challenge for domestic brands. NIO's price of more than 500,000 yuan before subsidies is very aggressive.

Perhaps NIO simply wants to rely on ES8 to establish its brand image and pave the way for subsequent low-end models, but the cost seems too heavy.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.