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With revenue of 17.446 billion yuan and losses of 5.046 billion yuan, NIO announced its second-quarter 2024 financial results (unaudited).

The substantial losses have prompted us to ponder: What does the future hold for NIO?

Guided by this question, let's delve into NIO's financial data and formulate two pertinent inquiries.

Question 1: With losses totaling 45.3 billion yuan over two and a half years, when will NIO achieve profitability?

Based on public data, NIO reported revenue of 9.908 billion yuan and losses of 5.184 billion yuan in the first quarter, and revenue of 17.446 billion yuan and losses of 5.046 billion yuan in the second quarter, amounting to total losses of 10.2 billion yuan in six months. In 2023, NIO recorded losses of 20.719 billion yuan, and in 2022, losses amounted to 14.437 billion yuan.

Over two and a half years, NIO has incurred cumulative losses of 45.3 billion yuan.

Corporate losses are a common phenomenon, particularly among high-tech enterprises.

Losses are not necessarily alarming, but they become concerning when they lack predictability. In other words, as long as there is a reliable profitability plan, capital is willing to invest. However, for an unprofitable venture, it is uncertain how long investors' patience will last.

For NIO, it is crucial to establish a reliable and executable profitability plan.

Previously, it was rumored that Li Bin anticipated NIO to achieve profitability in 2024. Let's wait and see if this prediction comes true this year.

Question 2: How is NIO managing its cash flow?

According to public data, NIO's monetary funds for the past three quarters, on a quarterly basis, are as follows: As of December 31, 2023, cash and cash equivalents, restricted cash, short-term investments, and long-term time deposits totaled RMB 57.3 billion (USD 8.1 billion). As of March 31, 2024, this figure was RMB 45.3 billion (USD 6.3 billion). By June 30, 2024, it stood at RMB 41.6 billion (USD 5.7 billion).

It is evident that NIO's monetary funds have been declining over the past three quarters.

Monetary funds represent a company's most liquid assets and reflect the net cash flow and opening balance on the balance sheet date. Normally, the more monetary funds a company has, the stronger its solvency, and vice versa.

NIO's monetary funds are indicative of its cash flow performance, and their continuous decline warrants further investigation into the underlying causes. Since NIO's second-quarter cash flow statement is not yet available, we cannot comment on its operating cash flow.

3. What Does the Future Hold for NIO?

As a publicly traded company, NIO's future impacts the interests of shareholders, upstream and downstream suppliers, car owners, financial institutions, and other stakeholders.

NIO's future is not solely Li Bin's concern; it mirrors the situation faced by Evergrande, which is not solely Xu Jiayin's concern.

NIO's future faces two key challenges

First, maintaining stable cash flow to prevent any disruptions.

As we all know, corporate losses do not necessarily lead to bankruptcy, but a disrupted cash flow often spells doom.

Therefore, NIO must pay particular attention to cash flow management and planning. Potential strategies include:

Launching mid-to-low-end products to diversify cash flow sources, such as NIO's Ledao, which prioritizes volume over profit, similar to XPeng's MONA strategy.

Additionally, proactively planning equity and debt financing, as well as alternative financing from banks and other financial institutions, and adopting early payment collection and late payment strategies to optimize upstream and downstream capital utilization.

Second, reducing costs and achieving profitability as soon as possible.

Profitability is the ultimate goal for capital investment. While investors may tolerate initial losses in anticipation of future profits, their patience is not infinite. Achieving profitability swiftly to fulfill investors' profit expectations is crucial to maintaining their confidence in the venture.

In fact, the challenges faced by NIO are common among loss-making new energy vehicle (NEV) manufacturers, including XPeng.

Currently, the NEV industry is undergoing a consolidation phase, with many predicting that only a limited number of manufacturers will survive. However, each player is betting on being among the survivors.

Only time will tell the outcome.