Huawei has become a milestone for NIO.

Just a few days ago, NIO and Huawei were still debating over the battery swapping model, but now they have unexpectedly collaborated in the charging sector?

Recently, Ma Lin, Assistant Vice President of Brand and Communication at Shanghai NIO Automobile Co., Ltd., acknowledged that in addition to building battery swapping stations, NIO is also constructing a large number of charging piles, and most of the stations constructed this year are integrated battery swapping and charging stations, accessible to vehicles of various brands, including HarmonyOS Smart Drive.

According to the blogger whose post was retweeted by Ma Lin, it can be roughly assumed that HarmonyOS Smart Drive has already reached a collaboration with NIO, at least receiving a strong boost in the charging aspect.

Over the past year, NIO's energy replenishment system has increasingly gained industry recognition, with an increasing number of automakers partnering with NIO on battery swapping and charging, serving as a testament to both NIO's brand success and the success of its energy brand, NIO Power. In the new energy vehicle industry, NIO Power's (a mobile internet-based power solution) coverage capabilities are unparalleled. As of June 2024, it has accumulated 22,755 charging piles and 2,439 battery swapping stations.

However, behind these impressive achievements lies the immense pressure silently borne by NIO. Li Bin has repeatedly emphasized in public that NIO Power is their heaviest asset and the primary source of significant losses. In 2023, NIO's losses reached 21.147 billion yuan, yet NIO still needs to continuously construct new battery swapping and charging facilities and upgrade existing swapping stations, with no end in sight to the "money-burning."

Despite its heavy losses, NIO Power must continue to invest, facing pressures and doubts no less than those surrounding NIO's products. But HarmonyOS Smart Drive's access to NIO's charging network is undoubtedly a significant signal. This seemingly insignificant collaboration could be a turning point for NIO Power's business and, by extension, for NIO.

Battery Swapping is the Ideal, Charging is the Reality

From November last year to May this year, seven automakers, including Changan, Geely, and GAC, announced their collaboration with NIO on the battery swapping model, with plans to jointly build interoperable battery swapping stations.

The increasingly vast battery swapping alliance appears poised to become a significant revenue stream for NIO, offering hope for turning losses into profits. However, in reality, charging may be the turning point for NIO to achieve profitability.

Although seven automakers have joined NIO's battery swapping alliance, and Xiaopeng Motors CEO He Xiaopeng has also hinted at the possibility of joining, automakers adopting the battery swapping route are still in the minority in the overall new energy vehicle market.

The recent debate between Huawei and NIO executives over the battery swapping model stemmed from Huawei Terminal BG CTO Bruce Lee's belief that battery technology is rapidly advancing, and compatibility with older batteries could become a significant burden. NIO Vice President Shen Fei countered that one should not easily speak out in unfamiliar fields, lest experts become "bricklayers." However, Shen Fei did not directly address how to solve the compatibility issue with older batteries.

NIO's battery swapping model has been in operation for just six years, and various issues may not yet be apparent. However, when batteries with higher energy density and larger capacities are introduced, compatibility issues between new cars and old batteries or vice versa may become problematic.

Moreover, as charging power continues to increase, the time required for charging is becoming shorter, gradually approaching the efficiency of battery swapping. In the long run, while NIO's battery swapping alliance is likely to attract more members, charging as a method of energy replenishment is unlikely to be eliminated and will likely remain the preferred choice for the vast majority for a long time.

In fact, NIO understands this well. Li Bin emphasizes that NIO has a "chargeable and swappable" energy replenishment system, not a "one or the other" choice. While vigorously promoting the construction of battery swapping stations, NIO has not neglected the development of charging facilities, even becoming the domestic automaker with the most deployed charging piles.

If we expect "scale effects" to turn around NIO and NIO Power's current revenue situation, empowering their charging capabilities externally would undoubtedly present a better opportunity.

However, simply relying on the large number of charging piles is insufficient. The five largest domestic charging pile operators, TELD, StarCharge, Yuncharging, State Grid, and Weijingyun, each have over 150,000 charging piles available. As third-party charging pile providers, they do not need to engage in competition among automakers, but only TELD has explicitly achieved profitability, with StarCharge claiming to be profitable.

For any company's charging business, only by securing the support of leading new energy automakers can it have a chance to achieve profitability.

Embracing Leading Automakers Leads to More Effective Results

Searching for nearby charging stations on a map app reveals that most charging stations have an idle rate of over 50%. While the collaboration between NIO and HarmonyOS Smart Drive will likely have limited short-term impact on improving the utilization rate of NIO's charging piles, this is merely a phased issue.

Compared to China's over 300 million vehicles, the number of new energy vehicles is still relatively small. As new energy vehicles gradually replace fuel vehicles, consumer demand for charging piles will gradually increase, ushering in a profitability turning point for charging service companies.

As the number of new energy vehicles grows, the demand for public charging piles will also increase. Currently, traditional automakers are not too invested in building charging piles, which is the first favorable factor for NIO's charging business to achieve a breakthrough.

The reason why other automakers are reluctant to invest too many resources in building a charging ecosystem is not hard to understand. Constructing a standard charging station can cost millions of yuan. With low usage rates, charging stations can easily become liabilities. Therefore, many domestic new energy automakers have entrusted the task of building charging stations to third-party enterprises.

Unbound by automaker brands, third-party charging stations can more freely provide charging services to vehicles of various brands, thereby reducing idle rates. NIO also understands that only by reducing the idle rate of charging piles can it increase revenue from its charging business and achieve profitability as soon as possible.

HarmonyOS Smart Drive is a leader among China's new automotive forces, delivering 46,141 vehicles in June. Collaborating with the HarmonyOS Smart Drive brand can be seen as a milestone for NIO, as NIO's charging stations will now cater not just to a few brands but to all new energy automakers.

In addition to HarmonyOS Smart Drive, NIO's charging business has previously collaborated with various new energy automakers, including FAW Hongqi, Xiaopeng, and Geely, among others, including some powerful established automakers. The support from these leading enterprises can effectively increase the exposure of NIO's charging stations, reduce the idle rate of NIO's charging piles, and accelerate NIO's pace towards profitability.

In the short term, building charging stations and charging piles is undoubtedly a money-losing endeavor, but in the long run, charging stations are akin to a country's infrastructure. Planning should not simply be based on current demand but should focus on long-term considerations. Invest today, win in the future.

It cannot be overlooked that NIO's early layout of its charging network often occupies advantageous locations such as shopping malls and supermarkets, and the intersecting layout of destination charging stations and ultra-fast charging stations further enhances coverage density. Objectively speaking, as more and more brands are connected, the idle rate of its charging equipment will greatly improve.

Previously, Li Bin revealed that NIO Power, including the account for battery swapping stations, is currently the most promising among NIO's many businesses to achieve profitability. With both battery swapping and charging gaining the support of other brands, profitability should not be far off.

Deeply Empowering Products, Highlighting the Value of the Energy Replenishment System

After entering June, the price war in the domestic automotive industry has slowed down, with BMW even reportedly sacrificing sales to maintain prices. As the focus on price competition decreases, automakers are gradually moving towards value competition.

But how can value competition be demonstrated? If it's a competition of configurations at the same price point, isn't that another form of price competition? Services and energy replenishment experiences may be the areas that best highlight the purchase value of products beyond the products themselves.

While third-party charging stations can certainly charge new energy vehicles, due to cost considerations, they primarily offer 2C charging piles. However, vehicles priced above 200,000 yuan are actively adopting 5C fast charging technology, and the construction of 5C charging piles is likely to be dominated by automakers. NIO Power's battery swapping and charging ecosystem can provide users with a faster and more comfortable energy replenishment experience, thereby empowering products.

The threshold for the electrification transformation of new energy vehicles has been successfully crossed, and they are accelerating towards intelligence. However, as automakers research technologies such as intelligent driving, smart cockpits, and intelligent electric control, it is difficult to achieve a unique competitive advantage centered on intelligent functions. From this perspective, NIO Power's layout is strategically valuable and will become one of NIO's core competitiveness in the future.

Combined with Huawei's decision at the end of 2023 to deploy 100,000 liquid-cooled ultra-fast charging piles and Xiaopeng and Zeekr's accelerated construction of ultra-fast charging stations, it seems that other automakers are intent on learning from NIO's energy replenishment ecosystem layout.

HarmonyOS Smart Drive and Zeekr have ample financial resources, while Xiaopeng Motors already has over a thousand charging stations, lagging behind NIO in charging layout but still having a chance to catch up with effort. Battery swapping is where NIO differs the most from other automakers. Joining NIO's battery swapping alliance is the only way to catch up with NIO in the battery swapping ecosystem.

Among automakers, NIO Power is already in a league of its own, providing an energy replenishment experience that will become one of NIO's core competitiveness, empowering future automotive products. At the same time, NIO Power will attract more automakers to join NIO's battery swapping and charging alliances, gradually growing into a key business for NIO to turn losses into profits.

Source: Leikeji