On March 21, NIO unveiled its financial results for the fourth quarter and full year of 2024, revealing a landscape fraught with challenges. Despite doubling its revenue and gross margin in 2024, NIO continues to grapple with persistent losses. During the earnings call, CEO Li Bin reiterated the goal of achieving profitability by Q4 2025, yet with each passing year, the timing of NIO's profitability remains as uncertain as Schrödinger's cat. Over the years, NIO has garnered a stellar reputation among high-end users for its service business, leading to a diversion of focus from its core operations. Recently, its business strategy has appeared overconfident, as if holding all the winning cards, resulting in haphazard decision-making. As competition intensifies in the new energy market, NIO's financial pressures mount, and its room for maneuver diminishes. Confronted with this urgency, Li Bin has embarked on a profound reflection, signaling the advent of significant change.

NIO's Prolonged Challenges

In 2024, NIO recorded revenues of RMB 65.73 billion, a year-on-year increase of 18%, and delivered 221,970 new vehicles, up 38.7% from the previous year. Fourth-quarter revenue reached RMB 19.7 billion, a 15.2% year-on-year increase, with 72,689 new vehicle deliveries, a 45.2% year-on-year surge. All these figures set new benchmarks. In terms of vehicle manufacturing, NIO generated revenues of RMB 58.234 billion in 2024, a 18.2% year-on-year increase. For the fourth quarter, revenues amounted to RMB 17.476 billion, up 13.2% year-on-year, marking an impressive performance. Gross profit margins also witnessed a substantial improvement, with NIO's gross profit reaching RMB 6.493 billion in 2024, a 112.8% year-on-year increase, and a full-year vehicle gross margin of 12.3%. In the fourth quarter, gross profit was RMB 2.3 billion, up 80% year-on-year, with a vehicle gross margin of 13.1%. Judging solely by these figures, NIO appeared to be on a roll in 2024. However, the underlying issue is that NIO's net loss exceeded RMB 7.1 billion in the fourth quarter of 2024, a 32.5% year-on-year increase and a 40.6% quarter-on-quarter increase.

Throughout 2024, NIO continued to incur losses, with a net loss of RMB 22.4 billion, equivalent to a daily loss of RMB 61.2 million. This widening "wound" has resulted in cumulative losses exceeding RMB 100 billion since 2018, reaching RMB 109.3 billion. On the day NIO's financial report was released, the capital market responded swiftly, with its share price plummeting by more than 5% at one point. Judging from the data alone, a company that has incurred losses of RMB 100 billion over ten years could be considered a rarity in business history. In any other industry, shareholders might reconsider the legitimacy of the company's existence. In 2024, when revenue hit a new high and gross margins doubled, how did NIO continue to incur losses?

The battery swap model has long been hailed as NIO's core competitiveness but also a potential cost monster. By the end of 2024, NIO had built over 3,000 battery swap stations. Even with a conservative estimate of RMB 3 million per station, NIO's cumulative investment would be less than RMB 10 billion. However, the investment in battery swap stations may not be the true crux of NIO's current cost dilemma. From 2024 onwards, NIO has consistently been profligate with its cost expenditures. Even though the gross margin for vehicle manufacturing returned to double digits in the fourth quarter of 2024, the gross profit gained from hard-won price reductions was insufficient to offset NIO's poor cost control, directly leading to ongoing operating losses.

In 2024, NIO's selling, general, and administrative expenses increased by 22.8% year-on-year to RMB 15.74 billion, outpacing revenue growth. Notably, NIO's marketing expenses in the fourth quarter reached RMB 4.878 billion, up 22.8% year-on-year, primarily used for Ledo brand promotion. From a purely financial perspective, NIO's strategy of "trading losses for market share" results in a net loss per vehicle of around RMB 100,000. The scale effect is negated by high channel expansion and brand marketing costs, making NIO stand out among new energy vehicle makers in terms of losses. Moreover, as NIO intensifies promotion and hype for the Ledo and Firefly brands in 2025, coupled with marketing for multiple upcoming models, the pressure on its cost control may not dissipate fundamentally.

The lack of fundamental relief in cost control, leading to continuous losses, also puts NIO's financial situation under immense pressure: In 2024, NIO's cash reserves approached RMB 42 billion, but its current liabilities exceeded its current assets, with a current ratio of less than 1, facing pressure to repay short-term debts.

In response, NIO emphasized that based on its assessment of revenue growth, working capital management, and its ability to raise funds from banks, it believes its financial resources can support operations for the next 12 months.

From 2023 to 2024, NIO's total shareholder equity shrank significantly from RMB 25.7 billion to RMB 6 billion.

However, the silver lining is that by the end of February 2024, NIO secured an additional RMB 2.8 billion in funding, and in March, NIO and CATL reached a battery swap cooperation agreement, including strategic financing of up to RMB 2.5 billion. It is evident that NIO CEO Li Bin has always had his unique approach.

During this earnings call, addressing funding concerns, NIO also assured that it has diverse financing channels and will flexibly arrange financing. Notably, with a focus on cost reduction and profitability, NIO's one-and-a-half-hour fourth-quarter earnings call was among the longest in recent automotive company earnings calls.

The Disappointing Ledo and Li Bin's Reflection

In the new energy sector, sales determine survival. In 2023, over ten new energy brands maintained their position in the first tier by selling at least 10,000 vehicles per month. In 2024, the monthly sales threshold for new energy vehicles doubled, raising the bar and increasing the difficulty. In the second half of 2024, the Ledo L60, on which NIO placed high hopes, was tasked with boosting sales. This reflects NIO's recent detachment and readjustment in the new energy competition: The trust built through previous high-end electric vehicles has eroded over the past year due to the relative decline in product strength and sales of NIO's main brand models, making it difficult to compete alone in an increasingly fierce market, ultimately putting financial pressure on NIO.

Therefore, the iron rule of scale necessitates that NIO increase sales to survive. Judging from NIO's goal of doubling sales in 2025, the Ledo L60, along with a new SUV model to be launched under the Ledo brand, and the lower-priced Firefly, will together form the "NIO + Ledo + Firefly" product lineup in 2025, covering the price range of RMB 150,000 to RMB 800,000. These two sub-brands will support the foundation of NIO's overall sales in 2025. However, Ledo, which is supposed to be the breadwinner, is not yet capable of supporting NIO's entire family.

From spring to winter in 2024, despite intense promotion, the Ledo brand delivered 19,929 vehicles in the fourth quarter. However, in 2025, Ledo delivered 5,912 vehicles in January, a 43.8% quarter-on-quarter decline, and 4,049 vehicles in February, a further 31.5% decline, with cumulative deliveries falling short of 10,000 vehicles. This falls short of the goal set by Ledo President Ai Tiecheng during the 2024 Guangzhou Auto Show of delivering 15,000 vehicles in January and February 2025. Additionally, based on Li Bin's previous projections, Ledo was expected to deliver over 20,000 vehicles in a single month in March 2025, with NIO's overall sales for 2025 reaching 440,000 vehicles. However, the current situation indicates considerable pressure.

In the RMB 200,000-300,000 price range, Ledo faces fierce competition and needs to continuously invest in marketing costs, which will significantly compress NIO's maneuvering space. In fact, in the second half of 2024, there was criticism of Ledo and NIO's multi-brand strategy for 2024. A poignant criticism is: If a company cannot manage its main brand well, is it necessary to expend effort on multiple brands?

Under the pressure of multiple factors, especially the issue of resource duplication between Ledo and NIO, Li Bin had to confront the problem during this earnings call. Regarding the dual-brand strategy, Li Bin said that NIO and Ledo are reusing resources in areas such as after-sales, finance, and human resources. Currently, in some regions, management teams are attempting to simultaneously oversee sales and service for both the Ledo and NIO brands. When responding to the underperformance of Ledo L60 orders, Li Bin mentioned that recent market competition and negative public opinion have had a 30%-40% impact on sales. Subsequently, Li Bin cited multiple reasons, including high order pressure due to insufficient brand awareness for Ledo, insufficient sales outlets, and inadequate sales staff training, ultimately leading to Ledo's underperformance.

In this financial report, NIO set its 2025 vehicle delivery target at 41,000-43,000 units, a year-on-year increase of 36.4-43.1% but a quarter-on-quarter decrease of 42%. Total revenue is expected to range from RMB 12.4 billion to RMB 12.9 billion, a year-on-year increase of approximately 25%-30% but a quarter-on-quarter decrease of 28%. However, NIO's slightly weak sales performance in the first two months of 2025 and its relatively "conservative" guidance for first-quarter 2025 sales seem unlikely to dampen Li Bin's optimism. He mentioned that NIO's sales target for 2025 remains at 440,000 vehicles, and the company will strive to achieve profitability in 2025.

Li Bin Begins Planting Trees

On the company's tenth anniversary, Li Bin wrote an internal letter urging the team to "stay true to our original aspirations and focus on action," emphasizing, "Next, we will face higher-dimensional competition, where we cannot have weaknesses and cannot expect a quick victory." Over the years, due to its service business, NIO has gained a strong reputation among high-end users, leading it to lose focus on its core business. Especially in recent years, its business layout has appeared overconfident and assured, leading to haphazard decisions. Despite years of losses, NIO has not significantly scaled back its operations: from new projects such as batteries, chips, and mobile phones, to expansions in existing business segments like intelligence, energy, and user-related services, NIO seems to be everywhere.

Li Bin has always advocated for long-termism, comparing NIO to Tesla and Amazon on multiple occasions, arguing that years of losses do not prevent Tesla and Amazon from becoming great companies. Facing questions, Li Bin previously stated, "Companies that do not invest for the future may fare better in the present but will surely lose out in the future."

However, in Tesla, which has also incurred losses for over a decade, Elon Musk demonstrates extreme cost control, taking a completely different approach. From this perspective, profitability is a result, not a cause. What NIO needs to focus on now is cost control, putting all efforts into one hole, and focusing on its core business. At this juncture, how to quickly lead NIO out of the quagmire of losses has become a critical task for Li Bin. The highly anticipated Ledo, which faced delays in delivery after its launch, actually led to customer loss. Such issues are not new: In 2021, many long-time NIO owners faced embarrassingly long delivery times for the ET5, exceeding six months. Moreover, NIO's inefficient internal organizational capabilities in 2024 undoubtedly contributed to Ledo's failure to meet expectations after its listing.

From this perspective, the abundant successful business experience in the first half of Li Bin's life has supported his easygoing nature, lax management, and divergent strategies, leading people to often refer to him as "Brother Bin," a nickname implying his good-naturedness. However, NIO's sluggish pace may also be related to Li Bin's excessive leniency, even indulgence and disorder within the company. At the end of February this year, an NIO employee published a long post with ten suggestions, urging the company to quickly transition from abstract ideas to pragmatism, be market-oriented, reject fantasies and empty talk, concentrate resources, and face reality. Many of the criticisms and questions were directed at Li Bin. Subsequently, Li Bin replied in the comments section, "Thank you all for your suggestions. To enhance everyone's awareness of operations, I will start with myself."

Immediately afterward, Li Bin forwarded the letter to all employees and pinned it at the top. Since then, Li Bin has swiftly sought change, initiating a grassroots transformation, reorganizing departments, scaling back businesses, reducing costs and increasing efficiency, replacing the project-based reward system with a results-oriented approach, personally visiting the front lines, diving deep into supply chain management, and proclaiming, "Every penny must make a sound." Of course, the best time to plant a tree was ten years ago, but the next best time is now. However, the focus of planting trees is always the person planting them, not the tree itself. From this perspective, compared to the nearly unlimited personnel adjustments at XPeng Motors, will Li Bin's next reform venture into deeper waters?