Local media outlet 36kr has published an excellent story today that sheds light on why Nio is periodically in trouble and how it defuses its challenges.

(Image credit: CnEVPost)

Local media outlet 36kr's PowerOn section today published an excellent report on why Nio is periodically in a tricky situation and how it defuses the challenges.

CnEVPost has translated the article with the author's permission. Below is its full content.

Nio's cyclical crisis and self-help

By Peng Suping

In May this year, something circulated in the circle of Nio's senior employees: the company held a meeting on capital coordination.

For employees who lived through Nio's 2019, they were mostly no strangers to such meetings.

In the second half of 2019, when Nio was in operational trouble, similar meetings were held several times, which were mainly used to clarify the funding requirements of various business lines in order to free up resources.

Nio has denied having such a meeting. However, during its first-quarter earnings call shortly after that, Nio CEO William Li announced that the company would be suspending a number of projects that required large capital investments.

What some veteran employees didn't expect was that this crisis seemed to come a little fast, less than four years after the last one.

The immediate source of the dilemma is declining sales. Since the beginning of the year, the ET5 sedan, which the company thought had the potential to become a blockbuster model, has had a lukewarm performance, and the main model, the ES6, is waiting to be revamped.

Without the anchor model to support it, Nio's monthly sales fell 60 percent from the end of last year, with some months seeing less than 10,000 units.

Despite the weak sales, Nio has a huge business portfolio: three car brands, a smart driving business, a battery business, a chip business, a phone business, and a battery swap service. These businesses have seen Nio spend more than 10 billion yuan a year on R&D and sales.

Nio's revenue and expenses are seriously out of balance, with a net loss of 14.44 billion yuan last year, up a whopping 260 percent from a year earlier.

Nio is also losing cash reserves at a rapid pace, with cash and equivalents, restricted cash and short-term investments decreasing by more than 6 billion Chinese yuan each quarter since the second half of last year.

Nio seems to be reverting back to the critical moments of 2019.

Rumors began to swirl within the company, with some employees worried about new projects being canceled and feeling like they were going to be laid off.

Although Li encouraged employees to focus on their projects at hand, do their own work, and not think so much, the specter of belt-tightening was already hanging over the company.

In a face-to-face meeting, a question that garnered a lot of likes was, "Nio's sales are low, the stock price has dropped 50 percent, and I'm losing more money every day in the stock market than I'm making at work, so what should I do?"

Li tried to calm the anxious employee by saying that when sales improve, everything will turn around.

What he didn't say was that during that time he was already looking around for financing.

Luckily, Nio got a white knight, and in early June, Nio's engineering department was given a mysterious mission to get several cars tuned up and ready to drive in the Middle East.

No one knew what the purpose of the assignment was, but they heard that the instruction came directly from Li.

This shipment of vehicles to the Middle East helped Nio secure some space. That month, Nio announced that it had received an investment of around 6 billion Chinese yuan from an Abu Dhabi investment institution.

The whole process was quick, but people close to the deal said the financing wasn't as easy; the Abu Dhabi investor wanted a bigger share, but Nio didn't want to let the stake dilute too much. So Tencent ceded some shares to broker the deal as quickly as possible and get the money in.

At the same time, Nio announced a rare price cut of 30,000 yuan across its entire model range, and its sales picked up, delivering more than 20,000 units in July. Nio seems to have defused the crisis once again.

But no danger comes out of nowhere. China's auto market is entering a long, brutal battle, and investors are becoming more cautious and defensive, so the cost of making mistakes is incalculable. Not to mention the cycle of stepping off the cliff.

As glamorous as the ET5 was when it was launched, it ended on a sad note.

It's Nio's coupe model, with pleasing styling and an initial starting price of slightly over 300,000 Chinese yuan, which was the lowest of Nio's models.

On the day of the ET5's launch at Nio Day in late 2021, the model received a huge number of orders. Li told the media at the time that it was the highest number of post-launch orders ever for a Nio model.

Nearly a year later, in September 2022, the ET5 show cars made their way into four stores in Shanghai, with tons of potential customers lining up to see the car.

"It's the same situation as the launch of the iPhone back in the day," said Nio salesman Qin Lang (alias).

According to Qin, his phone was constantly ringing with alerts about customers paying their intent money, "We all felt that Nio's heyday was coming."

According to his recall, ET5 at its peak had as many as 128,000 intent orders, the highest for a Nio model. Barring any surprises, the ET5 would sell more than 10,000 a month, making it Nio's first true blockbuster model.

But surprises happen. The highly acclaimed ET5 suffered delivery difficulties.

Deliveries of the ET5 began at the end of September 2022, and in the first full delivery month -- October 2022 -- only 1,030 units were delivered, and only 2,861 units were delivered in November.

This performance surprised salespeople. To make matters worse, the waiting time for the ET5 was getting longer and longer, "An order placed in October last year will not be delivered until April this year, which is equivalent to [customers having to] wait for half a year."

In the coupe market, where the ET5 is aiming for a price of around 300,000 Chinese yuan, it has a forest of rivals, including the Tesla Model 3 and the Xpeng P7. Nio's delivery capacity was weak, and customers naturally flowed to other companies.

By the middle of the year, the ET5, which had climbed to adequate levels of capacity, had missed the best time to sell, and went from struggling to deliver to struggling to sell, and saw a lot of inventory. Nio started offering subsidies to clear inventory for this car.

It was a pretty hard lesson learned. Why did the ET5 not become the blockbuster car it was expected to be? There was a lot of discussion within Nio, and Li has taken various teams through a number of retrospectives, as the cost was just too heavy.

There is no definitive reason that summarizes what happened to the ET5.

Pan Lin (alias), an employee of Nio's manufacturing business, told PowerOn that the ET5's production process was bumpy, and that instead of being produced in Nio's F1 factory, which is already a well-established operation, it was produced in the F2 factory, which had just been built.

The F2 factory has more space and a better environment, but because it's a new factory and the team is newly built, the working language isn't very uniform, he said.

In addition, the F2 plant is geographically located between Huainan and Hefei. When the ET5 went into production last October, the Covid epidemic was severe, and because of the differences in Covid control policies in different cities, it was extremely inconvenient for employees to move across cities, and the F2 plant was even more affected than the F1 plant.

Many of the ET5's components were also redesigned and mass-produced for the first time. For example, its integrated electric drive system (EDS) is an entirely new product, and the production line is in the newly built F2 plant.

The new model, new factory, and new components make production and integration an unprecedented challenge.

Nio's mainstay model, the ES6, was revamped this year and became the mainstay to save sales, and Nio took no more chances and put the car's production in the more mature F1 plant.

Factors that delayed the delivery of the ET5 went beyond manufacturing, with the model's own design flaws and post-delivery quality issues also creating a drag.

For example, the ET5's small rear space, short range, seating issues, and vehicle rattles made the six-month wait seem worthless.

"Some models are launched to fill a niche, but vehicles like the ET5 are meant to expand sales," Pan said.

Li had clear plans for all of these, but the gap between expectations and reality frustrated him.

Li no longer allowed executives to sit in offices in Shanghai and remotely control production and R&D tasks in Hefei, and when problems arose, they were asked to be on-site to communicate and resolve them.

Since the beginning of the year, two of Nio's executive vice presidents -- Shen Feng, head of manufacturing, and Zhou Xin, head of product -- have been based in Hefei, and Nio's employees at the director level and above have been required to take turns traveling to the factories for meetings.

The results of these improvements are obvious. In May of this year, Nio launched the new ES6, realizing that deliveries began as soon as it was launched, supporting Nio's sales of about 20,000 units in both July and August.

However, the whole process felt scary for Nio's staff. After the ES6 was launched, its delivery cycle lengthened due to a supply shortage of a 20-inch wheel. This was clearly a mistake at a time when Nio needed the model to save sales.

Nio needs sales to pick up quickly because it's towing a heavy commercial juggernaut: in-house developed autonomous driving technology, chips, cell phones, batteries, cockpits, electric drives, battery swap stations, seats, air suspension.

This is an even more ambitious R&D map than Tesla's, and there is almost no precedent in China's smart EV industry.

This huge map puts Nio's R&D spending and sales expenses at 10 billion Chinese yuan in 2022, making it difficult for the company to get a breather.

Burning money is an intuitive perception that outsiders have of Nio and even Li.

For Nio employees who have worked with Li for many years, this is not an accurate statement. In their view, Li or Nio just believes more in the value created by the investment of resources.

In the early years of Nio, he criticized the team when he saw Nio's office in Wuhan stocked with expensive mineral water.

In a CCTV interview, he mentioned that his children faced difficulties enrolling in school because he paid himself too little.

Li himself does not have any habit of enjoying an extravagant life, but Nio has never skimped on investments related to R&D and product experience.

Taking battery cells as an example, an engineer from a fellow car company told PowerOn that Nio would spend more money on purchasing the better one when purchasing CATL's batteries. "The performance difference isn't that big, but that's what Nio will do."

Nio does the same with the seats. Traditional luxury brands tend to treat leather seats with diamond stitching to address the common blistering problem.

But Nio will use large areas of leather and leave them unstitched, in order to achieve a look like a large sofa at home. Of course, the later blistering problem was complained by Nio's users.

"Nio doesn't care that much about money," a product employee at the company told PowerOn.

In a traditional car company, the chief project engineer needs to create as much value as possible with limited funds, so he or she will repeatedly consider the configuration, performance and other aspects. At Nio, on the other hand, as long as the general direction is right, it can go ahead.

Technical talents often circulate between Nio, Li Auto and Xpeng, and their general comment is that they are very comfortable doing R&D work at Nio.

Xpeng is labeled technical, but engineers applying for budgets need to rigorously justify input and output benefits. Li Auto is widely known to be conservative with its R&D investments until 2023.

Nio's R&D team, on the other hand, is almost never short of money. A project manager said he could walk down the street one day with an idea, tell his boss about it, explain what value it could generate, and request a fee of up to 1 million Chinese yuan, even if the project didn't even appear in last year's budget.

Nio will be even more generous with budgets for middle and senior management. In 2021, Nio poached a tech talent from a North American autonomous driving company and allocated him an annual budget in the billion Chinese yuan range, despite the position being a senior director.

Many executives who had contact with Li told PowerOn that Li looks at the long-term grand strategic direction and trends, and as long as there's long-term value with that direction, he'll feel comfortable going for it.

Against this backdrop, Nio's R&D landscape has been rapidly growing.

In the information presented to the public, Nio, like Tesla, has developed its own chips, smart driving, cockpits, electric drives, and batteries.

And more than Tesla, Nio has also entered the phone industry and has iconic battery swap stations that it invests heavily in every year.

In addition, Nio has developed its own air suspension, seats, silicon carbide, cameras, and some other components.

Nio's smart driving domain controller is also different from other car companies: its peers usually integrate Nvidia chips through a tier-one supplier, Huizhou Desay SV Auto, and only do the upper-level software applications themselves. Nio, on the other hand, skipped Desay and paid Nvidia a huge amount of development fees directly to make its own domain controllers.

Instead of pursuing short-term returns and single-point gains, Nio focuses on long-term value. That's its long-termist strategy, and that's the undercurrent of this company. Of course, this may also be the second misunderstanding of Li's founding of Nio.

A senior employee told PowerOn that Nio's ambitions were evident soon after the company was founded. The company had incubated more than 20 R&D projects around vehicles and the core vehicle systems, and then only a handful were left after a screening process and after the operational crisis of 2019.

In 2020, the EV industry as a whole was growing rapidly. Nio's market capitalization once surpassed that of Xiaomi, and Xpeng's once rivaled that of Honda, even though their monthly deliveries at the time were only at about 10,000 units.

It's hard to stay calm in such a fantastic picture.

One executive of a new car-making force told PowerOn that everyone took the capital bubble as their strength.

Xpeng CEO He Xiaopeng expanded his business to include flying cars and robots and was so distracted that employees could not often see him on the elevator until late last year, when the company was in crisis.

Nio, on the other hand, once again opted for rapid expansion. In early 2020, not long after the company hit rock bottom in its crisis, Li began to reveal to shareholders that Nio was planning the development of AI chips.

There's no doubt that this is a project that could see annual R&D investment in the 1 billion Chinese yuan range. In the following years, phone and battery projects with the same level of investment have also been initiated.

For car companies, in-house development is to achieve product and experience differentiation on the one hand, and on the other hand, to achieve control of the industrial chain and gain bargaining power.

Li once mentioned in an internal meeting that in the mass market, the battery accounts for 40 percent of the cost of the vehicle, and assuming that the gross profit margin of the battery is 20 percent, then manufacturing the battery by itself will increase the gross profit margin by 8 percentage points. If self-developed chips were added, the gross margin can be an additional 10 percent.

Li has built Nio's massive R&D footprint, and he has taken on the role of CTO, personally managing these projects with more than a dozen technology-related VP-level executives reporting directly to him.

Some industry chain sources said that Li has a strong interest in R&D and is a strong learner, and even in a meeting with a leading supplier, he asked questions that were difficult for the supplier's technical VP to answer.

In the emerging industry of intelligent electric vehicles, the supply chain is relatively immature, and product and process technologies are iterative, so in-house development and vertical integration are conducive to improving R&D efficiency and reducing overall costs.

BYD has benefited from extensive vertical integration, while Li Auto, which had previously focused only on building cars, realized this year that it had been overly cautious in the past and began to loosen its budgetary requirements. Li Xiang, CEO of Li Auto, has asked each of the company's technical teams to think more from the perspective of a tech company.

However, vertical integration in the auto industry is not a borderless expansion, especially when resources and roots are still quite weak.

Nio's layout has already begun to show signs of overflowing beyond its primary businesses along the expansionary inertia.

A senior employee who was alerted to Nio's expansionary posture last year said that the company was portraying as if it was all about the long term, saying what value it could create in a few years. And it's hard to answer the question of whether it can improve delivery and reduce costs at the moment.

Late last year, William Li received a copy of a plan from Europe that included a goal of selling tens of thousands of cars (Nio denied the information to PowerOn).

Nio's subsequent building of stores and recruitment of staff in Europe has been in line with this goal. At one point in the European market, Nio was approaching 3,000 employees, and a European R&D team was beginning to be built.

At that point, Nio sent a 2023 sales forecast that included its European target to its supply chain: over 400,000 units.

2023 was the second year of Nio's big push into the European market. With the brand and sales and service system just being established, this annual sales target is certainly ambitious.

Employees with access to the European business say that until recently, Nio's monthly sales in Europe, including leasing and sales, were in the hundreds.

No one can say how the target of tens of thousands of units was set, but it wasn't long before it became clear that Nio had shelved that ambition.

Earlier this year, a new 2023 sales target the company sent to its supply chain was cut in half to about 240,000 units.

Big swings in forecasts can challenge supply chain confidence, but they can also be a quick stopgap. And it's once the decision is made to execute on an overshooting target that the constant cannibalization of resources, which can be difficult to pull out, begins.

For 2019, Nio's VP of battery R&D, Zeng Shizhe, has come up with a battery upgrade: offering a 125-kWh battery pack.

The battery packs currently in use at Nio come in two versions, 75 kWh and 100 kWh. The upgrade program means that the battery team wants to make the next generation of batteries on the 25 percent capacity upgrade.

However, this scenario did not convince the company's management. A source from the Nio battery team said that management, including president Qin Lihong, felt that the 125 kWh capacity was not a breakthrough, and that the company would have to realize a 150 kWh capacity if it decided to do so.

150 kWh is a huge challenge, and CATL's 9-series high-nickel Qilin Battery, which was only formally mass-produced in the first quarter of this year, has a capacity of 140 kWh. This could serve as a reference for how difficult it is to develop 150 kWh batteries.

At Nio Day in early 2021, Nio announced a 150 kWh semi-solid-state battery, with mass production planned for late 2022.

However, mass production of the battery has been repeatedly delayed, from early to mid-2023. Li's most recent promised delivery was in July, but it has not yet begun to enter service.

The challenges encountered with the 150-kWh semisolid battery are many. Some industry insiders told PowerOn that WeLion, the supplier of the battery's cells, had cell yields of just over 50 percent last year.

But Nio was not intimidated, and instead took a firmer stance to push for mass production of the semi-solid state battery.

Zhang Ran (alias), an engineer who got access to Nio's semisolid batteries, was told as soon as he joined the company that the 150-kWh battery pack was the highest-priority project.

Earlier this year, Nio sent hundreds of employees to the production lines in Huzhou to assist in WeLion development.

Nio even recruited Apple and Panasonic technical executives from the US, who also work on the production lines in Huzhou.

There, engineers often worked overtime until midnight or even the early morning. They start work at 9 am and often finish at 1 am.

WeLion delivered the cells to Nio at the end of June, but that was only the first step in the mass production of the 150-kWh battery. Nio has to assemble the cells into battery packs, which presents additional technical and engineering challenges.

Assembling the battery packs involves processes such as soldering and gluing, and the large soft-pack cells are easily scratched, making consistency difficult to ensure. The samples made may not be insulated and have the wrong voltage. And once a step goes wrong, the whole progress may be suspended for a week or even half a month.

Under the mass production hell, Nio's battery team had to modify the design. This gave Zhang even less hope. Normally, changing the design of an automotive product on the eve of mass production is a big no-no, as the process and other procedures have to be redone.

The feeling among Nio's front-line salespeople was that the company was going to push through all the difficulties and devote all its resources to getting this project done.

At one point, Nio stopped other projects in order to deliver the 150-kWh battery and pushed forward with the battery program at any cost.

However, many employees were skeptical about how much actual revenue the 150-kWh semisolid battery might bring.

Nio president Qin once said that the cost of a semi-solid-state battery could be comparable to a Nio ET5, making it difficult to roll out such a battery on a large scale.

And Nio's 1,000-kilometer range, mentioned two years ago, is already a reality in the EV industry.

The phone is also one such project that requires a huge investment of resources that employees don't quite understand.

The Nio Phone has been released recently and is a flagship device. It has a high price tag and its best feature is its connectivity with the car, replacing the car key and having many vehicle control features.

In early 2022, Nio started hiring massively for the phone business. Li has repeatedly explained the reason for making the phone -- to give Nio users a phone that has the best experience in terms of connectivity with vehicles.

He said that more than 50 percent of Nio users use Apple iPhones, but Apple is now very closed to the automotive industry. For example, Nio's second-generation platform for cars comes standard with UWB technology, which supports a new generation of digital car keys, and Apple doesn't open the interface.

Although the ecology of Android phones is open, an implicit industry rule is that the background program management strategy of cell phone manufacturers will kill the car key program. In order to keep the car key program running in the background, car companies need to pay a fee to the phone makers.

Nio, which has resources and ambition, is naturally reluctant to be constrained by others, and air suspension and seat manufacturers with insufficient cooperation have been replaced by Nio with self-developed products.

However, manufacturing phones is not easy, this industry is already a red sea, and small players have long been out of the game.

Li's judgment isn't exactly clear. A phone executive he consulted with told PowerOn that Li was once hesitant about how big to take the phone business. The executive advised him not to go too big, and Li heeded that advice, deciding to limit annual investment to less than 1 billion yuan.

Even after limiting the investment scale, the differentiated value of Nio Phone is being compressed.

Since last year, Apple has opened the UBW technology interface, and after BMW, BYD's UWB car key function has been realized. There are also a large number of car companies that have submitted applications waiting for Apple's approval.

A person from a car company that is known for capturing users' needs has been deeply involved in the definition of digital car keys, and he believes that cell phone manufacturers are unlikely to use the technology as a monopoly resource for a long time, because it is contrary to the demands of cell phone users.

Looking back at Nio's rise, the company's resource-heavy investment strategy has helped it maintain a long-term lead.

In 2018, when there was a lot of skepticism about new car-making forces, Nio became the first new carmaker to achieve mass production and delivery, and quickly amassed the largest number of orders and users.

In the same year, Nio was first new carmaker listed in the US, gaining lucrative resources and earning enough exposure. In April 2021, Nio became the first of the new car-making forces to see its 100,000th vehicle roll off the assembly line.

As the big brother of the new car-making forces, Nio has always maintained a first-run stance, whether in terms of market pace or product scale. It is not an exaggeration to say that Nio has shaped the basic outline of the brand of new car-making forces.

But can heavy investment always get a head start? The answer is not necessarily.

Pan Lin (alias), an employee on the production line in Hefei, told PowerOn that in the past, new car launches pursued timing too much, and orders often came before the trial production was finished. Once the vehicles started production, the time left for improvement was quite limited, and quality problems would ensue.

Last year, after the Nio ET7 and ET5 began deliveries, a salesperson on the company's internal forum questioned whether the quality team could go and look at the problems users were experiencing.

With quality hard to guarantee, the high-end image that Nio has invested a lot of resources and costs to create will inevitably be diluted.

Li said in an internal letter earlier this year that software and hardware quality problems in the early days of the new car's launch had affected the company's product reputation and prestige.

But the quality problems didn't come exclusively from the production line staff. Pan often encountered situations in which his supervisor said the car needed to be launched urgently, and whatever resources were needed were available. But he actually wanted to tell his supervisor, "I don't want either money or talent, just time."

Since 2022, Nio has released eight new cars with an average of one at two- to three-month intervals.

Yet no matter how many products are added, Nio's monthly sales have stayed in the 10,000-unit range.

Automotive is an asset-heavy industry, and a new car requires hundreds of millions of Chinese yuan or even billions of Chinese yuan in capital investment from development to completion of validation testing. But Nio has yet to secure a stable cash flow, and the strategy of loading up bullets to grab the pace may cause cyclical resource vacancies, in addition to causing quality problems.

During the second-quarter earnings call, Li said that the Nio brand will not launch any new models next year, and only the first car from Alps will be launched in the second half of next year.

PowerOn has learned that Nio had previously planned to launch a sedan positioned higher than the ET7 in 2024, but that plan has been delayed, and the first model of Nio's third brand, Firefly, had also been at risk of being canceled.

Nio's management has had to revisit the way the strategy is being pushed forward.

On January 1 of this year, Li sent out a heavily worded all-hands email on the topic of "Pace and Efficiency," placing new demands on each business team.

He asked the supply chain, manufacturing, and logistics teams to respond faster to market fluctuations, and the quality team to reduce quality cost losses.

A grandiose plan will ultimately be realized by the execution of every detail.

The pace of Nio's product launches is starting to slow down. According to the previous process, delivery of the new ES6 could be initiated in February, but Nio deliberately delayed the node by a few months this time, and the new ES6 was not officially launched until the end of June.

During those months, Nio's procurement staff and quality engineers were based in Hefei to address delivery and quality challenges. "The company used several hotels and arranged shuttle buses to the factory."

With plenty of time, the delivery and quality of the new ES6 have improved significantly. Pan said the new ES6's PP100 (number of problems per 100 vehicles) is 70-80 percent lower than last year's ET5.

Starting with the new ES6, Nio has slowed down the pace of new car launches. "New product launches are now pushed back three months to allow time for more DRE (defect removal) and quality control."

As far as efficiency is concerned, Nio is also sorting out its R&D-to-product-delivery process and has started implementing a matrix organization.

The company's R&D system is divided into two lines of business -- horizontal and vertical -- where the vertical involves different R&D operations and the horizontal leads product delivery.

For example, in both the NT 2.0 and NT 3.0 platforms, there are separate positions responsible for delivery, and each of the control domains below them will also have a person responsible for delivery.

"They lead what should be done in a release, what the design options are, and are accountable for the end result."

The launch of Nio's Banyan 2.0.0 system in July this year, which included over 120 feature additions and experience optimizations, is considered a milestone for the R&D system. "At least the software team fought a big battle."

Some things just take time and can't exactly be captured by investing resources. And in the meantime, Nio needs to carry the pressure of selling thousands of cars a month and nearly breaking cash flow.

Li didn't originally intend to flip-flop on price.

Nio launched the new ES6 in late May, and the model, despite being expected to help change the company's fortunes, was not priced to surprise at all.

In fact, the starting price of 368,000 Chinese yuan at the time was the result of a compromise by Li. A source close to the project told PowerOn that the project's team initially offered several options, and Li was satisfied with a higher price.

"He feels that the ES6 is a car in the 350,000 to 400,000 Chinese yuan class, so he wants to set a price like that without going into too much detail to explain why to users."

To Nio employees, Li is a graceful boss, and in his mindset, the price melee in the market won't last long. "As long as the product is good and the service is good, sales are just a matter of time, so he has never been in a hurry."

He is also reluctant to engage in very fierce head-to-head competition with his peers. On many occasions, Li told his staff, "Don't go to and compete for the bottom with others, and you can even refrain from releasing monthly sales." Instead of allowing his team to verbally attack peers, he encourages them to draw on the strengths of others.

In May of this year, competition in the EV market intensified around the launch of the new ES6, which was in the same price range as Li Auto's Li L7, and the rivalry between the two became tense.

At an internal communications meeting, someone couldn't help but complain that Li Auto CEO Li Xiang often makes sly jabs at Nio on Weibo, and could the company come up with some way to deal with it.

William Li responded that Li Auto's Li told him on WeChat that no company is defeated by this kind of thing, and you must lose because the products and services are not done well.

This year's market is cruel enough. Even Elon Musk, CEO of Tesla, said that if the price is more money than people have, that demand is irrelevant.

In the first half of this year, Nio has lost 14 billion yuan in cash and equivalents, while orders for the new ES6 have been slow to meet expectations.

That triggered a fierce reaction from investors, who argued that various promotional programs with little effort were not enough to turn the situation around and advised Nio to come up with stronger measures.

Li also saw how the slump in sales was hitting the company and finally took the step of cutting prices.

On June 12, Nio announced that it was stripping the battery swap entitlement from the price of the car, thereby reducing the price of all models by 30,000 Chinese yuan. The ET5 Touring was launched, and the price is also lower than market expectations.

The effect of the price cuts has been immediate, and the new ES6 and ET5 Touring have become the pillars of Nio's sales, helping the company reach around 20,000 units for two consecutive months.

It is only when the motor of sales is turned up that the ship can be pulled forward.

Nio began a series of adjustments on the sales side. For example, city general managers in several regions were rotated and their authority was contracted to focus primarily on sales.

Nio also set up an intermediary department for marketing, which is responsible for the full chain of marketing a new car from development to post-launch. It has also followed the example of Huawei and Li Auto by forming a model war chest. The department reports to Ted Li, vice president for product.

Nio hasn't unleashed a radical management purge like Xpeng, but has made small, quick adjustments across business lines.

Li has listed a long list of adjustments in the VAU (Nio's assessment criteria), including ensuring adequate and stable quality and supply after the new car's launch, optimizing the organizational structure and job settings, and clarifying the company's resource boundaries.

The sales crisis triggered by the product failure obviously triggered a series of rescue programs for Nio. And after sales pick up and the crisis eases, it is not yet known how far the changes initiated by Li will touch.

Car building is a battlefield of long-termism. Since the industry's trough in 2019, Li has staked its entire fortune. But BYD, which has been quietly developing for 20 years, and Lei Jun, the CEO of Xiaomi, who entered the car-making field at the age of 51, who is not a long-termism?

Beyond the grand ambitions, making long-term strategies more sophisticated and tougher may be the only way to keep a company from cyclically stepping on a tightrope.