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Weilai is still trapped in the shackles of changing batteries.
Text/Editor by Ren Xueyun/Wang Fangjie
Source: FunTalk
There are always moments in reality that feel imaginative.
For example, a car rushed out from the 3rd floor of a building and fell. Such an abnormal accident did happen this summer. Since then, as a manufacturer of accident cars, NIO has been ridden negatively. From an inappropriate PR response, to being shorted by a short-selling agency, to a recent inexplicable news.
According to the news, in the recent CCTV “Dialogue” program, Li Bin denied that “the bet with Hefei failed.” However, anyone who has watched the relevant video will find that the recording time of this program is by no means recent, but March this year.
As for why such old news has become news through packaging, the reason behind it is more imaginative than the content itself.
The Grizzly Bear’s short-selling report is mainly aimed at an affiliated transaction of Weilai, that is, selling batteries to the affiliated company Wei Neng, and then Wei Neng provides battery use rights to car owners in the form of subscription services. The latter Known as a BaaS service (Battery as a Service).
Grizzly believes that this business has helped Weilai to confirm a large amount of revenue in advance. Because Weilai originally provided battery installment payment services to car owners, if it hadn’t designed the BaaS model, Weilai could not have recovered all the battery money at one time as it is now.
This is also true, but objectively speaking, affiliated transactions are not illegal. As long as the financial reports are truthfully and completely disclosed, the prices of related transactions should be in line with market pricing as much as possible.
Therefore, many people think that Weilai’s battery business is a confused account. It looks like there is no problem, but it is not so reassuring. For example, if NIO cannot profit from the BaaS service business, then NIO is essentially letting part of the loss-making business out of the balance sheet. An article on the official account used the title-NIO’s “Enron” moment.
In fact, it is not difficult to understand NIO’s account, because any company’s decision-making actions are always traceable. Sometimes it comes from the prospect of the future, and sometimes it comes from the pressure of reality.
In August 2020, NIO launched its BaaS service, and in April, it had just accepted an investment of 7 billion yuan from the Hefei Municipal Government, which helped NIO escape the quagmire.
But the investment is conditional. According to the content announced by Hefei’s official website, “NIO China is expected to generate revenue of 14.8 billion yuan in 2020 (3 models listed), 120 billion yuan in 2024 (6-8 models listed), and total revenue from 2020 to 2025. Revenue is 420 billion yuan, total tax revenue is 7.8 billion yuan, and it will be listed on the Science and Technology Innovation Board by 2025.”
The above clauses are actually a dual requirement for a company, not only to have scale, but also to have clear profit expectations.
Among them, the requirements for scale are simple and straightforward, and the standards are not low. In 2020, Weilai’s revenue was 16.258 billion yuan, reaching the line. In 2021, NIO achieved a revenue of 36.16 billion yuan, which means that in the next 4 years, it will achieve a cumulative revenue of 367.6 billion yuan. In 2024 and 2025, the revenue will be 45.2 billion, 67.9 billion, 101.8 billion and 152.7 billion respectively.
It can be seen that Weilai has a strong scale drive. Based on this drive, it has two choices. The first is to build and sell as many cars as possible, and the second is to adopt technical means of optimizing reports.
Of course, adults do not do multiple-choice questions, but it is not easy to achieve the first one. The data shows that the cumulative delivery volume of Weilai in the first half of the year was only 50,827 vehicles, and the total delivery volume was the bottom of the new forces.
The requirements for profit expectations are not clearly stated in the terms, but they are highly directional. It is understood that although the Science and Technology Innovation Board allows unprofitable companies to go public, the CSRC is currently more cautious about companies that declare a huge market value and are still making huge losses. People told “The Most Talk”. Moreover, judging from the previous situation, the Science and Technology Innovation Board is not “friendly” to car companies, and companies such as Geely, Weimar, and Leapmotor have successively terminated the listing process of the Science and Technology Innovation Board.
The above-mentioned sponsor stated that if a company like Weilai wants to apply for the Science and Technology Innovation Board, it must have a clear profit expectation. It can be used as evidence that at the 2021 financial report, Li Bin said that Weilai hopes to achieve full profitability in 2024.
This time is in line with the previously agreed IPO deadline. If NIO wants to IPO on the Science and Technology Innovation Board in 2025, it will submit the report no later than the beginning of 2025, that is, it will make a profit in 2024, or give a clear profit expectation.
But for now, Weilai is still a long way from the break-even line. In 2021, the company lost 10.572 billion yuan, and in the first quarter of 2022, it lost another 1.783 billion yuan, an increase of 295.56% year-on-year.
There is really not much time left for Weilai.
In the above-mentioned program, although Li Bin denied that the gambling failed, he also said that Weilai repurchased some shares in 2020 and 2021. The original value of the repurchased part was 1.5 billion yuan, and Weilai had paid 7.5 billion yuan. Yuan.
In any case, part of the investment in Hefei has already been cashed out.
01 Weilai and Wei Neng
Weineng was born to solve problems.
Before launching the BaaS model, Weilai used to have a battery installment plan.
In this plan, Weilai’s car price will be 100,000 lower than the regular purchase, and users need to pay a monthly battery fee of 1,280 yuan per month for 78 consecutive months, and can enjoy battery upgrade services at the same time. 60 months.
In other words, Weilai needs to receive battery money month by month within 60 to 78 months.
In mid-2020, Li Bin took this version off the shelves and launched a BaaS solution, that is, customers can choose to buy a car without a battery, and the price of the latter is at least 70,000 yuan lower than that of a vehicle with a battery. Of course, an electric vehicle without a battery can only be regarded as a model, so what the customer has to do is to lease batteries from the BaaS provider Wei Neng. According to the battery capacity, they can choose to pay 980-1480 yuan per month, or 11,760 yuan per year. -17680 yuan.
Based on this model, the ownership of the vehicle will be transferred to the owner (excluding the battery) with the transaction, and the ownership of the battery belongs to Wei Neng.
Once the BaaS solution was launched, the effect was immediate. Only in the launch season, that is, Q2 in 2020, Weilai’s gross profit margin turned positive for the first time to 9.7%; in Q3, it reached 14.5%. That year, NIO’s operating cash flow turned positive for the first time, reaching 1.951 billion yuan.
However, just like the conservation of energy in the universe, when Weilai’s battery revenue pressure is relieved, Wei Neng faces challenges.
Based on BaaS pricing and the actual price of the battery, the cost recovery period for a battery is roughly 6 years. That is to say, once the battery has been in service for more than 6 years, Weineng can theoretically make money.
Therefore, Wei Neng can immediately carry out an asset securitization plan for newly purchased batteries, and the financing will be used to purchase new batteries from Wei Lai.
So the key to the question becomes how long a battery can last. We can decompose this question into how long is its financial life cycle and how long is its real life cycle in actual use.
Before that, please allow us to quote the following somewhat tongue-in-cheek statement, which comes from Weineng’s relevant financing documents.
“During the power exchange process, the power battery on the NIO owner’s vehicle will be exchanged into the NIO power exchange system, and a certain power battery in the NIO power exchange system will be exchanged into the NIO owner vehicle. The above power In the process of physical exchange of batteries, (a) the ownership and use rights of Weineng power batteries will be put into the NIO power exchange system for circulation; (b) at the same time, Wuhan Weineng will obtain the ownership of a replacement power battery of the same capacity. The power battery will be used as the power battery rented by NIO owners during the rental period.”
It seems that both NIO and NIO use batteries as a standardized asset (similar to standard coal), which is mixed in the NIO power exchange system. The batteries circulating in this system include BaaS batteries held by Wei Neng, backup batteries, and of course batteries of other Wei Lai owners.
But the problem is that the battery is not standard coal, it is a physical asset that will continue to wear out with use. According to NIO’s 2021 annual report, NIO provides a warranty period of 8 years for the battery. Ernst & Young Huaming’s asset evaluation report on Weineng also shows that Weineng’s battery has a service life of 8 years and an estimated residual value rate of 5%.
It can be seen that the profit cycle of Wei Neng should be the seventh and eighth years, but considering that Wei Neng still purchases labor services from Wei Lai, its own management costs, and the cost of various financing, it is very likely that it will reach the third Seven-and-a-half years, or even the eighth year, it has room for profit.
Well, now comes the question. How long can a new energy vehicle battery last? Under normal circumstances, when the capacity of a power battery is lower than the initial 80%, it no longer meets the standards for the use of electric vehicles. Of course, in theory, with a reasonable number of mileage, such as 300,000 kilometers in 8 years, the new energy batteries currently on sale can withstand it.
But two factors are still variables of the actual battery life.
First: NIO adopts a rental + battery swap model. If it is a traditional charging mode, the ownership of the battery has been transferred to the owner with the sale of the car. During the use process, the car mainly bears the depreciation of the battery and the loss of charging efficiency. However, the owner of the battery replacement will definitely have higher requirements on the battery. It makes no sense that the battery installed last time can run 500 kilometers, and this time it can only run 400 kilometers.
Therefore, the quality of the batteries circulating in the Weilai power exchange system must be maintained at a high level, which will be a strict requirement for the actual service life of the batteries.
According to “Tiger Sniff”, at the previous press conference, Shen Fei, senior vice president of Weilai Energy and chairman of Wei Neng Company, did say that Weilai’s battery elimination standard is much higher than the industry, and there is no need to wait until the capacity decays to 80%. %. At present, Weilai has a very small number of batteries out of operation.
Second: the iteration of technology. One of the reasons for NIO to persuade car owners to choose the battery rental plan is that the plan leaves room for higher-level batteries in the future. In fact, the new energy battery industry also follows Moore’s Law, and more efficient batteries are continuously introduced to the market. At the same time, battery prices are also dropping. For example, from 2012 to 2021, the price of power batteries has dropped by 85%.
Therefore, it is very likely that within 8 years, the original 70-degree/75-degree and 100-degree batteries will face impairment or elimination. When consumers are more inclined to choose newer batteries, the transfer efficiency of old batteries will be greatly reduced. Weineng will have to purchase a large number of new batteries to meet the needs of old BaaS users.
The above discussion on the actual service life of the power battery is related to whether Weineng can recover its cost or even make money at the end of its service life. Because neither the power battery nor the BaaS service has gone through a complete 8 years, I am afraid only time will know this issue.
Of course, since the BaaS solution is a rental solution, battery ownership has always been in Wei’s hands. Eliminated batteries still have other values, such as the cascade utilization of batteries. At present, Weineng is building a power battery full-cycle general technology research and cascade utilization industrialization project with an investment of 80 million yuan.
However, at the recent NIO POWER conference, Shen Fei said that the cascade utilization of batteries is actually a false proposition. He said, “If I can accurately control the cycle life and increasing life of this battery, I can make the best use of this battery. It is debatable whether there is an echelon battery in this situation.”
02 NIO and battery swap
As of the end of September 2021, the number of batteries held by Weineng was 40,053. In order to purchase these batteries, Weineng paid NIO 267.96 million yuan and 2.78995 billion yuan in 2020 and the first three quarters of 2021, respectively. Based on this calculation, the average transaction price between Wei Neng and Wei Lai is 76,000 yuan per battery. Considering that the battery has 70 degrees, 75 degrees and 100 degrees, the transaction price does not deviate from the market.
But the Grizzlies still feel that Wei can help Wei Lai fictitious income, which is indeed a bug in the short report. It mistakenly took the asset package of the first phase of ABN issued by Wuhan Weineng, that is, 19,000 batteries, as the number of all BaaS services, thus thinking that Weineng was over-provisioned with a large number of batteries.
The actual situation is that Wei Neng will package some battery assets in stages and carry out asset securitization. According to information released by NIO, half of the more than 90,000 vehicles sold last year chose BaaS services, which is consistent with the number of batteries held by NIO.
But this kind of bug is like tearing a hole, exposing a fact that is often overlooked. Based on the battery swap mode, the number of batteries circulating in the NIO battery swap system actually exceeds the scale of car sales. Because a fully charged backup battery is always needed in the swap station.
According to the data provided by Shen Fei, the scale of backup batteries in Weilai’s current power exchange system is: 3,821 long-life batteries with 100 kWh of electricity, and 5,140 standard battery life with 75 kWh of electricity, a total of about 9,000 pieces.
The ownership of these batteries belongs to Weilai. There is no doubt that financially, they are a burden on NIO.
Because no matter whether these batteries are included in NIO’s assets or inventory, within a period of time (probably 8 years), they must be depreciated or depreciated year by year, resulting in a considerable cost or expense.
In addition, since the backup battery needs to be allocated proportionally, it is currently about 5%. As more and more cars are sold, the scale of the backup battery held by NIO will also increase.
The most troubling issue is that this impairment or depreciation is progressive. For example, the company’s battery depreciation in the third year is based on the total amount of new spare batteries added in the first and second years, and so on.
Regardless of whether there is a BaaS service, these costs/expenses are the absolute burdens that NIO needs to bear based on the power exchange model.
And Weilai pays more than that for the battery swap mode. In order to effectively implement the power exchange model, NIO must and has already invested in a large number of power exchange stations across the country and even around the world. As of July 6, Weilai has completed the construction of 1,011 power exchange stations nationwide. According to the plan, by 2025, this number will be refreshed to 4,000.
According to relevant data, the cost of building a power station in China is 772,000 US dollars, that is to say, for this alone, the investment cost of Weilai has exceeded 3 billion.
One of the more overlooked costs is the electricity cost of charging. In order to encourage users to use battery swaps, NIO currently implements 4-6 free battery swaps per month for car owners. In addition, commercial charging piles also often engage in activities to charge car owners free of charge. According to our understanding, such a service level has been able to satisfy the vast majority of The commuting needs of some car owners.
NIO’s car owners are pleased with the “zero-cost” commute, but NIO has to bear most or even all of the electricity costs. Please note that, unlike the use of household charging piles, the power resources purchased by NIO above are all commercial or industrial power, and the unit price is 2 to 3 times that of residential power.
For example, a car owner who has owned Tesla and NIO ES8 found that if his Tesla uses a home charging pile, the monthly electricity bill is 200 yuan, but if he uses an external super charging pile, it will cost about 400 yuan. .
A reference data is that, on the super charging pile, to fully charge the battery of a Tesla car (which can run 400 kilometers), the approximate charging cost is 60~70 yuan. According to the introduction of Weilai, it has carried out 10 million battery replacement services, which shows that Weilai’s accumulated electricity cost has reached hundreds of millions of yuan.
In the mode of free battery replacement, these costs are almost rigid, and of course, it is also not borne by other technical route car companies.
It can be seen that under the pressure of profit, Weilai has become a trend of riding a tiger, and the power exchange is probably the tiger.
At the beginning of its business, Weilai chose two paths to build its own competitiveness, namely, the path of battery swapping technology, and the user first. Ideally, with the development of the industry, battery swapping technology will become a deep moat for NIO, and users will pay for it, and are willing to pay a higher cost, such as buying 1.05 batteries, one of which is used on the road, and also There are 0.05 batteries left in NIO for backup.
Ideally, Weilai does not need to cut prices for promotions. Originally, it did not have much room for price reduction. In the 2020 Q3 conference call, Li Bin admitted that in the long run, there will not be much room for cost reduction. Therefore, the scale effect has no way to bring a substantial increase in gross profit margin to Weilai.
But the reality is not ideal. Weilai is still caught in the market competition, and the power exchange did not make it detached, so the BaaS service was born. In the predicament of no room for price reduction, it lowered the threshold for car purchases in disguise with a more flexible price strategy.
However, in order to make BaaS services attractive for a long time, Weilai has to provide services such as free battery swaps for car owners, and thus move forward with a heavy load.
At least so far, in the new energy vehicle market, NIO’s core competitiveness is still users. But compared with technology, the investment based on serving users has very low leverage.
So Weilai is getting heavier and harder.
In fact, in 2019, it was also sad. At that time, the Hefei Municipal Government helped Weilai temporarily get out of trouble with 7 billion yuan. But this kind of help is not indefinite or unconditional. In a way, it is like a confinement spell.
If you want to know how a company with a slap in the face will behave, look no further than Journey to the West.
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