With the release of 2023 financial reports by Zero Run Motors on the evening of March 25th, NIO. US/9866. HK, XPEV. US/9868. HK, Ideal Motors (LI. NASDAQ/2015. HK), and Zero Run Motors (9863. HK), the four leading new car manufacturers, have all submitted their 2023 performance reports.
In the fiscal year 2023, "Weixiaoli Zero" all achieved revenue growth. The revenue of NIO, Xiaopeng, Ideal, and Zero Run reached 55.62 billion yuan, 30.68 billion yuan, 123.85 billion yuan, and 16.75 billion yuan, respectively, with year-on-year growth of 12.9%, 14.2%, 173.5%, and 35.2%.
Ideal Automobile has taken the lead in crossing the life and death line and breaking the curse of losses, becoming the first new Chinese automaker to achieve annual revenue exceeding 100 billion yuan and achieve profitability. However, the other leading new car making forces are still trapped in a loss making quagmire.
In the fiscal year 2023, NIO, Xiaopeng, and Zero Run suffered losses of 20.72 billion yuan, 10.38 billion yuan, and 4.22 billion yuan respectively. NIO and Xiaopeng's net losses expanded compared to the fiscal year 2022, with year-on-year increases of 43.5% and 13.6%, respectively, setting the largest annual loss since vehicle delivery. In contrast, due to the increase in sales and continuous cost reduction and efficiency improvement, the profitability of Zero Run Motors has slightly increased, and its net loss has narrowed.
Looking at the Chinese new energy vehicle market in 2023, the overall competition is exceptionally fierce, and price wars have brought huge challenges to the entire industry. In the process of accelerating the elimination round, NIO and Xiaopeng have successively announced the launch of sub brands to anchor the sinking market. Zero Run Motors has established a global strategic partnership with Stellantis Group, forming a joint venture to seek sales breakthroughs by searching for a second growth curve in overseas markets. For new forces in the automotive industry, 2024 remains a critical period of both challenges and opportunities.
Significant differentiation in gross profit margin
With Tesla taking the lead in raising the "price knife" at the beginning of 2023, new energy vehicle companies have followed suit, lowering prices and providing fancy subsidies. The "price war" and "internal competition" throughout the year have accelerated market integration and clearance, and also broken the optimistic expectations of most car companies, including new car manufacturers, for 2023 sales.
According to the plan, NIO's sales target for 2023 is to double from 2022, with an annual sales target of over 245000 vehicles; Ideal plans to capture a market share of 20% in the domestic range of 300000 to 500000 yuan by 2023, with a corresponding sales target of 280000 to 300000 vehicles; Relatively conservative Xiaopeng has also set a goal of selling 200000 vehicles throughout the year; The goal of Zero Run Motors is to double its sales by around 220000 units compared to 2022.
But things didn't go as planned. In 2023, NIO, Xiaopeng, and Zero Run delivered 160000, 142000, and 144000 vehicles respectively, with growth rates of 30.7%, 17.3%, and 29.7%, which is far from the established target. Specifically, looking at each company, NIO, which underwent price equity adjustments in the middle of the year, has not maintained a sustained recovery in monthly sales. High pricing has encountered resistance in the terminal market, and Xiaopeng and Zero Run have repeatedly offered price reduction subsidies, making it difficult to maintain their original market share.
Ideal is an exception, with 376000 new cars delivered throughout 2023, a year-on-year increase of 182.2%, far exceeding the target. The three models L9, L8, and L7 under the Ideal Automobile brand are all in leading positions in their respective segmented markets. The continuous growth of sales and market share also support the continuous improvement of Ideal Automobile's performance and achieve profitability.
Despite the year-on-year growth in sales of "Weixiaoli Zero", the gross profit margin has shown differentiation due to the impact of the "price war".
The ideal of a stronger person stands out with a gross profit margin of 22.2%, and its impressive performance and strict cost control make its profitability very stable. "As an intelligent electric vehicle enterprise, we believe that the threshold for a healthy gross profit margin is around 20%," Li Xiang, Chairman and CEO of Ideal Automobile, has repeatedly stated publicly. The gross profit margins of NIO, Xiaopeng, and Zero Run are 5.5%, 1.5%, and 0.5%, respectively. In the same period of 2022, they were 10.4%, 11.5%, and -15.4%, respectively.
It is worth noting that Zero Run Automobile achieved a positive gross profit margin for the first time in the 2023 fiscal year. The company stated that due to changes in product structure, the average selling price of automobiles has increased; The scale effect brought about by sales growth has reduced manufacturing costs and continued cost management work, but this data still lags behind that of Weixiaoli.
The gross profit margin of Xiaopeng Motors is -1.6%, compared to 9.4% in 2022. Xiaopeng Motors stated that the main reasons for the decline are as follows: firstly, inventory write downs and inventory purchase commitment losses related to G3i, which had a negative impact on the 2023 automotive gross profit margin by 2.4 percentage points; The second is the increase in promotional activities and the expiration of subsidies for new energy vehicles.
But in 2023, Xiaopeng Motors has undergone a series of bold internal organizational structure, marketing channels, and product planning reforms, and Xiaopeng Motors, which has left the ICU, will continue to undergo changes.
Xiaopeng Motors Chairman and CEO He Xiaopeng revealed at the financial report that in terms of intelligence, starting from the new models launched in the second half of this year, Xiaopeng Motors plans to adopt new technology solutions that can reduce XNGP's hardware costs by 50%. In addition, in 2024, Xiaopeng will continue to expand its investment, including investing more manpower and over 40% of its R&D budget year-on-year. The annual R&D investment in "Al technology with intelligent driving as the core" is a total of 3.5 billion yuan.
Reducing costs and increasing efficiency are also the main topics for NIO in 2023. Li Bin, founder and CEO of NIO Auto, has stated on multiple occasions that he wants to improve internal efficiency and optimize costs, while emphasizing that "the money that needs to be spent should be spent, and the money that needs to be saved should be saved.". In the fiscal year 2023, NIO's R&D investment reached 13.43 billion yuan, exceeding 10 billion yuan for two consecutive years. Starting from the second half of last year, NIO has taken measures to improve sales performance, focusing on the expansion and training of sales personnel and the expansion of sales outlets. However, based on the corresponding sales performance, NIO's internal efficiency still needs to be continuously optimized.
And NIO's controversial "battery swapping model" also saw a glimmer of profitability at the end of last year. In order to run the business model of battery swapping, NIO has successively cooperated with enterprises such as Changan Automobile, Geely Holdings, Wanneng, Anhui Traffic Control, Jiangqi Group, Chery Group, and Nanwang Energy Storage in the field of battery swapping. While expanding its circle of friends, NIO has also reduced operating costs and improved efficiency through external cooperation and opening up.
In terms of cash reserves, as of the end of 2023, "Weixiaoli Zero" had cash reserves of 57.3 billion yuan, 45.7 billion yuan, 103.7 billion yuan, and 19.4 billion yuan, respectively. Ideal has achieved its own growth, and NIO, Xiaopeng, and Zero Run have sufficient cash flow in the short term, but quickly establishing a business model is still the key to long-term survival.
Solving Difficult Problems with Scale Effect
On the eve of the decisive battle, every car company is eager to gain more leverage in terms of scale, and the importance of economies of scale is becoming increasingly prominent. Taking BYD and Ideal Automobile as examples, having sufficient sales and crossing the scale gap can accelerate profitability. In the view of industry insiders, under the premise of adhering to strategic losses such as large R&D investment to enhance the long-term competitiveness of enterprises, new forces in the automotive industry need to achieve an annual delivery scale of around 300000 vehicles in order to turn losses around.
"It is difficult for NIO brand sales to break through the 200000 vehicle mark alone, and the healthy development of automotive companies must rely on sufficient production and sales to support it," automotive industry analyst Zhong Shi told 21st Century Business Herald reporters. The solidification of the original substrate has become a top priority for NIO to seek large-scale development. In March this year, there was new progress in the planning of NIO and Xiaopengzi brands. Xiaopeng Motors is about to launch a new brand, offering A-class cars priced between 100000 and 150000 yuan, targeting the global automotive market. The second brand of NIO is named "Le Dao" and positioned in the mainstream market of 200000 to 300000 yuan.
"Every car company has a reasonable positioning for its brand, and after a period of solidification, the positioning becomes relatively clear and the target audience is relatively stable. In this situation, launching a new brand, distinguishing products through different brands, and achieving a wider target audience can effectively achieve its own growth." In the view of Cui Dongshu, Secretary General of the China Association of Automobile Manufacturers, the launch of sub brands by new forces still revolves around the core concept of "having more children is easy to fight".
And Zero Run Motors is seeking overseas development to achieve a second growth pole. At the end of last year, Stellantis and Zero Run Motors established a joint venture called "Zero Run International" in the Netherlands with a ratio of 51:49. Zero Run will take the lead in expanding into the European market through its international joint venture company, and the Zero Run C10 is expected to be delivered in the third quarter of this year. According to the plan, in the next 2 years, Zero Run Motors will have 5 global products sold simultaneously in Europe, Asia Pacific, the Middle East, the Americas, and other regions. Thanks to the expansion of the global market, Zero Run is expected to achieve a positive net profit margin by the end of 2025 or early 2026.