On March 13th, the authentic spy photos of the first model of NIO’s sub-brand were exposed online. At the same time, the official name of NIO’s sub-brand has been confirmed as “LeDao Automotive,” with the first model named LeDao L60. The English name for LeDao Automotive is ONVO, with the letter “N” forming the brand logo.
ONVO is a sub-brand of NIO.
NIO Chairman William Li(Li Bin) explained the Chinese meaning of the brand name “LeDao” to users: “LeDao” signifies family happiness, adept household management, and engaging in enjoyable conversations.
Public records show that NIO has previously registered multiple new trademarks, including “LeDao,” “Dongliang,” “Xiangxiang,” and others. Among them, the application date for “LeDao” is July 13, 2022, with NIO Technology (Anhui) Co., Ltd. listed as the applicant.
NIO’s plans for the new brand(ONVO)
As the time approaches, more details about the new brand(ONVO) are gradually emerging.
During a recent earnings call, Li Bin stated that NIO’s new brand aimed at the mass consumer market will be unveiled in the second quarter of this year, with the first model set for release in the third quarter and mass deliveries expected to commence in the fourth quarter.
Li Bin also revealed that the second model under the new brand, an SUV tailored for large families, has entered the mold-making stage and is scheduled for market release in 2025. Additionally, the third model is currently under development.
Based on existing models, the price range for vehicles under NIO’s second brand is expected to be between 200,000 and 300,000 RMB.
Li Bin indicated that this new model will directly compete with the Tesla Model Y and will cost about 10% less to produce. Considering the current price range of the Tesla Model Y at 258,900 to 363,900 RMB, a 10% reduction in cost suggests that the starting price of the new model could be around 230,000 RMB. Given that the lowest-priced NIO model, the ET5, starts at 298,000 RMB, it can be inferred that the high-end version of the new model should be priced below 300,000 RMB.
The difference between NIO and ONVO brands
In order to differentiate itself from NIO’s premium positioning, the new brand will establish an independent marketing channel. Li Bin stated that the new brand will utilize a separate sales network, but some of NIO’s existing after-sales systems will be used for post-sales service. “The company’s goal for 2024 is to establish no fewer than 200 offline networks for the new brand.”
Regarding battery swapping, the models of the new brand will also support battery swap technology, which has been one of NIO’s core competitive advantages. NIO announced that it will have two sets of battery swap networks: NIO’s dedicated network and a shared battery swap network. The models of the new brand will use the shared battery swap network.
The ONVO is crucial to NIO
Current status of NIO
In the industry’s view, the pricing of the new brand, which is more affordable, will be crucial for NIO to turn the tide this year.
On March 5th, NIO released its full-year financial report for 2023, showing year-on-year growth in revenue and sales, but a further widening of losses.
According to the financial report, NIO achieved total revenue of 55.62 billion RMB in 2023, a year-on-year increase of 12.9%; the full-year net loss further expanded by 43.5% to 20.72 billion RMB.
Currently, in terms of cash reserves, benefiting from two rounds of strategic investments totaling $3.3 billion from foreign investment institutions in the second half of last year, NIO’s cash reserves rose to 57.3 billion RMB by the end of 2023. Based on the current losses, NIO still has a safety period of three years.
“On the capital market front, NIO is favored by internationally renowned capital, which has significantly increased its cash reserves, providing sufficient funds to meet the ‘finals’ in 2025,” said NIO.
R&D investment is the main contributor to NIO’s losses, and it has been increasing year by year. In 2020 and 2021, NIO’s R&D investment was 2.5 billion RMB and 4.6 billion RMB, respectively. However, the growth rate subsequently increased rapidly, with R&D investment reaching 10.8 billion RMB in 2022, a year-on-year increase of over 134%. R&D investment in 2023 increased by 23.9% to 13.43 billion RMB.
However, in order to enhance competitiveness, NIO will not reduce its investment. Li Bin stated, “In the future, the company will continue to maintain R&D investment of around 3 billion RMB per quarter.”
Problems with NIO
For new energy vehicle companies, high R&D investment is not necessarily a bad thing, but NIO’s low return on investment is the key reason for industry skepticism.
Data shows that NIO delivered 160,000 vehicles throughout 2023, a 30.7% increase from 2022. In January of this year, NIO delivered 10,100 vehicles, and 8,132 vehicles in February. Sales volume remains a bottleneck for NIO. Despite adopting various promotional methods last year to temporarily boost delivery volume, NIO still failed to meet its annual sales target.
By contrast, in 2023, Li Auto‘s R&D investment was 1.059 billion RMB, with a net profit of 11.8 billion RMB, and annual sales of 376,000 vehicles.
However, during the conference call, Li Bin expressed optimism about NIO’s sales this year, confident in returning to a monthly sales level of 20,000 vehicles.
To return to the level of 20,000 vehicles per month, the second brand ONVO is crucial.
NIO’s future plans
Li Bin stated that the NIO brand will continue to focus more on gross profit margin, aiming for profitability rather than resorting to price wars to increase sales volume. On the other hand, the second brand will prioritize sales volume over gross profit margin, especially in the initial stages. He believes that this combination is a better strategy for the company’s long-term operations.
Additionally, Li Bin revealed that NIO will launch a new brand with a price tag of only tens of thousands of RMB next year, expanding the market coverage of NIO products.
In 2024, with another wave of price cuts looming, the competition in the automotive market is becoming increasingly fierce. It is expected within the industry that the automotive market will undergo a major reshuffle in the next two years. New players in the industry such as NIO and Xpeng, who have not yet turned a profit, need to make no mistakes if they want to break free from their predicament. From the perspective of cash reserves and brand planning, NIO has already made sufficient preparations and is ready for battle.
