46 billion in 8 years! What did NIO get in return for its “big money” in R&D?
2024-07-30
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Author | Qiu Kaijun
Editor | Zhang Lianyi
"Chips and operating systems are our weak points, and we lack the core and soul, especially for automotive-grade products."At the 2022 China Electric Vehicle 100 Annual Forum, Miao Wei, former Minister of the Ministry of Industry and Information Technology, issued a "warning in prosperous times."Who will “take the lead”?Everyone’s first reaction may be Huawei, or a technology madmanBYD, and then you might think of state-owned enterprises such as FAW Group and SAIC Group.More than two years later, Huawei's Ascend intelligent driving chip and Hongmeng OS were the first to "hand in the exam", breaking the "lack of core and soul" situation. The second automobile company to make a breakthrough in this field was somewhat unexpected.It is NIO, which is widely known for its label of “good service”."NIO has good service, so does that mean its technology is not good?" Li Bin, chairman of NIO, said that NIO is constrained by the label of "good service" in public opinion because this label is too prominent and people may mistakenly think or accuse it of having shortcomings in other areas."A student who is good at Chinese is not necessarily bad at math or sports. He or she may be well-rounded in moral, intellectual and physical development."Li Bin said, "Since we decided to launch NIO IN last year, we have told everyone our background, which is technology and research and development."On July 27, NIO held the "NIO IN 2024 NIO Innovation and Technology Day". This is the second time NIO has held an Innovation and Technology Day.At the first Innovation and Technology Day, NIO mainly made “ambitions” and released 12 R&D frameworks for the “NIO full-stack technology”.At this year's Innovation and Technology Day, NIO has already "submitted its paper"——- NIO's NX9031 was successfully taped out, the world's first 5nm smart driving chip;
- The vehicle-wide operating system "SkyOS · Tianshu" was officially released in full, achieving an industry breakthrough;
- Banyan 3, NIO’s first intelligent system built on the underlying capabilities of AI;
"NIO truly has both a 'core' and a 'soul'," Li Bin said at the Innovation and Technology Day.Li Bin demonstrates the smart driving chipShenji NX9031
Perhaps, we really didn’t see NIO clearly before. This new force that we thought was lavish, extremely pursuing user satisfaction, and always paying special attention to appearance and style is actually a science and engineering man.In other words, a technology giant in the era of smart electric vehicles.8 years and 46 billion in R&D? Where did it go?“In entrepreneurship, if whoever has more money wins, we would have won long ago.”Li Bin joked this during an interview with Innovation Technology Day.Indeed, in the process of Weilai's financing, it raised a lot of money, evenIdeal AutoHis peers all attributed their financing difficulties to the fact that Li Bin had taken away too much money.Why does NIO need so much money?This is based on a judgment - the threshold for car manufacturing is very high and requires a lot of money."The threshold is very high. A few years ago I said it was 20 billion yuan. Now it may not be possible without 40 billion yuan." Li Bin said so in 2021. He said 20 billion yuan in 2016.20 billion and 40 billion may sound like statements to deter rivals and potential opponents, but this shows the continuous expansion of the connotation and extension of automobiles. It also reflects that even for Li Bin, who thinks far ahead, his cognition is also evolving.Some new forces that came earlier than NIO, such as Yuntu Automobile, actually only spent 20 to 30 billion to build a car.This is a traditional independent brand "OEM" method of making cars. They imitate a platform, organize external design, R&D, and suppliers, build a factory, and then recruit dealers and service providers to build the car.If you are more ambitious, based on the scope of new energy vehicles, for example, making the vehicle platform yourself, and doing some research and development or even self-production of the three-electric system, then you may have to add tens or even hundreds of billions.If we want to pursue higher goals, such as using new technologies and new materials and introducing the most advanced production lines, we will probably have to add at least a few or dozens of small goals.If we want to ensure the service experience, face users directly, do direct sales, and even provide charging or battery replacement, that would require an investment of nearly 10 billion yuan.The wave of intelligence is coming. If we develop smart driving and smart cabins independently, and even the underlying chips, AI, etc., there will be dozens or even hundreds of small goals.Also, if you are more ambitious and want to build an ecosystem, like Weilai does with mobile phones, or like Huawei and Xiaomi connect various terminals and cars, the R&D investment will be incalculable...This is not an exaggeration.General calculationTeslaSince its establishment, the R&D investment has been close to 16 billion US dollars; Lei Jun announced in 2021 that he would build a car and planned to invest 10 billion US dollars in the next 10 years...NIO's R&D investment is: since 2016, it has spent nearly 46 billion.The first NIO Technology Innovation Day in 2023,Li Bin announced the R&D framework of 12 "NIO Technology Full Stack", including: chips and on-board intelligent hardware, battery system, electric drive and high-voltage system, vehicle engineering, vehicle global operating system, panoramic interconnection, intelligent driving, intelligent cockpit, smart energy, intelligent manufacturing, artificial intelligence, and global digital operations., meeting NIO’s R&D and operational needs in nine elements in three dimensions: intelligence, electric, automobile, product, service, community, multi-brand, multi-platform, and multi-region.This technology landscape starts from the mechanical part of the car, expands to the electric drive and energy replenishment system in the electric car era, and then expands to the core technology and applications in the era of intelligent networking..."This is also a feature of today's smart electric vehicles. In the past, the automotive industry also developed this kind of platform-level technology, but those platform-level technologies were an order of magnitude different from the platform-level technologies of today's smart electric vehicles," said Li Bin.From this perspective, 46 billion doesn’t seem like a lot.R&D for gross profit and profitNot only NIO, but all ambitious car companies are involved in the R&D war.Therefore, we also need to compete in the ability to continue operating and the efficiency of research and development.Otherwise, such a huge investment may not only affect the company's profit plan, but may even prevent the car company from surviving until the day when its research and development bears fruit.Li Bin said in response to a question from Electric Vehicle Observer:R&D investment will not harm the company's business model and sustainable operations."60%-70% of our current expenditures are basic R&D expenses, not for a particular model or brand. Today, these things can be used on all brands and models."Li Bin said.He cited the example of the operating system, saying, "SkyOS can become the foundation of all brands of all models, and its R&D investment efficiency is very high."What is the difficulty? "It is a little troublesome to build the foundation first, and it takes a longer time to invest. SkyOS has already invested so much, and it is still increasing every month. Not many companies are willing to do this."but"Even if NIO sells 10 million units a year, its investment in basic research and development will not increase much. This is the benefit of having a very good platform in terms of intelligence and electrification."He also used NIO's battery pack as an example. "For one brand, one or two generations of models use only one specification of battery pack. Even in the future, when the battery form and high-voltage platform are stabilized, four or five generations of models can use a universal battery pack."Li Bin said that such an underlying platform capability is what NIO has been continuously building over the past few years. "At first, you may think that you have invested too much money, but once you start doing it this way, it will become easier as time goes by."The long-term effects of platform-based R&D can be anticipated, but how to evaluate the R&D results?Li Bin said when comparing it with Tesla, the R&D investment is definitely less than Tesla."Our R&D efficiency is very high. From the perspective of a full-stack technology, we have done so much with such a small amount of money, and the efficiency is still very high. For example, we delivered five new models in four months last year. So those who say that NIO is inefficient are really setting the pace."NIO Smart Driving’s available mileage and user mileage
In addition, Li Bin and NIO President Qin Lihong believe that it takes time for the results of research and development to be reflected."(R&D) can increase gross profit margin and profits in the long run. It is an investment in the short term, but it is a profit in the long run," Li Bin said, citing NIO's self-developed smart driving chip as an example.Each of NIO’s cars is equipped with four NVIDIA ORIN chips, and NIO is one of NVIDIA’s largest customers."Their gross profit margin is very high. This chip is money, which is the R&D cost. But once it is mass-produced, its unit price will definitely be cheaper. So in fact, R&D can be exchanged for gross profit, but the effect of R&D exchanging gross profit is slow."Qin Lihong also said, "Research and development for gross profit, especially like giving your children the best education, will eventually bring greater returns, but don't expect a child to go to school at the age of 7 and start making money at the age of 8. Education is a process."Fortunately for NIO, the results of its 46 billion yuan investment in research and development are beginning to show.Judging from the direct results, NIO Innovation Technology Day demonstrated several major items.In terms of intelligent driving chips, NIO's Shenji NX9031 was successfully taped out. This is the world's first 5nm intelligent driving chip. Both the chip and the underlying software are independently designed. Shenji NX9031 has more than 50 billion transistors. Whether in terms of comprehensive capabilities or execution efficiency, a self-developed chip can achieve the performance of four industry flagship chips, which is similar to NVIDIA's four Orin chips with a computing power of over 1000TOPs.In terms of operating systems, the vehicle-wide operating system "SkyOS · Tianshu" was officially released in full. As an AI-oriented vehicle-wide operating system, SkyOS · Tianshu has seven major features: high bandwidth, low latency, high computing power and heterogeneous hardware, cross-domain integration, flexible and continuous evolution, high reliability, and information security.In terms of intelligent systems, NIO released Banyan 3, its first intelligent system built on the underlying AI capabilities. This system will support the accelerated evolution and growth of NIO's intelligent assistant NOMI, reconstruct NOMI's cognitive and complex task processing capabilities, and accelerate the evolution of the cockpit experience from "single-point function" to "active intelligence."The Banyan 3 intelligent system is expected to push the first version to users in late August.In terms of intelligent driving, NIO also released China's first intelligent driving world model NWM (NIO World Model). The related NIO intelligent driving technology architecture NADArch2.0 was also officially released, with stronger predictive capabilities, making the intelligent driving experience safer and more humane.Intelligent driving based on NADArch2.0 will be pushed into vehicles in phases in the second half of this year.NIO second generation mobile phoneIn terms of smart ecology,NIO Phone, the second model of NIO, is launched, with the price of performance version 6,499 yuan, flagship version 6,899 yuan, and EPedition 7,499 yuan. NIO Phone is equipped with NIO's self-developed SkyUI, which can achieve "zero system ads" and "zero commercial pre-installation", and greatly enhance the intelligent experience and smooth car control experience.Technology and technological products still need to be empowered on vehicle models.Li Bin said, "The Ledao model, NIO ET9, will gradually let everyone see that it has begun to play a role."Li Bin said that for LeDao, which supports pure visual intelligent driving, 900V platform and battery swap network, "it will definitely have very good (sales) performance in its market segment."For example, NIO’s self-developed intelligent driving chip, the Shenji NX9031, is expected to be installed in the NIO ET9 in the first quarter of next year.While investing heavily in research and development, we must also be careful about cash flow and use the sales revenue of current models and services, as well as continued financing, to keep ourselves alive until the day when research and development bears fruit.This is the balance that smart electric vehicle companies are trying to maintain as they face both short-term and long-term challenges.Moreover, Li Bin stated that investment in research and development must continue."Tesla's revenue is $800 million per quarter, and our highest revenue per quarter is more than $500 million."Later, "NIO has made sufficient mental preparations, investing about 3 billion in R&D expenses every quarter and more than 10 billion in R&D expenses a year, with 60%-70% in basic R&D. Such an investment, coupled with our efficient execution, enables us to qualify for the finals.”
