Wei Xiaoli's net losses increased significantly in the second quarter. How did trams get out of the quagmire of losses?

　　Author: Wei Wen

　　Although "Weixiaoli" has achieved a sharp increase in revenue in the second quarter of 2022, it has not yet escaped from the quagmire of losses.

　　According to the second-quarter financial reports recently disclosed by Weilai Automobile, Xiaopeng Automobile, and Ideal Automobile, these three car companies, which are regarded as the head of the new car-making forces, all experienced a net loss of the same and a month-on-month increase.

Among them, NIO’s net loss in the second quarter was 2.758 billion yuan, an increase of 369.6% year-on-year and 54.7% month-on-month; Xiaopeng Motors’ net loss was 2.709 billion yuan, an increase of 126.1% year-on-year and 58.8% month-on-month; The loss was 641 million yuan, ushering in the largest single-quarter loss since its listing.

　　Li Auto achieved a single-quarter profit in the fourth quarter of 2020 and the fourth quarter of 2021, while NIO and Xpeng Motors have always been at a loss.

　　According to the prospectus previously disclosed by Nezha Auto and Leap Motor, these two new car companies that are chasing "Wei Xiaoli" are also in the midst of substantial losses.

Among them, Nezha’s cumulative loss in 2020 and 2021 exceeded 4.2 billion yuan; the cumulative net loss of Leapao in the three years from 2019 to 2021 exceeded 4.8 billion yuan.

　　Although sales are on the rise, the new car-making forces in China seem to have a long way to go before they can break even or become profitable.

Even GAC Aian, which has GAC as the endorsement, has a cumulative loss of nearly 2.7 billion yuan from 2019 to 2021, and its loss is the same as its sales volume, showing an upward trend year by year.

Different from the traditional car companies with the fuel vehicle market as the basis, except for Tesla and BYD, most new energy car companies cannot escape the cycle of selling too much and losing too much.

　　Many people in the industry, especially those from traditional car companies, are puzzled by this strange circle.

A senior executive of a traditional car company once mentioned in an interview with the media: "With more than 300,000 electric vehicles, under our system, only about 4,000 vehicles can be sold a month to achieve profitability."

　　However, it is worth noting that compared with traditional car companies with perfect sales channels and R&D and production systems, the new car companies including Wei Xiaoli are generally less than 10 years old. As well as the self-built energy supplement system, each of which can be called a huge "capital melting pot".

　　In Wei Xiaoli's previous financial report, the huge expenditure on research and development expenses, marketing expenses and operating expenses is considered to be the main reason why it is difficult for new car companies to achieve "self-hematopoiesis".

Taking Weilai as an example, the 2021 financial report shows that Weilai’s R&D expenditure is 4.5919 billion yuan; sales, general and administrative expenses have reached 6.8781 billion yuan; its net loss that year was 4.016 billion yuan.

　　Li Bin, chairman and CEO of Weilai Automobile, once said that the strategy implemented by Weilai in 2021 is that gross profit can cover sales expenses and management expenses, and losses mainly come from long-term R&D investment.

By 2022, Wei Xiaoli has not stopped the pace of channel expansion and R&D investment.

In the second quarter of 2022, Weilai's R&D expenditure was 2.15 billion yuan, while the ideal R&D expenditure in the same period was 1.53 billion yuan; Xiaopeng also reached 1.27 billion yuan.

　　Earlier, a R&D executive of a new car-making force once told reporters: "Even if the technical barriers of electric vehicles are not as high as those of traditional fuel vehicles, compared with traditional car companies with a century-old heritage, new-power car companies are still later. In terms of research and development, they can only exchange more investment for time, traditional car companies work for three years, then new forces car companies hope to spend three times the amount of money and finish it in one year.”

　　In addition, many new power car companies are emphasizing the differentiated advantages of full-stack self-developed and built on intelligence.

Different from the machine-led R&D system in the past, the capital cost of self-developed software is relatively higher, and even the multinational giant Volkswagen cannot escape this rule.

Earlier reports said that Cariad, a software company owned by Volkswagen Group, invested far more than expected, but the progress was far less than expected, which was one of the reasons for the dismissal of former Volkswagen Group CEO Herbert Diess.

　　In terms of channels and energy supplement construction, Wei Xiaoli, who mainly operates self-operated channels, is also spending a lot of money to build a corresponding service system.

Taking Weilai as an example, in August alone, Weilai added 8 Weilai Centers, 5 Weilai Spaces, 5 Weilai Service Centers and 3 Weilai Delivery Centers; at the same time, 44 new seats were added for replacement. Power station, 43 supercharging stations and 42 destination charging piles.

　　At the moment, Wei Xiaoli is far from reaching the stage of enjoying dividends.

Although the new energy vehicle market is gratifying, Wei Xiaoli not only needs to face the competition from upstarts such as Nezha and Leapmotor, but also needs to deal with the pressure from traditional car companies such as Volkswagen, Toyota, Mercedes-Benz, BMW, etc. Baidu, Xiaomi and Apple are catching up.

Some analysts believe that for the temporarily leading new power car companies, they are in a state of sailing against the current and retreating if they do not advance.

　　Continued investment to enhance the competitiveness of the company, further increase the scale of sales, and achieve breakeven and profitability with large-scale effects are what Wei Xiaoli will do in the next few years.

　　According to the research report of CITIC Securities, Tesla’s financial performance in the past few years has confirmed that electric vehicle companies currently enjoy a relatively obvious positive feedback effect: “Increased sales → reduced procurement costs → reduced selling prices → continued to increase sales”, taking the lead. Electric vehicle companies that have crossed the break-even point are expected to climb a higher profit slope than traditional fuel car companies.

　　In 2020, 12 years after the release of its first product, the Roadster, Tesla made a profit for the first time, but it is worth noting that in 2020, Tesla made a profit of US$1.58 billion from the sale of carbon credits, exceeding the company's net profit of US$721 million that year; In 2021, Tesla’s global production and sales scale will reach nearly one million vehicles, with a net profit of US$5.519 billion, of which auto sales revenue will reach US$44.125 billion. Its gross profit margin for its vehicle business in 2021 will reach 30%, far exceeding that of global mainstream such as Toyota and Volkswagen. Car companies, this finally helped Tesla take off the hat of "carbon seller".

　　Previously, Li Bin publicly stated at the financial report meeting that in the fourth quarter of 2023, Weilai may usher in a breakeven and achieve profitability in 2024.

Recently, Weilai said that by 2023, Weilai's current product matrix will be fully switched to the NT2.0 platform.

After all products are built on the same platform, NIO can enjoy the cost reduction brought by more scale.

　　CITIC Securities believes that the three new power companies, Weilai, Ideal and Xiaopeng, have approached or exceeded the break-even point in the first quarter of 2022, and the free cash flow has also approached the balance point after putting aside research and development expenses.