The dawn is breaking, perhaps the best description of NIO Inc.'s recent state. From the second brand ONVO's successful market entry, to strong demand for NIO's flagship models, and the company's rising gross margins and stock price, profitability targets seem within reach.

There was a time when losses and delivery fluctuations put NIO Inc. under pressure, with founder Li Bin's insistence on long-term thinking criticized by some as "being out of touch." Now, as the inflection point in the pure electric three-row SUV market becomes apparent, this period of "holding on" has finally begun to pay off.

On September 3rd, the day after NIO's impressive Q2 earnings release, media outlets conducted an in-depth exchange with Li Bin. He comprehensively reviewed how NIO Inc. won this uphill battle through strategic determination of "what to change and what not to change."

**Moment of Return**

In Li Bin's view, NIO Inc. indeed entered a new cycle in Q2, returning to an upward trajectory in both deliveries and operations. Looking at delivery volumes specifically, August deliveries exceeded 31,000 units, creating a historical high - a miracle created by the combined efforts of three brands. ONVO L90 alone achieved a record of over 10,000 deliveries in its first month.

Meanwhile, NIO Inc.'s profitability has returned. Q2 gross margin reached 10.3%, while other business gross margins reached approximately 8% for the first time in history. Li Bin said that with increasing sales proportions of high-margin products like L90 and ES8, Q4 gross margins could very likely return to 16%-17%.

Living within means, NIO Inc.'s improvement isn't just about opening the "revenue generation" valve - efficiency gains in "cost control" are also beginning to show results.

Li Bin noted that R&D investment over the past few years was consistently at a high intensity of over 3 billion yuan per quarter. Starting from Q1 this year, after implementing the CBU operating mechanism, spending efficiency has greatly improved. "We're confident about controlling R&D expenses within 2 billion yuan; we're confident about controlling sales and administrative expenses within 10% of sales revenue in Q4."

These positive signals have raised market expectations for NIO Inc. achieving profitability in Q4.

At the scene, Li Bin started calculating: "Taking gross profit sales revenue multiplied by gross margin minus expenses, if we can achieve 150,000 units in Q4, there's still a chance to achieve Non-GAAP profitability."

However, Li Bin admitted this challenge is enormous. To achieve this target, Q4 monthly average deliveries need to exceed 50,000 units, achieving a record-breaking 150,000 unit sales scale for the entire quarter. Fortunately, the current strong sales of L90 and ES8 give Li Bin tremendous confidence. He revealed that four models are currently in production queue waiting for delivery, "Besides L90 and ES8, ONVO L60 and Firefly also have very strong demand."

Li Bin provided specific breakdowns: L90 targeting 15,000 units in October; ES8 will increase capacity to 15,000 units/month in December. "By December, ONVO and NIO Inc. will each contribute 25,000 units, with Firefly contributing 6,000 units."

It can be said that the spring of pure electric vehicles has truly arrived.

"Why we say this year is an inflection point - users are gaining increasingly higher experience benefits from pure electric technology. In July this year, pure electric grew 24.5% year-over-year, while range-extended declined 11.4% year-over-year. Among current new ES8 pre-order users, range-extended and fuel vehicle owners account for 80% - everyone has recognized its value."

Li Bin revealed that when visiting Kashgar last year, he discovered that even range-extended players had deployed charging infrastructure there, with their preparation for pure electric charging infrastructure exceeding his expectations. "This shows that charging is really much more convenient than before this year, and that's when electric vehicles' cost advantages emerge."

Therefore, Li Bin again emphasized that the golden age of range-extended large three-row SUVs is passing, while the era of pure electric large three-row SUVs is arriving.

However, to be fair, persisting through such fierce market competition to reach today hasn't been easy. "This quantitative to qualitative change represents NIO Inc.'s unwavering commitment to its technical route - the pure electric technical route of chargeable, swappable, and upgradeable technology. Surviving the trough led to seeing this dawn."

**Change and Constancy**

"The hardest thing about running a business is determining what to persist with and what to change - this is an eternal topic for entrepreneurs." Li Bin began by reviewing the underlying reasons NIO Inc. could survive until dawn arrived.

First, Li Bin insisted on two constants. "What NIO Inc. does today isn't much different from ten years ago," Li Bin said NIO Inc. hasn't engaged in much backtracking, persisting with technical routes and product planning without wavering from the chosen path.

"The recent strong sales of NIO Inc.'s vehicles prove that although the technical route didn't receive its deserved returns due to external reasons over the past three years, when the inflection point arrives today, its competitiveness becomes apparent," Li Bin stated directly.

He believes automotive industry competition mainly comes from products, and product competitiveness comes from three levels: the fundamental technical route at the bottom, product planning above that, and product definition at the top.

"The industry often operates on the principle that speed conquers all, with most reflection and analysis at the product definition level, but there's less discussion about technical routes and product planning." Li Bin said this is a significant difference between NIO Inc. and competitors. Through cold bench self-research, NIO Inc.'s front storage compartment and spacious interior provide users with high perceived value.

Moving from products to brands, the industry now clearly sees that NIO Inc.'s sales growth largely comes from multiple forces working simultaneously, but there's also a complex story behind this.

Actually, Li Bin established two joint ventures as early as 2017 - Changan NIO Inc. and GAC NIO Inc. Changan NIO Inc. is now AVATR, while GAC NIO Inc. became HYCAN after Li Bin's exit.

This was NIO Inc.'s initial attempt at a multi-brand strategy, as Li Bin knew premium brands have limited coverage. But Li Bin later realized joint venture models had relatively low efficiency, so in 2020 he decided to go it alone, leading to the ONVO and Firefly brands.

However, sub-brand investment over the past few years has been very heavy. "R&D and brand building also cost money, and with NIO Inc.'s own sales not meeting expectations, financial pressure was enormous." Li Bin said there were several choices then - suspend sub-brands and focus on the NIO Inc. brand first - but internally they chose to persist through gritted teeth.

Facts prove Li Bin made the right choice. "Now we can see the synergistic advantages among these three brands beginning to emerge. The company's R&D structure is now very flat, with one team supporting three brands; motors and electric drives are highly reused; Firefly's nationwide sales team only added 31 people, and ONVO's entire team is also compact."

Key strategic persistence gave NIO Inc. the capital for later turnaround, though NIO Inc. wasn't stubborn about everything.

Li Bin stated, "Where we need to listen and learn is product definition. L90 and L60 now both have single motors, and 'refrigerator, TV, big sofa' configurations are also included. Whatever configurations peers have that users recognize, we learn from them. Product definition must keep pace with the times. Whatever users need, we satisfy - this is our motivation for change."

Meanwhile, NIO Inc.'s organizational structure continues evolving. From comprehensive CBU implementation to senior team optimization adjustments to organizational streamlining, these reform effects have been validated through strong sales of ONVO L90 and NIO Inc. ES8.

"The 2019-2020 trough, I think we survived partly through luck, with user support and Anhui's assistance in times of need. But this time, we need to emerge through our own capabilities," Li Bin told media.

**Q&A Session Highlights**

**Q: What does the external technical service revenue mentioned in yesterday's call refer to?**

Li Bin: Our major shareholder Abu Dhabi acquired McLaren, and we have deep technical cooperation with McLaren. We have some technical output, with main revenue coming from this. But this revenue is unstable, varying in amount.

**Q: Will battery swapping business see large-scale profitability next year?**

Li Bin: Large-scale profitability for battery swapping needs considerable time - it's based on installed base returns. Swap stations have several functions: swap service revenue (60 daily orders break even, currently 20% reach this level), helping car sales, and brand promotion needs.

**Q: How does NIO Inc. ensure each generation of frequently updated models like ES8 can achieve profitability?**

Li Bin: Some of these three generations involve underlying technology expenditures not necessarily related to specific models. About 60-70% of NIO Inc.'s R&D expenses are in underlying and platform technologies. Our teams now support rapid iteration of multiple models across three brands, with R&D efficiency higher than many imagine.

**Q: Regarding Q4 profitability significance for NIO Inc.?**

Li Bin: People still focus on our sustainability - it affects sales, user conversion efficiency, recruitment, and supply chain relationships. Proving we can achieve this at an appropriate time node is quite important. It's both an operational necessity and a comprehensive test - if we can't achieve profitability at 150,000 unit scale this year, there are either management or strategic problems.

**Q: How does NIO Inc. think about future globalization?**

Li Bin: Our globalization has paid considerable tuition fees. We went to Norway and Europe in 2021. We underestimated international political environment changes - Europe later raised tariffs on Chinese imported cars by 30%, and charging prices increased significantly.

We recognize global development can't simply use China's model. For the next two years, we're prioritizing China, approaching global markets through local partnerships.

**Q: Can you summarize NIO Inc.'s formula for creating hit products?**

Li Bin: First, know your target market - who you're making products for. The target market can't be too small. Based on price and final purchasing needs and purposes, we need to understand how many users this market has, then see what their needs are.

The biggest difficulty is deciding whether to enter a market and whether market judgment is correct, along with future three-to-five year development trends. This is most important since automotive requires looking at three-to-five year trends.

**Q: What's NIO Inc.'s error tolerance for Q4 profitability?**

Li Bin: Overall, we're still making predictions based on what we can control and setting targets accordingly. There are indeed some external macro factors we can't control that weren't in our expectations - this is certainly a risk.

**Q: How is production capacity preparation progressing?**

Li Bin: Production capacity mainly needs to adapt to smart electric vehicle changes. Current demand is strong upon launch, then declines for a period before rising and stabilizing. So how supply chains match this, it's becoming increasingly like consumer electronics.

**Q: Regarding the inflection point of pure electric vehicles, NIO Inc. must have accumulated some barriers?**

Li Bin: We're not just talking about electric as a technical route. Like BYD's DMI, persisting with a technical route reflects its competitiveness at certain time nodes. In intelligence, we've established a systematic foundation with chips, soul, and intelligent chassis.

Why we can now efficiently launch products so quickly with such high reuse rates is because the foundation is well-built, supporting three brands and multiple platforms.

We have many technical route long-term competitive advantages that are just beginning to show. We're not catering to short-term benefits - our advantage is systematic efficiency. Looking at NIO Inc. requires systematic thinking, not focusing on single points but systematic consideration - this may be our difference from others.