What does the explosive sales of Joy L60 mean for NIO (09866)?

The L60 of Joyway has become a hit and is now trending. Recently, well-known car blogger Sun Shaojun revealed that in the span of 72 hours, nearly 30,000 orders were placed for the L60 model under NIO (09866), with an average of 160 to 180 new orders per store. This year's production capacity has been completely sold out. Li Bin confirmed this information, mentioning that the backend servers have been expanded by 5 times to accommodate the surge in orders. On September 19th, the first car of Joyway, the L60, was officially launched. The product was announced in May and began accepting pre-orders. Initially priced at 219,900 yuan, the standard edition was released at a starting price of 206,900 yuan for the market, 13,000 yuan lower than the pre-sale price. The BaaS model is priced at only 149,900 yuan, surpassing market expectations. With competitive pricing and abundant features, the L60 has achieved great sales. With the skyrocketing popularity of the L60, there have been numerous criticisms and even negative comments on short video platforms, focusing on issues of battery rental and charging. Faced with the negative publicity, Li Bin jokingly said, "We planned to gang up on Mordern Y together, but ended up getting stabbed by our competitors with five knives." So, what is the core logic behind the success of the L60 in selling out? What are the strengths and weaknesses compared to competing models? And what does this mean for the entire NIO system? The Logic Behind the L60's Sales Success The key point in any product's success lies in the clear definition of the target audience. The L60 is positioned as a pure electric mid-size SUV, targeting young families in the competitive 200-300 thousand yuan price range. Competing sedan models include MI SU7 and Xpeng P7, while SUV models include Model Y and Xpeng G6. The L60 offers a larger size and greater flexibility in terms of options and recharging capabilities, making it stand out in the market. In the highly competitive new energy vehicle market, high value for money is a top priority for buyers. What makes the L60 appealing to young families? The standard version of the L60 is priced at 206,900 yuan, with an additional 2,000 yuan for four-wheel drive. The long-range 85-degree battery version is priced at an additional 29,000 yuan, bringing the price to 255,900 yuan for the high-end version. Consumers can choose between purchasing the entire vehicle or renting the battery. The 60-degree battery rental reduces the price by 57,000 yuan, with a monthly rental fee of 599 yuan, while the 85-degree battery rental reduces the price by 86,000 yuan, with a monthly rental fee of 899 yuan. Comparing to Model Y, which comes in three versions priced higher than the L60, the L60 offers a longer wheelbase, larger interior space, a larger battery capacity, more display screens, and various other advantages in terms of features. The L60 also provides front seat massages, appealing to families looking for comfort. Additionally, features such as the 900V high-voltage platform, interchangeable and rechargeable battery system, low energy consumption, intelligent driving system, and AI assistant give the L60 an edge over Model Y. The affordability and comfort features of the L60 make it a compelling choice for families. Despite its success, the L60 will face challenges in the future, including intense competition from other new energy vehicles, the re-entry of BBA brands into the market, and the battle for consumer preference between new and old brand concepts. Amidst all the success, the L60 has also faced criticism and controversy, particularly regarding its battery rental option. Despite the negative publicity, the L60's battery swapping system, backed by NIO's extensive network of swap stations, provides flexibility and a variety of recharging options for users. The negative comments on social media platforms may not significantly impact actual users, but they have influenced public perception. The new energy vehicle industry is constantly evolving, with prices of new models decreasing and intense competition among manufacturers. By lowering the price of its BaaS model, the L60 has set a new benchmark, impacting the pricing strategies of other competing models. The success of the L60 is expected to continue, with the SUV segment focusing on this price range.Facing more intense industry competition.In addition, BBA has re-entered the price war, which will reshape the user composition of joint venture brands and domestic brands. Taking BMW as an example, recently BMW reduced the price of its mid-size electric car BMW 2024 eDrive 35L by 130,000 yuan, to 223,900 yuan. This price will undoubtedly directly compete with the Loda L60. The target value of BBA is deeply rooted in some consumers. Even though it lags behind domestic brands in terms of configuration, as long as the price drops to a certain range, some consumers are still willing to pay for the car badge. Significant improvement in overall sales and cash flow of NIO After analyzing the logic behind the explosion of orders for the Loda L60 and the challenges it will face, we return to the perspective of the capital market to see what impact this car will have on the NIO system? From the industry perspective, the new energy vehicle industry is still in rapid development, with a penetration rate exceeding 30% this year, and the penetration rate of passenger cars exceeding 50% in a single month. The success of Xiaopeng MONA and NIO Loda may prompt more old brands to emulate them, creating new brands with higher cost-effectiveness to compete for more consumers in the sinking market, increase sales, and thus alleviate the common cash flow pressure. Regarding the pricing of the Loda L60, Li Bin stated that there is still a profit margin to be made even if it is 43,000 yuan cheaper than the Tesla Model Y. If the Loda L60 continues to explode in orders and the profit margin increases, it will undoubtedly greatly improve NIO's profitability and cash flow. Although Loda L60 did not disclose specific order data, based on Li Bin's revelation of the production capacity of 5,000 units in October, 10,000 units in December, and 20,000 units in March next year, the Loda L60 is likely to become the main sales force among all NIO models. After NIO's original models delivered more than 20,000 units for four consecutive months (May-August 2024), if the Loda production capacity reaches 20,000 units per month next year, without considering new models, NIO's monthly sales will approach or exceed 50,000 units, with the hope of topping the pure electric sales chart. Roughly speaking, if the Loda L60 sells an average of 20,000 units per month next year, it will be 240,000 units in a year. At an average price of 220,000 yuan per vehicle, it will contribute revenue of 52.8 billion yuan, and with a profit margin of 10%, it will contribute a gross profit of 5.28 billion yuan. This will significantly reduce NIO's shareholder losses, drive the company into a profit cycle, and boost investor confidence. The capital market has also given NIO a vote of confidence. Since the launch of the Loda L60, NIO's Hong Kong stocks have continued to rise, with a cumulative increase of nearly 40% in September, leading the new forces in the automotive industry. In summary, Loda is the brand for NIO to increase its sales volume. As the first model, the Loda L60, with its higher cost-effectiveness compared to the Tesla Model Y, more convenient battery swapping, more comfortable and intelligent configurations, successfuly captures a portion of young family consumers and potential consumers of BBA's exchangeable cars. The explosion of orders for the Loda L60 will drive a significant improvement in NIO's overall sales and cash flow, but will also face many challenges ahead, still a long way to go.