Nio (NYSE: NIO) has been making strides in cutting costs and aims to achieve profitability by the fourth quarter of this year. While this goal has been well-known, the methods by which the electric vehicle (EV) maker is reducing costs have not been widely discussed. However, a recent report has shed light on some interesting details regarding Nio’s cost-saving strategies.
One of the key factors contributing to unnecessary additional production costs in vehicle manufacturing is material waste resulting from product transitions. In the latest updates to Nio’s ES6 SUV, EC6 coupe SUV, ET5 sedan, and ET5T wagon, many existing materials could not be reused, such as the vertically mounted central screen. However, Nio’s new strategy in the latest product transition has played a significant role in cost savings, according to a report by local media outlet 21jingji.
During the transition phase of the four models, Nio found itself with over 1,000 sets of vertical screens remaining, along with matching wiring harnesses and other materials. Instead of scrapping these materials, Nio decided to place an additional order for 1,000 vehicles based on the remaining inventory of vertical screens and cleared out the older models through promotions. This decision not only reduced material wastage but also yielded a gross margin, even after accounting for discounts.
The material wastage encountered by Nio during this product transition was significantly less than in previous transitions, thanks to the company’s new strategy. This not only reduced Nio’s own losses but also those of its supply chain partners, with overall loss control outperforming industry standards by nearly 50 percent.
This success is primarily attributed to Nio’s Cell Business Unit (CBU) management mechanism, which resolves coordination issues between different teams. The CBU mechanism, which Nio began piloting last year and rolled out to all teams this year, aims to maximize the company’s overall return on investment by enabling better coordination between production and sales teams and reducing cost losses.
In addition to the CBU mechanism, Nio has also established a weekly joint production and sales meeting mechanism, as well as a biweekly operational organization transformation meeting. These meetings allow core leaders from each CBU to report progress to Nio’s founder, chairman, and CEO William Li. Furthermore, Nio has undergone ongoing team mergers and personnel reductions based on annual operational goals and resource boundaries, resulting in the departure of senior managers and business experts whose roles no longer align with business development needs.
Despite these personnel changes, departing employees have expressed support for Nio on the company’s internal forum, Speakout. Nio will release its unaudited first-quarter 2025 financial report later today, following a conference call with management. The company’s recent delivery figures show a positive trend, with a 13.08 percent year-on-year increase in May and a 34.75 percent year-on-year increase in the first five months of the year.
Overall, Nio’s cost-saving strategies and focus on reducing material wastage during product transitions are proving to be effective in improving profitability and enhancing overall operational efficiency.
