Is NIO targeting Huawei in the smartphone market?

Author | Chai Xuchen

Editor | Zhou Zhiyu

Just as Huawei phones are making a comeback and the Mate 60 is selling well, NIO has also launched its own phone.

"Our confidentiality work has been done well, those leaked spy photos on the internet before were not real."

On September 21st, during NIO Technology Day, when Chairman Li Bin took the stage for the second time and revealed the long-rumored "NIO Phone", cheers erupted from the audience.

As a newcomer in the mobile phone industry, the price of the NIO Phone, ranging from 6,499 to 7,499 yuan, is not "humble" at all, even comparable to Huawei's flagship Mate 60 and iPhone 15.

An electric vehicle manufacturer is also entering the mobile phone market (the first domestic car company to independently develop and manufacture phones, achieving what Musk wanted to do first), and the pricing strategy of NIO is quite unique. However, from Li Bin's statement, it can be seen that NIO Phone is not intended to compete head-on with Huawei and Apple phones, but rather serves as an auxiliary tool for NIO cars to better connect with mobile phones.

In Li Bin's view, the motivation behind making phones is very simple, which is to create a product that seamlessly connects with car owners, rather than relying on phones for profit. He even promised, "We will make many car models, but only one phone."

According to him, the NIO Phone is equipped with UWB ultra-wideband technology, which can completely replace car keys and supports 30 functions that can be accessed with a single touch of the "car control key". It can also achieve seamless integration and interaction with NIO's in-car system.

Moreover, NIO's phone is positioned as a flagship device, with a leading version of the Qualcomm Snapdragon 8 Gen 2 processor, a combination of up to 16GB+1TB of memory, a rear camera setup including a periscope lens, and a 120Hz variable refresh rate screen... In terms of specifications, it is basically on par with high-end devices from mainstream brands. Li Bin jokingly said, "It's not far ahead, but it works very well."

In the current technology ecosystem, Li Bin's calculation is still focused on consolidating the moat of user experience. He believes that both cars and phones have mobility attributes, and the combination of the two can define a brand new mobile internet experience. Li Bin openly stated that this is also why phone manufacturers are making cars and why NIO is making phones. They see the same opportunity, "different paths, same destination."

This also reflects Li Bin's growing anxiety in the environment where technology companies are accelerating their entry into the high-end car market.

In this regard, Apple's CarPlay is undoubtedly a matter of faith, and Musk has also emphasized the importance of car-infotainment system integration. Although Apple's Project Titan is often shrouded in mystery, one thing is certain: if Apple Car becomes a reality, the iPhone will definitely be an important component of Apple's car manufacturing.

Coincidentally, at the launch event of the new M7 in early September, Yu Chengdong spent a lot of time introducing the "smooth" interaction experience between Huawei's HarmonyOS ecosystem, car infotainment systems, and mobile phones, tablets, and other devices, which has become a trump card for Huawei's entry into the car manufacturing industry. Next, it may be necessary to leverage the cooperation with new partners such as Chery and JAC to expand our advantages.

Moreover, the penetration of smartphone manufacturers in the automotive industry is accelerating. Lei Jun's Xiaomi car is scheduled to start production next year, and OPPO has also made it clear that they will expand in the field of "car-device cross-domain integration".

What NIO wants to do is to build its own ecosystem more diligently and deepen its moat, using the ecosystem to bind car owners and gain loyalty.

Yin Shuijun, the head of NIO's mobile phone division, stated that NIO Phone can achieve industry-leading experience or innovation in the field of car connectivity.

In addition, Li Bin also mentioned that NIO Phone will also be compatible with sub-brands such as Alps. There are even plans to develop headphones and smartwatches.

However, whether car owners will spend a large amount of money to buy a "premium version of a car key" is still a big question.

Some industry insiders believe that NIO is "attacking others' strengths with its own weaknesses," which seems unwise. Although the potential of the ecosystem story is gradually emerging, the market believes that NIO, which is still in a loss-making state, should prioritize other matters.

In fact, the cost of developing a mobile phone is astonishing.

In 2019, Xiaomi spent nine months and invested 4 billion yuan to develop the flagship Xiaomi 9 of that year. In 2020, Li Xiaolong, Vice President of Huawei's mobile phone product line, said that the development of Huawei Mate40 cost about 3.75 billion yuan.

Some industry insiders believe that even if NIO uses a smartphone reference design and focuses on the experience of the smartphone system and car-machine interaction, it is estimated that it will still spend hundreds of millions of yuan on research and development.

Developing high-end smartphones, researching and developing 150-degree large batteries, rapidly expanding battery swap stations, accelerating international expansion, and chip development and production are all key tasks for NIO at present. Each one is an important part of improving user service experience and also a huge cost burden.

Therefore, financing has become a necessary option for NIO. On September 19th, NIO announced plans to issue a total of $1 billion in convertible bonds.

"The R&D investment in each quarter will account for more than 20% of the revenue, and this level of R&D investment will be maintained in the future," said Li Bin. He stated that this is money spent on the cutting edge and is the basic guarantee for NIO to participate in the next stage of intense competition. After experiencing the darkness of 2019, he will also guard the boundaries of the company.

The extent to which smartphones can play a role in NIO's ecosystem still needs to be tested by the market. However, with the breakthrough of NIO's second-generation models achieving monthly sales of "maintaining second and challenging third," the market has initially seen the improvement in NIO's investment efficiency.

In the future, the mutual coupling of smartphones and cars and the mutual promotion of sales may become a reality. In this dimension, NIO does need to compete with Huawei, Apple, and others. Investors and car owners hope that Li Bin and NIO have made the right bet and can survive until that day.