• Nio has introduced a CBU system to strengthen cost control and multiple functions will be downsized based on full-year targets.

• The new mechanism requires "every penny invested to be heard back," said a source close to Nio's management.

Nio (NYSE: NIO) is undergoing a new organizational restructuring to focus more on cost control, with founder, chairman, and CEO William Li increasing his involvement in supply chain management, according to a local media report.

Nio shares gained 3% in morning trading.

The electric vehicle (EV) maker has launched an internal management mechanism called CBU (Cell Business Unit), which is expected to be fully implemented in the second quarter, according to a report in 36kr today.

The core logic of the CBU is to split all of Nio's operational work into non-overlapping units, each of which is to establish clear ROI (return on investment) indicators and a performance reward and punishment system, according to the report.

Under the system, each division of Nio settles costs separately, calculating the costs that have been spent, and will be spent, on different projects, the report noted.

Li led company to sort out 15 system capabilities in 2024 and used them to advance the CBU mechanism, according to 36kr.

Nio's teams including service operations team, and energy team have been implementing the CBU mechanism for more than a year, getting good results, according to the report.

"The new mechanism requires every penny invested to be heard back," said a source close to Nio's management.

With Nio looking more at cost management, Li has noticeably stepped up his involvement in supply chain management, getting deeply involved with many supply chain procurement projects, according to 36kr.

At key points in product development, Li will scrutinize costs and be directly involved in price negotiations for core components such as batteries, according to the report.

Li will analyze procurement cost reduction and target achievement with supply chain teams based on weekly sales volume changes to make the next decisions, according to the report.

Nio also introduced suppliers to the CBU system and created joint operating statements to make costs and profits transparent, according to 36kr.

After boosting scale and getting room for price reductions, Nio's new platform saw a 10 percent drop in the overall cost of seats, the report said.

More parts will be shared on models including the ET9, which will begin deliveries soon, and the upcoming facelifted ES6, EC6, ET5, and ET5 Touring, the report said, citing a Nio source.

These new models will be equipped with Nio's in-house developed smart driving chip, which reduces the average cost per vehicle by more than RMB 10,000 ($1,380), according to 36kr.

To manage costs, Nio sent a team to learn from Luxshare Precision, an Apple supplier known for its excellent cost control, in 2024, according to the report.

The company is also reassessing the necessity of many of its operations and programs.

Since last December, Nio's resource investment and staff size in the phone business has been drastically reshuffled, with the mobile software team having been merged into the digital cockpit team, and duplicate positions significantly streamlined, according to 36kr.

In addition to the phone business, multiple departments in Nio's other business clusters will also undergo organizational streamlining and staff downsizing in the near future based on full-year business goals, the report said.

These adjustments will involve the sub-brand Onvo.

On February 28, Nio announced internally that it was merging the delivery channels of the Nio and Onvo brands, according to 36kr.

Additionally, in remote areas of China such as Harbin, Yinchuan, Urumqi, and Xining, Onvo's sales are headed by the general manager of Nio's regional companies, according to the report.

Nio relocated a roughly 40,000-square-meter after-sales service master warehouse -- primarily used for managing and deploying after-sales parts -- to a new city 10 kilometers away in 2024, allowing per-square-meter rents to drop by more than 70 percent, the report said.

This has resulted in a drop in warehouse logistics and operating costs, saving over RMB 200 million in cost expenditures, according to the report.

The efficiency of the service operations team is also improving. Nio has delivered nearly 400,000 vehicles in the past two years combined, but the number of people in the service operations team has decreased by nearly 20 percent from the figure at the end of 2022, the report said.

Nio's after-sales service business was profitable for the full year 2024, 36kr said, citing a person familiar with the matter.

($1 = RMB 7.2602)