Ninebot, including the Segway brand it acquired in 2015, has had a rollercoaster ride on the stock market. After soaring to dizzying heights (RMB 112 per share) in early 2021 from rapid growth in its self-balancing scooter and electric scooter businesses, its share price has since plummeted (to around RMB 30 per share), returning to its starting point. Yet, beneath this turbulent surface lies a story of remarkable growth and strategic evolution.
Eight years ago, Ninebot’s revenue barely crossed the RMB 1 billion (USD 138.2 million) mark. Fast forward to today, and it’s cruising past RMB 10 billion (USD 1.3 billion). This growth trajectory is even more impressive when you zoom in on recent performance. In Q1 2024, the company reported a 54.18% year-on-year increase in revenue (RMB 2.562 billion) and a staggering 675.34% jump in net profit attributable to shareholders (RMB 136 million).
These numbers tell a tale of successful “de-Xiaomization” – Ninebot’s strategic move away from its former reliance on Chinese tech giant Xiaomi. But this transformation hasn’t been without its challenges.
Ninebot’s traditional strongholds—self-balancing scooters and e-scooters—have faced headwinds. Declining overseas demand and domestic road rights restrictions have taken their toll. However, the company has skillfully pivoted, making significant inroads in the electric two-wheeler market. This segment now rivals its legacy businesses, generating RMB 4.323 billion (USD 597.5 million) in revenue last year—a 74.1% year-on-year increase.
Moreover, Ninebot isn’t putting all its eggs in one basket. The company is also venturing into robotics, with its lawn mowing robots showing promising growth. In Q1 2024, Ninebot sold 33,100 of these units, translating to a 267% year-on-year revenue increase.
Despite these positive indicators, the capital market’s response has been lukewarm at best. Investors seem wary of Ninebot’s prospects in the highly competitive electric two-wheeler market, both domestically and internationally. The nascent robotics business, while promising, is still too small to move the needle significantly.
Yet, Ninebot’s journey offers valuable insights into the complexities of ecosystem companies breaking free from their original sponsors. It’s a testament to strategic planning, enduring growing pains, and the delicate balance between profit and revenue growth.
Struggles with its legacy business
Ninebot has remained tight-lipped about whether Xiaomi and Sequoia Capital will continue to support its development after reducing their stakes. The company has only asserted its independence from reliance on a single customer.
Over the past two years, Xiaomi and Sequoia Capital have gradually divested their holdings in Ninebot, leaving investors curious about their future involvement. This is a critical question, given the pivotal role these backers played in Ninebot’s ascent to a RMB 10 billion revenue company.
In 2014, Xiaomi and Sequoia, along with other investors, injected USD 80 million into Ninebot. This capital fueled Ninebot’s audacious acquisition of Segway, catapulting it to global leadership in self-balancing scooters. The ensuing collaboration with Xiaomi proved to be a double-edged sword. While it ensured robust product sales, it also resulted in razor-thin profit margins. In 2019, Ninebot’s gross profit margin through Xiaomi channels was a mere 15.11%, compared to a hefty 42.58% for its independent brand.
Post-IPO, Ninebot strategically reduced its reliance on Xiaomi, seeking more lucrative channels. By 2023, Xiaomi-related revenue had dwindled to just 4% of the total.
However, this de-Xiaomization hasn’t been without growing pains. The self-balancing scooter and electric scooter businesses, once Ninebot’s bread and butter, have faced significant challenges. From 2021–2023, sales revenue from Xiaomi electric scooters plummeted by nearly 90%, from RMB 2.543 billion (USD 351.5 million) to RMB 321 million (USD 44.3 million). Self-branded scooter revenue saw only a modest increase. Moreover, operational risks faced by overseas shared scooter clients led to a decline in related revenue.
Squeezed from both sides
In response to these challenges, Ninebot has placed its bets on electric two-wheelers and robots. The company’s foray into electric two-wheelers has been notable, achieving sales of 100,000 units in its first year on the market. Ninebot has positioned its EVs in the mid- to high-end market, emphasizing intelligent features.
The Chinese market presents both opportunities and challenges. With over 300 million electric two-wheelers in use and new national standards driving replacements, the potential is significant. However, competition is fierce, with traditional manufacturers upgrading their offerings and new entrants like Huawei and Midea joining the fray.
Consumer preferences in this market are clear: battery life and range are paramount, with price expectations between RMB 3,000–5,000 (USD 414.6–691.1). Ninebot is adapting to these demands, gradually lowering its price range to attract more buyers.
Ironically, while Ninebot initially de-Xiaomized to escape low profit margins, the electric two-wheeler business is notorious for slim margins, typically between 15–20%. Ninebot is no exception, with its electric two-wheeler segment posting a 19.27% gross profit margin in 2023, the lowest among its product lines.
Ninebot’s venture into robotics, particularly with its Navimow lawn mowing robots, represents another strategic bet. However, this niche market is crowded with domestic manufacturers and has limited growth potential. Industrial Securities projects the global lawn mowing robot market to reach USD 3.5 billion by 2026, with a 12% compound annual growth rate (CAGR) from 2021–2026.
Leveraging Segway’s brand recognition and channels, Ninebot has made inroads in Europe and is poised to enter the North American market. Sales have been promising, with nearly 40,000 units sold in 2023. However, the revenue from this segment remains modest relative to Ninebot’s overall operations.
While Ninebot’s strategic pivots show promise, they may not be enough to regain investor confidence in the short term. The company faces the challenging task of proving it can thrive in highly competitive markets while maintaining profitability. As Ninebot continues to navigate its post-Xiaomi era, its ability to balance innovation, market share, and financial performance will be crucial in shaping its future trajectory.
This article was written by Leslie Zhang in Chinese language for 36Kr
