Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NIO Inc (NIO, Financial) achieved a quarterly record delivery of 57,373 units in Q2 2024, up 143.9% year-over-year.
- Vehicle margin increased to 12.2% in Q2 2024, driven by continuous cost optimization of core components and supply chain.
- NIO Inc (NIO) introduced new technologies, including the SkyOS operating system and the Banyan3 smart system, enhancing its product offerings.
- The company is expanding its international presence, with plans to launch products in the UAE in Q4 2024.
- NIO Inc (NIO) has a robust charging and swapping network, with over 2,561 power swap stations and 23,000 power chargers installed worldwide.
Negative Points
- Despite the increase in vehicle margin, NIO Inc (NIO) reported a net loss of RMB5 billion in Q2 2024.
- SG&A expenses increased by 31.5% year-over-year and 25.4% quarter-over-quarter, driven by higher personnel costs and increased sales and marketing activities.
- The company faces fierce competition in the premium EV segment, which may impact its market share and pricing strategy.
- NIO Inc (NIO) is still incurring losses on its power swap business, partly due to offering free lifetime power swaps to early adopters.
- The company needs to balance between vehicle delivery volume and vehicle margin, which may limit drastic improvements in either metric.
Q & A Highlights
Q: How will NIO ensure a high conversion rate for the new L60 model after its official launch? Will the company consider more aggressive pricing given the competition? What preparations have been made to avoid supply disruptions?
A: (Bin Li, CEO) The L60 has received strong preorders, surpassing expectations. The presale price is RMB290,900, and there is room for final price adjustments before the official launch. The company aims to balance vehicle margin and price. For supply chain security, the target is to achieve a supply capacity of 10,000 units by the end of the year and 20,000 units per month next year.
Q: What is the outlook for NIO-branded vehicle sales and gross profit margin based on the current product portfolio?
A: (Qu Yu, CFO) The vehicle margin in Q2 was 12.2%, mainly due to efficiency improvements in supply and production. There are opportunities for further improvements in cost optimization and high-margin products. The vehicle margin is expected to reach around 15% by the end of the year. The long-term target for the NIO brand is a monthly volume of 40,000 units and a vehicle margin of 25%.
Q: Given the strong order for ONVO L60, do you still maintain the volume target of 20,000 units for this year? What is the progress for the upcoming months?
A: (Bin Li, CEO) Delivery of the L60 will start in late September, with most deliveries happening in Q4. The target is to reach a monthly delivery volume of around 10,000 units by December. The supply side will ramp up production gradually.
Q: What are the targets for SG&A expenses in the upcoming quarters?
A: (Qu Yu, CFO) R&D expenses will remain around RMB3 billion per quarter, with slight fluctuations. SG&A expenses will increase with the delivery of L60 but will be optimized as the delivery volume ramps up.
Q: What kind of gross margin is expected for the ONVO L60 at higher volumes? What is the capacity expansion plan and CapEx plan for 2025 and 2026?
A: (Bin Li, CEO) The L60 is expected to achieve a 15% vehicle margin at higher volumes. The company is upgrading its F2 factory to double shifts and planning a third factory to be operational by Q3 next year. CapEx for 2024 will be significantly lower than 2023, with similar intensity expected for 2025.
Q: Could you share the progress of NIO's autonomous driving programs, including consumer take rate, disengagement rate, scenario coverage, and regional expansion?
A: (Bin Li, CEO) NOP+ is used by over 300,000 users with a cumulative mileage of over 1.1 billion kilometers. NIO is developing an end-to-end model and has released the industry's first end-to-end AEB function. The company is confident in its leading position in smart driving technologies.
Q: What is the potential growth rate for the China EV market in the next few years? What is the EV penetration expected to be?
A: (Bin Li, CEO) The penetration rate of new energy vehicles in China is expected to surpass 80% in two to three years. The decline of ICE cars will accelerate the growth of new energy vehicles, with the penetration rate growing faster than expected.
Q: Can you provide more details on the NIO operating system, SkyOS, and its advantages?
A: (Bin Li, CEO) SkyOS is the world's first full-domain vehicle operating system, making the car safer, more secure, and more efficient. It addresses challenges like data throughput, domain fusion, and communication latency. SkyOS will be applied to all NIO brands, including ONVO and Firefly.
Q: What are the major drivers for the improvement in other income gross profit margin in Q2? What is the forecast for future margin improvement?
A: (Bin Li, CEO) The improvement is due to increased profitability and efficiency in aftermarket sales and decoupling lifetime free power swaps from vehicle sales. The company expects continued margin improvement with the growth of the user base and sales volume.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
