Li Bin, NIO CEO
Hello everyone, thank you for participating in NIO’s Q4 2020 earnings conference call.
In Q4 of 2020, NIO delivered a total of 17,353 units of ES8, ES6 and EC6, representing a YoY growth of 111% and a MoM growth of 42%. The total annual delivery in 2020 reached 43,728 units, a YoY growth of 113%. In January 2021, NIO set a new high with 7,225 units delivered, a YoY growth of 352%. In February, 5,578 units were delivered, a YoY growth of 689%.
All three models of NIO achieved good results in 2020. ES6 ranked first in the Chinese electric SUV market sales volume for the full year of 2020, ES8 occupied the top spot in the Chinese high-end electric SUV market above RMB 400,000, and EC6 won the first place in the Chinese high-end coupe SUV market for three consecutive months since November 2020. With high-level product quality and service reputation, NIO continues to gain recognition and praise from more and more users and the industry. In the China Insurance Automotive Safety Index (C-IASI) assessment released in January 2021, EC6 achieved the best score among all models assessed in 2020.
Based on a competitive product portfolio, high-quality service and innovative business model, NIO has gained more and more recognition from users. We expect the total delivery in Q1 of 2021 to reach 20,000 to 20,500 units.
In terms of gross margin, driven by continuous growth in delivery volume, firm average selling price, continuously improving material cost and manufacturing efficiency, our vehicle gross margin in Q4 reached 17.2%. In addition, the comprehensive gross margin was also boosted to 17.2% by the revenue from new energy credits.
We continued to achieve positive operating cash flow in Q4 of 2020 and full-year positive operating cash flow. In all aspects, NIO’s operating efficiency and system efficiency have significantly improved in 2020.
Next, I will communicate with you about some key operational work of the company.
On NIO DAY on January 9, 2020, we launched the first flagship sedan model, ET7, based on the NT2.0 technology platform. With its leading dimensions among peers, breakthrough and innovative appearance, luxurious and exquisite interior design, efficient electric drive platform, immersive digital cockpit experience, and industry-leading autonomous driving ability, ET7 has been highly recognized by users, media and the industry, with orders exceeding our expectations.ET7 will be equipped with NAD, NIO’s Autonomous Driving system based on NIO’s full-stack autonomous driving technology platform, powered by NIO Aquila super sensing and NIO Adam super computing. NIO Aquila super sensing system includes 33 high-performance sensors, including 11 8-megapixel HD cameras and one high-precision LIDAR with a detection range of 500 meters. NIO Adam supercomputing platform has a total computing power of 1016 TOPS. NAD’s sensors and computing power far exceed those of competitors, greatly accelerating the mass production of autonomous driving industry.
NAD will gradually realize an easy and safe point-to-point autonomous driving experience in scenarios such as highways, urban areas, parking, and charging, freeing up time and reducing accidents. NIO pioneered the monthly subscription service mode for NAD, AD as a Service, enabling more people to try and enjoy NAD functions.
At NIO Day, we also released the second-generation battery swap station, which is more cost-effective than the first-generation one, with a three-fold increase in service capacity. At the same time, NIO released a 150-degree battery pack that achieves a 50% increase in energy density, significantly improving the range of NIO’s entire product line. ET7 equipped with a 150-degree battery pack will have a range of over 1,000 kilometers. Under NIO’s service system, every existing user can flexibly upgrade to different sizes of battery packs as needed.
NIO is committed to creating an innovative system of separating vehicles and batteries, renting batteries, and providing flexible and upgradable charging services for users. With the growing user base, increasingly diverse battery pack combinations, more and more users are choosing Battery as a Service, BaaS. As of February 2021, 55% of new orders chose BaaS. We believe that BaaS and NIO’s perfect charging and swapping service system will accelerate the conversion of gasoline vehicle users to pure electric models.
The development of new products and technologies is the cornerstone of long-term development. NIO will firmly increase R&D investment, speed up the development and mass production of core technologies and new models. The R&D investment in 2021 is expected to double, reaching around 5 billion RMB.
Regarding production capacity, we have reached a full supply chain production capacity of 7,500 in January. Our partner, JAC, has started the expansion of its factory and plans to achieve a single shift capacity of 150,000 and a double shift capacity of 300,000 by the end of this year, preparing for the production of ET7 and subsequent products.In February 2021, NIO signed a cooperation agreement with Hefei to jointly plan and build the Xinqiao Intelligent Electric Vehicle Industrial Park, which integrates research and development, manufacturing, demonstration applications, and industrial supporting services, and aims to create a world-class intelligent electric vehicle industry cluster with a complete industrial chain.
In terms of sales and service network, NIO currently has 23 NIO Centers and 203 NIO Spaces, covering 121 cities in China. We have seen the continuous contribution of offline spaces to improving brand awareness, increasing orders, and operating user communities. In 2021, we plan to add 20 more NIO Centers and 120 more NIO Spaces to expand geographical coverage, leverage the advantages of NIO’s online and offline direct sales system, and enhance the experience and efficiency of the entire sales process.
NIO has built 191 battery swapping stations, covering 76 cities. In the second quarter of this year, we will gradually deploy second-generation, lower-cost, and more user-friendly battery swapping stations, with the goal of increasing the total number of battery swapping stations to at least 500 this year. At the same time, we will increase the construction of supercharging networks and destination charging piles. Currently, we have 127 supercharging stations and more than 1,700 destination charging piles. Our plan is to reach 600 supercharging stations and 15,000 destination charging piles by the end of 2021.
As the number of NIO vehicle owners continues to grow, the operational efficiency of NIO’s after-sales service system is also continuously improving. Currently, we have 31 NIO service centers and 158 authorized service centers. To achieve better after-sales service experience, we will expand the layout of after-sales service network in 2021 to further improve the after-sales service system.
NIO is committed to building a community centered on vehicles, sharing joy, and growing together. The NIO Day 2020 on January 9th received widespread attention with nearly 100 million online viewers. At the NIO Day, we launched the BLUE POINT Plan, becoming the world’s first automotive brand to help users with carbon emissions certification and trading. In 2021, the second NIO User Trustee Council also established user care, industry community, social welfare, and environmental protection as this year’s work priorities. User support is our driving force for continuous advancement.
In 2020, NIO achieved an important milestone in its development. With the support of our users and the efforts of our team, NIO’s overall operations have entered the right track and entered the accelerated development stage. As a start-up company, we will maintain our original intention, continue to firmly invest in new product and core technology research and development, further develop the charging and swapping network and after-sales service network, and provide the best all-round experience for NIO users.
Thank you for your support! Now, Steven will introduce the financial performance of the fourth quarter. Please welcome Steven.
Feng Wei, NIO CFO
Thank you, William.
Next, I will introduce the financial performance of NIO in the fourth quarter of 2020. Considering the duration of this conference, you can refer to our financial report released online for other details.## Q4 2020 Revenue
The total revenue for Q4 2020 was CNY 6.64 billion (USD 1.02 billion), representing a YoY increase of 133.2% and a QoQ increase of 46.7%.
The total revenue consists of two parts: automotive sales revenue and other sales revenue.
The automotive sales revenue for Q4 2020 was CNY 6.17 billion (USD 946.2 million), accounting for 93% of the total revenue. The YoY increase of automotive sales revenue in Q4 2020 was 130.0%, and the QoQ increase was 44.7%. The YoY growth was mainly due to the increase in delivery volume brought by multiple models, as well as the expansion of sales network through continuous layout of NIO Space.
The other sales revenue for Q4 2020 was CNY 467 million (USD 71.6 million), with a YoY increase of 184.1% and a QoQ increase of 80.2%. The main reason for the YoY increase of other sales revenue in Q4 2020 was the increase in sales revenue from double credit sales and the installation of home charging piles and sales of accessories, which was consistent with the increase in automotive sales volume in Q4 2020.
Q4 2020 Cost
The cost of sales for Q4 2020 was CNY 5.5 billion (USD 842.8 million), with a YoY increase of 77.3% and a QoQ increase of 39.6%. The main reason for the YoY increase in Q4 2020 was the increase in automotive delivery volume.
Q4 2020 Gross Profit
The gross profit for Q4 2020 was CNY 1.14 billion (USD 175 million), with a YoY increase of CNY 1.4 billion and a QoQ increase of CNY 556.1 million. The increase in gross profit was mainly due to the increase in automotive sales volume and gross margin in Q4 2020.
Q4 2020 Comprehensive Gross Margin
The comprehensive gross margin for Q4 2020 was 17.2%, compared to negative 8.9% for the same period in 2019 and 12.9% for the previous quarter. The YoY increase in gross margin in Q4 2020 was mainly due to the increase in automotive sales gross margin.
The automotive sales gross margin for Q4 2020 was 17.2%, compared to negative 6.0% for the same period in 2019 and 14.5% for the previous quarter. The YoY increase in automotive sales gross margin was mainly due to the increase in delivery volume and the decrease in some production material procurement prices.
Q4 2020 Research and Development Expenses
The research and development expenses for Q4 2020 were CNY 829.4 million (USD 127.1 million), with a YoY decrease of 19.2% and a QoQ increase of 40.4%. The YoY decrease in Q4 2020 was mainly due to the fact that EC6 began mass production in September 2020, resulting in a decrease in related R&D expenses, as well as overall cost savings and improvement in R&D efficiency.
Q4 2020 Sales and Administrative Expenses
The sales and administrative expenses for Q4 2020 were CNY 1.2 billion (USD 185 million), with a YoY decrease of 21.9% and a QoQ increase of 28.3%. The YoY decrease was mainly attributed to overall cost control and operational efficiency improvement.### Financial Performance
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Q4 2020 operating loss was RMB 931.4 million (USD 142.7 million), a decrease of 67.0% YoY and a decrease of 1.5% QoQ.
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Q4 2020 share-based compensation was RMB 60.2 million (USD 9.2 million), an increase of 17.6% YoY and an increase of 22.3% QoQ. The YoY increase was mainly due to option grants in 2020 and the increase in the fair value of the grant date caused by the rise of the share price.
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Q4 2020 net loss was RMB 1.39 billion (USD 212.8 million), a decrease of 51.5% YoY and an increase of 32.6% QoQ. The main reason for the QoQ increase was the foreign exchange loss caused by the decline of the US dollar exchange rate.
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Q4 2020 net loss attributable to ordinary shareholders was RMB 1.49 billion (USD 228.7 million), a decrease of 48.4% YoY and an increase of 25.6% QoQ.
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Q4 2020 basic and diluted net loss per ADS was RMB 1.05 (USD 0.16). The adjusted basic and diluted net loss per ADS (non-GAAP) excluding share-based compensation and the change in fair value of redeemable non-controlling interests redemption value were RMB 0.93 (USD 0.14).
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As of December 31, 2020, NIO’s cash and cash equivalents, restricted cash and short-term investment totaled RMB 42.5 billion (USD 6.5 billion), achieving positive operating cash flow for the full year.
Business Outlook
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In Q1 2021, NIO expects deliveries to be between 20,000 and 20,500 units, representing an increase of approximately 421% to 434% YoY and an increase of approximately 15% to 18% QoQ.
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NIO expects Q1 2021 total revenues to be between RMB 7.38 billion and RMB 7.56 billion (USD 1.13 billion and USD 1.16 billion), representing an increase of approximately 438.1% to 450.8% YoY and an increase of approximately 11.2% to 13.8% QoQ.
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The business outlook reflects the Company’s current and preliminary views on the business situation and market condition, which are subject to change.
Q&A Session
Deutsche Bank
- Can you comment on NIO’s brand positioning in the high-end market and whether it will change in the future? Does NIO have any plans to establish a new brand to enter the mainstream market?
- NIO is expected to enter the European market later this year, what is the expected sales volume? Many media are speculating that NIO also has plans to enter the US market, can you provide more details?Li Bin:
In terms of possibilities, from NIO’s perspective, our NIO brand will focus on the high-end market. Therefore, our NIO brand will not enter the mass market. This is for sure. If you have some understanding of us in the past, we have made some attempts a few years ago through investment with GAC and GAC Chang’an. At present, we have lowered our shareholding in these companies to below 5%, from more than 40% before. From another perspective, it also provides us with more active possibilities to try to enter the mass market. We are actively looking for ways to enter the mass market, which is our long-term strategy.
The second question is about the international market. We will start sales and services in Europe this year. Our team is in the process of building it, and our plans are progressing as planned. We are preparing for products, sales and service networks, teams, and all aspects. The international market is a long-term venture. We have enough patience. In the long run, we can occupy a major market share in all major global markets. Of course, we know that this cannot be accomplished overnight. From NIO’s perspective, we established our research and development team in Europe and the United States on the first day. We have the management ability of a global team. We still know that entering the global market for consumer services is a huge undertaking. You just mentioned the US market. In fact, we have been conducting research on it for a long time. We are also exploring various commercial models and possibilities. Of course, we will definitely enter, and we will be very patient in doing so.
Bank of America Securities:
About the improvement of gross profit margin: NIO’s gross profit in the fourth quarter has improved significantly. Excluding the revenue from carbon credit transactions, the comprehensive gross profit margin has reached 15.7%. Can you introduce which specific factors have helped to improve the gross profit, such as the improvement of materials and the average selling price?
About battery and chip supply: What is the current situation of battery and chip supply? NIO also recently announced a delay in the flexible battery upgrade policy. Can you provide some detailed information about this?
About battery costs: The upstream cost of batteries has significantly increased, what will be the trend of battery pack costs in 2021? What is the expected gross margin for the whole year?
Qu Yu:The gross margin of the entire vehicle increased from 14.5% in the third quarter to 17.2% in the fourth quarter, mainly due to the increase in delivery of high gross margin ES8 and EC6 models and the improvement in manufacturing cost efficiency. As for the average selling price, it increased by approximately RMB 10,000 per vehicle, and there was also a slight improvement in materials and other costs. In the fourth quarter, the gross profit from carbon credit sales was RMB 120 million, contributing 1.8% to the gross margin and helping to improve the overall gross profit. We also expect a slight improvement in gross margin in Q1 2021, but not as significant as in 2020. As for gross margin guidance for the full year of 2021, it is still too early to tell.
Li Bin:
The impact of chips on the supply chain is significant, and it does have some impact on us in Q2. However, we can still meet our normal production plans at present. The situation is changing every day, and the global automotive industry is still greatly affected by chip shortages in Q2. Our team has been working on this since last year, and we even have direct contact with chip companies to streamline the entire chip supply chain. For our current needs in Q2, we can meet them, but the risk is high.
Battery supply is also a bottleneck, especially for 100 kWh batteries. The demand for electric vehicles has indeed increased significantly, and our partners still need to improve their production capacity to meet our standards. We expect the production of batteries to meet our requirements around July, and in the second quarter, the battery technology for the entire vehicle has limited the number of deliveries to around 7500 units.
Lastly, battery cell costs do not affect us much. Overall, we still see some decline in battery costs, but it will definitely not decrease as significantly as last year. The market changes have limited impact on us because we are still the main customer of CATL. We can still have a good pricing with them.
Credit Suisse:
Regarding recent sales expectations: recently, other car companies, such as Li Auto, have given lower guidance, while NIO’s sales expectations for March hit a new high. In addition, there is the impact of Tesla’s Model Y. So, is the recent sales and demand trend upward or downward? Also, your current production capacity is 7,500 units per month. Can this be understood as your sales expectations for the second quarter?
Li Bin:Generally speaking, Q1 is a bit challenging for the EV market due to factors such as subsidy reduction, end-of-year policies and many other influences. For many companies, this is a normal phenomenon. When Model Y announced its domestic prices in January this year, it should have been a good short-term plan. Tesla is like this, often releasing news and instantly reaping a batch of orders. We generally focus on long-term, steady growth. We are not pulse-oriented, and we will not obtain a large number of orders through a certain price reduction, nor will we become pulse-oriented sales behavior. We gradually increase our orders through our service network, through our user experience improvement, and through our user reputation. From our current standpoint, our strategy is not to lower prices. Our prices are very firm, which has also led to an increase in our gross margin. From this perspective, we are focusing on long-term strategies. Of course, there is also BaaS. Indeed, our take rate for February orders has reached 55%, and we can see an increase in take rate every month. From this perspective, our unique competitiveness and our continuous, long-term user development strategy enable us to withstand the entire cycle, and we are not as affected by seasonality and short-term influences as others.
Morgan Stanley:
About the 2020 sales: The new model, ET7, will not start delivery until next year. How will NIO maintain its strong sales with existing models this year? In addition to expanding sales and service networks, are there any restyling or other product plans to help boost sales?
About NIO House: NIO said last year that the cost-effectiveness of NIO House was relatively low. Why did NIO decide to increase the construction of NIO House this year? How much investment and expenditure will this increase bring?
William Li:
ET7 will be delivered next year, and there is still a lot of preparation work to be done, especially in the AD part, where we need to do enough testing and development. From now until the delivery of our ET7, we mainly rely on our three existing products, ES8, ES6 and EC6. If we look at our EC6, it began delivery in September last year, while the new ES8 was delivered in March, and the ES6 started delivery in the second half of 2019. From the perspective of a product life cycle, they are still very competitive products. Compared to other EVs and gasoline cars in the same price range, we have enough competitiveness. We do not think we need to make major changes to our current three products before NT2 technology. We will not do such a thing.On the other hand, as I mentioned earlier, we are actively expanding our charging and swapping network, as well as our sales and service network because China is a very large market. We believe that if we can improve the infrastructure in every city we go to, it will be very effective in increasing our sales volume before the technical update of NT2 next year. Therefore, our main focus is to expand the sales and experience through the expansion of our sales and service network, and we are very confident that we can achieve our overall sales target.
In addition, we mentioned BaaS and the delivery of 100% charged electric vehicles, which will provide a very good reason for oil car users to switch to electric cars. We see that the trend is getting faster and faster. From the perspective of smart electric cars, our main competitors are the enterprise cars of the same price range. In the price range of 300,000 to 400,000 yuan, Mercedes-Benz, Audi, and BMW have created new sales records for their oil cars. We still have a lot of opportunities. We believe that our current sales target will have sufficient demand.
Regarding NIO House, it is an important channel for converting orders, which helps to enhance brand awareness, expand user touchpoints, and promote sales conversion. At the same time, it has strong brand communication functions. We believe that increasing brand communication investment is beneficial to the long-term interests of the brand and sales in the context of rapid growth in sales revenue. NIO House is also an important place for user system and community operations, providing activity space for offline user connections and brand promotion. In addition, we have accumulated rich experience in operating offline networks in the past, and we have stronger control over site selection, planning, and cost-effectiveness. The investment and operating costs required for a single store are much lower than before. A reference number is that the average investment per store currently is 40% of the original investment, while rent and operating costs are 50% of the original level.
Regarding autonomous driving, you mentioned that NIO Adam supercomputing platform and NIO Aquila super sensing platform will be loaded onto the ET7. I would like to ask whether these two solutions will be used on existing models, including EC6, ES6, and ES8, and when will they happen? In terms of commercialization strategy, will you move towards an AD as a Service model based on BaaS? Regarding the amortization strategy, in addition to BaaS, will you also use the AD as a Service model to distribute the cost of autonomous driving subscription services?
Regarding production capacity, we said that monthly production capacity will be 7,500 units in the second quarter. However, we also mentioned that JAC is increasing production capacity to 150,000 units per shift. If the production capacity bottleneck can be resolved, and battery and chip supply problems are solved in the second half of the year, how will monthly production capacity increase?>Regarding ET7 orders: NIO has mentioned that the order volume for ET7 has exceeded expectations. Could you provide a rough estimate of the order quantity for ES7 at present?
Li Bin:
For the first question, of course, our ET7 is the first car to use NT2 technology. Our cars will all be developed based on NT2 platform. This is not an immediate matter. We will certainly communicate with you further about each specific car and when it will be launched, as well as our later product plans.
For the second question, we believe that future AD services will be provided through subscription fees, which is the right approach from a certain perspective. It is best for the users’ interests and is technically feasible and more reasonable. Of course, compared with the one-time charge mode of current ADAS, it is more about charging models for existing users. If the fee cycle of the car is 15 years, you will have a chance to obtain income during these 15 years, from this perspective, we think that the income model of the car during its entire life cycle should generate better income than it does now. In this aspect, if we look at all the charging models, whether it is Google or Microsoft, through cloud services, this is definitely a better growth engine. In terms of NAD, we will vigorously provide services. In fact, we already have great confidence in this mode of service, and users are willing to accept this kind of service.
In short, I think charging for AD as a Service will result in a higher take rate than it is currently, and we have the possibility of generating income for a car throughout its entire lifespan which is more user-friendly. Of course, based on the premise of its usefulness, we believe this is a more sustainable model.
As for the third question, I will add some information about production capacity. In January, we achieved a full supply chain production capacity of 7,500 units. Let me emphasize why it is a full supply chain production capacity. It’s not just us, but the entire vehicle factory capable of producing parts has this ability. That’s what we’ve always said about full supply chain production capacity.
During the Chinese New Year period, the Hefei factory has further increased its own production capacity. We are now capable of producing 10,000 units per month through some double-shift production lines. However, in the second quarter, due to the capacity of our supply chain partners such as chip and battery, we can only maintain a full supply chain production capacity of 7,500 units per month. That is to say, although the vehicle factory can produce 10,000 units per month, the supply chain can only be limited to 7,500 units. We expect that from July, the full supply chain production capacity should be able to increase. I won’t add more about further expansion of the factory. By early next year, we can achieve a single-shift production capacity of 150,000 and a double-shift capacity of 300,000 units.Translated English Markdown Text:
Regarding ET7’s Orders:
Regarding ET7’s orders, we announced the opening of pre-orders on January 9th. I can say that the performance of our ET7, both after its release and overall, surpasses that of any of our past cars. As for specific order numbers, we have not been providing that information for a while now. Instead, we are focusing on delivery data. Overall, we are extremely pleased with ET7’s performance, given that it starts at 448,000 RMB. In fact, we think it has exceeded our expectations.
Regarding BaaS:
CICC asks about the capital situation of our joint venture company relevant to BaaS and how many batteries it can provide. We have completed two rounds of financing and have eight shareholders, including seven investors. The total amount of investment we have received is 1.44 billion RMB. Recently, our friends in the investment community have reached out and expressed interest in increasing the investment amount. Additionally, we have increased our credit limit with the bank. We have enough leverage at the moment, and the supply of funds for the battery asset company, which is a crucial aspect of this model, is not a bottleneck. BaaS users will undoubtedly receive their vehicles later than order-placed customers because we are producing according to orders. Therefore, the percentage of deliveries will rise later.
Regarding Network Coverage and Expansion into Lower-Tier Cities:
UBS asks if we have any plans to enter third and fourth-tier cities. What is the sales ratio between first-tier and second-tier cities versus third and fourth-tier cities? Are we considering moving sales networks and focus to third and fourth-tier cities within the next twelve months?
We have always been quite proactive in terms of network coverage. Currently, we have covered 121 cities across the nation. Last year, we increased our coverage of NIO Spaces, and this year we will add 20 more NIO Houses and 120 more NIO Spaces. Our basic strategy is to build an offline store in any city that has a Mercedes-Benz, BMW, or Audi 4S center. There are still some areas we haven’t yet covered, but we believe we will reach every place where these stores exist this year. There are still some locations within third and fourth-tier cities.
Regarding ET7 and NAD:
In regards to ET7, we have done sufficient hardware redundancy and equipped it with powerful hardware. For users who haven’t chosen automatic driving, does the hardware come standard or do they have the option to subscribe for it later? If all of our cars come equipped with such hardware redundancy, the hardware cost for the vehicle would be high, and the gross profit margin would be affected. Do we need to rely primarily on lifecycle subscription services?We do not have a specific location to deploy, nor do we avoid any particular location. It is natural for us to focus more on regions like the Yangtze River Delta, based on the distribution of high-end vehicles. In terms of charging infrastructure, including supercharging networks and destination charging networks, we will tilt more toward some remote areas, such as Inner Mongolia, Heilongjiang, and Xinjiang. No one is willing to invest in building infrastructure there, but we will increase our investment in those areas with poor infrastructure. Our goal is to provide a good experience for all electric car users, regardless of their location. The electric vehicle penetration rate in these areas is currently low, and no third party is willing to invest in charging facilities. This is the area where we are different from others, and we are willing to invest in it.
As for the second question, all the hardware for AD as a Service is standard, including sensors and computing power. However, we will not lower the initial vehicle gross margin due to the AD as a Service sales model. We will maintain a reasonable vehicle gross margin, and we believe a gross margin of around 20% is reasonable. The revenue from AD as a Service will be a source of our gross margin, which is a more sustainable model.
Citibank:
Regarding NP and BaaS, what is the current and future take rate, and how much will they contribute to the gross margin?
Regarding annual sales guidance, what is the expected range of annual sales, and what are the conservative and optimistic sales expectations?
Li Bin:
Thank you. From the perspective of orders, in February, we have reached 55%. As for NP, we currently have two packages, a premium package and a fully equipped package. These two packages combined account for about 50%. Of course, some users may choose to add more later. Overall, it is relatively stable. Some users are willing to use it, while others are not. We can see some small increases in the near future.The improvement of BaaS has basically no significant impact on gross profit margin, perhaps only a little, basically none. NOP, of course, will increase gross profit. If we look at the increase in gross profit, it is one of the reasons for the growth. We can calculate it, because our large package now costs 39,000 yuan. If some proportion of the increase is beneficial, we will increase our efforts in after-sales recommendations this year, because we already have a large inventory of users, including more than 88,000 users, of which half have not selected NOP. We will have better policies this year, such as installment policies, to enable after-sales users to use NOP. This is a good change, which is a rough situation.
As for the overall supply chain capacity, from the first half of this year, according to the expected 7,500, we are confident about the second half of the year. Today is indeed too early to give an overall picture. We are very confident to achieve a better result through our sales service network, further deployment of our battery swap stations and charging piles. You can make a reasonable speculation. Of course, we have higher goals, but it is still too early to say.
Goldman Sachs:
Regarding battery swap station deployment: How will you layout and choose locations, and what is the frequency of user usage per year?
Regarding energy replenishment services: In the long run, given the popularity of BaaS, how will you determine the right locations for battery swap stations?
Li Bin:
We have an advantage in directly serving users. Overall, whether users can install charging piles at home, their main driving routes, and user distribution, we can know these locations and users’ primary driving areas because we produce according to orders. Therefore, we will combine these to make the best site selection plan.
Of course, there are also some aspects of highways. We mainly look at which highways our users may use more. This is a logical overall plan. In terms of site selection for battery swap stations, our efficiency is getting higher and higher, and our planning accuracy is also getting higher and higher. Compared with the early stage, the efficiency is much higher. Basically, each battery swap station can reach a reasonable volume soon after being put into use. Now, during peak hours, there are almost 10,000 battery swaps per day, so the efficiency is already very high.
In the long run, we believe that in China, because there are still many users who cannot install charging piles at home, although our household installation ratio is very high, we have also seen a significant increase in the proportion of users who cannot install charging piles at home among new users. From another perspective, it shows that our battery swap station is highly in line with the needs of users, and the combination of battery swapping and BaaS, supplemented by our charging network and third-party charging network, is the best experience for Chinese users.
Source: NIO
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.