Author: James Yang Jianwen
Updating financial reports is not always an interesting thing, especially when you’ve written a lot and can’t get any more interesting information. It’s like “tasteless food, a pity to waste”.
However, this time NIO’s financial report showed a lot of different things, with a wealth of information.
Without further ado, let’s start with some basics:
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Deliveries: A total of 21,896 units were delivered in Q2, including 4,433 ES8s, 9,935 ES6s, and 7,528 EC6s, representing a 9.2% sequential growth from the prior quarter.
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Revenue: RMB 8.45 billion, up 127.2% year-over-year and 5.8% quarter-over-quarter.
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Profit: The vehicle margin was 20.3% and the comprehensive gross margin was 18.6%.
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Net loss: RMB 590 million, an increase of 30.2% from Q1’s RMB 451 million.
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R&D expenditure: RMB 880 million, an increase of 28.7% from Q1’s RMB 686.5 million.
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Cash balance: RMB 48.32 billion (as of June 30, 2021).
Three new models to be launched next year
Regarding research and development, Li Bin stated in the previous quarter that NIO would spend RMB 5 billion this year. In Q1 and Q2, NIO spent RMB 686.5 million and RMB 880 million, respectively. This means that NIO will spend RMB 3.4335 billion in the next two quarters, an average of over RMB 1.7 billion per quarter, which is even more than the total spent in Q1 and Q2 combined.
Just as I was surprised about where NIO was going to spend so much money, I saw Li Bin say, “Our goal is to launch three new products based on the NIO 2.0 platform by 2022, including the flagship premium smart electric sedan ET7.”
In other words, in addition to the ET7, NIO will also launch two other models. Li Bin said, “The two new models will be announced at the appropriate time. One of them will be priced slightly lower than all current products and will be the lowest-priced model under the NIO brand.”
When asked for more details, Li Bin replied in official language, but we can still find some clues.
In the Q3 2020 financial report, Li Bin said that two sedan models would be launched. However, at the subsequent NIO Day, we only saw the ET7.In other words, one of the two new cars to be released soon should be a sedan. What’s more, it’s worth noting that NIO used the term “deliver” when referring to the three NT2.0 models that will be available next year. This suggests that NIO has almost completed the product definition work for these models, with the ET7 test car already being spotted on the road a few days ago. Based on the research and development cycle, NIO is already about two years ahead of schedule, compared to the industry standard of 3-5 years.
NIO is currently expanding its research and development team, with the number of researchers set to double by the end of this year. This means that the research and development costs that have surged in the last two quarters will be burnt up very quickly.
What’s even more exciting is that Li Bin stated that more models will be released in the next year.
The pace of progress is really too fast!
Entering the mass market through a new brand
From the current data, NIO’s sales performance is quite good. Whether in terms of year-on-year or month-on-month data, the company’s sales are on the rise. This has a lot to do with NIO’s active layout of offline channels and the widespread distribution of battery swapping stations.
However, it appears that NIO’s current product sales combination is reaching its peak. This is reflected in the company’s sales performance for this year:
In the sales rankings for July, both Li Auto and XPeng sales exceeded 8,000. Therefore, NIO needs a more popular range of products to create more revenue.
Li Bin stated that NIO will enter the mass market through a new brand.
Recently, Ai Tiecheng, former general manager of WeWork China, was appointed as NIO’s vice president for a new strategy. He will be responsible for an independent middle and low-end brand outside of NIO, reporting directly to NIO’s chairman, founder, and CEO Li Bin.
It’s clear that this new brand, positioned below NIO, will take on more volume and revenue creation tasks. What is currently known is that the core team of this new brand has already been established.
Li Bin stated that the relationship between NIO’s brand and the new brand for the mass market will be similar to that of Audi-Volkswagen or Lexus-Toyota. “Our new brand will not enter the segment market of Wuling Hongguang. We hope to provide better products and services at a lower price than Tesla.”
I think that at least one of the three NT2.0 models to be delivered next year will be delivered through the new brand. Moreover, it will directly compete with Tesla Model 3.# NIO Renews Manufacturing Agreement with JAC Motors
NIO, a Chinese EV maker, has renewed its manufacturing agreement with JAC Motors. From May 2021 to May 2024, JAC Motors will continue to produce ES8, ES6, EC6, ET7, and other future NIO models. JAC Motors will increase its annual production capacity to 240,000 vehicles, up from the current 100,000.
NIO is aiming for a monthly production capacity of 8,000 cars, which translates to an annual output of nearly 100,000 units. With this additional 140,000 production capacity, a large part of it should be allocated to these three models.
As its product line and sales volume continue to grow, NIO’s plans to build its own factory are likely to be put on the agenda as well.
European Market
Let’s talk about the European market.
In May 2021, NIO officially announced its strategy for Norway, marking its entry into the European market:
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In September 2021, NIO’s first service and delivery center in Norway will open in Oslo.
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In Q3 2021, the European version of the NIO App will be launched.
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In 2021, the European version of the NIO charging map and the first batch of four second-generation battery swapping stations will be put into operation.
The first batch of ES8s has already been shipped to Norway and is expected to be available for reservation and delivery in September 2021.
According to Li Bin, NIO’s founder, the delivery volume in Norway this year will not be too large, but they value its long-term strategic significance.
NIO has already started recruiting a general manager for NIO Germany, and it is highly likely that “NIO Germany” will be its next stop in Europe.
Furthermore, Li Bin revealed that all future models for European sales will be developed based on the NT2.0 platform.
Currently, Europe is the second-largest market for new energy vehicles, and various European countries are subsidizing electric vehicle products on a large scale. It is a very suitable soil for the growth of electric vehicles. NIO’s future development in Europe is worth paying attention to.
Galloping
NIO’s vision this time is truly huge. Forgive me for using “really” three times.
Firstly, unlike before, NIO will directly deliver three NT2.0 models next year, rather than just announcing them.
Secondly, the new brand positioning for some of the new models is “mass-market”, which offers great potential for sales.After years of operation, NIO has established its own high-end brand image. Now launching a new brand with a lower positioning, it can achieve a “downgrade attack” to face more potential customers and bring more product sales.
Moreover, these three models are all developed based on the NT2.0 platform and can share parts, which greatly provides imagination for NIO’s performance growth and reduces product development costs.
In the following years, NIO will deliver more models. Can you handle it?
Previously, NIO’s plan was basically one or two models per year. However, the entire automobile industry is obviously accelerating its transformation towards electrification: the German Big Three have each released their electrification strategy plans, and Biden recently passed the 2030 strategy. By 2030, the proportion of zero-emission models in sales needs to be increased to 40%-50%.
From the current speed of “making dumplings”-style new car launches and deliveries, NIO is already making new adjustments: accelerating the speed of product research and development and launch.
The current financial report is very satisfying.
Now, NIO is running wildly, but no longer in a disheveled manner, but more calmly.
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.