On June 9, 2022, NIO released its 2022Q1 financial report and held the first quarter earnings conference call.
During the call, Li Bin revealed that NIO achieved a new high in vehicle deliveries in 2022Q1, delivering a total of 25,768 vehicles, an increase of 37.6% year-over-year. We summarized Li Bin’s important speeches during the call as follows:
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In June, the supply chain and production have basically recovered, the NeoPark F2 factory will officially start production in the third quarter of this year, and several important markets, including Shanghai, have resumed deliveries. In June, vehicle production and deliveries will accelerate, and it is expected that the delivery volume in 2022Q2 will be between 23,000 and 25,000.
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NIO’s gross margin in 2022Q1 was 18.1%. Battery costs peaked in April, and to ease the upward pressure, NIO adjusted its product prices. With the delivery of new products and the ramp-up in production, the gross margin is expected to rebound in the third quarter.
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According to the announcement of the Hang Seng Index, NIO will be included in the Hang Seng Tech Index and the Hang Seng Composite Index on June 13.
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NIO is continuously increasing investment in the field of power battery-related areas. NIO currently has a battery-related team composed of more than 400 people, deeply participating in research and development work such as battery materials, battery cells and pack design, battery management systems, and manufacturing processes, to comprehensively establish and enhance battery systemization research and development and industrialization capabilities. We believe that these investments will enhance the long-term competitiveness and profitability of future products.
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In the third quarter, NIO will launch the NOP Plus enhanced navigation assistance function based on the self-developed high-precision map jointly developed with its partner Tencent.
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This month, NIO will release the all-new five-seater SUV ES7 based on NT2, and mass production deliveries will commence in late August.
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In terms of the battery swap network, NIO has built more than 960 battery swap stations, covering 197 cities globally. At the same time, it has deployed 829 supercharging stations and more than 4,140 destination charging piles cumulatively.
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On May 10, NIO signed a strategic cooperation agreement with Hefei City on the NeoPark Phase II project and supporting key core components. According to the agreement, NIO began planning and preparing for the construction of new brand product production capacity.
Conference Call Q&A
Q1: Given that we raised prices in May to reduce the impact of rising battery costs on gross margin, what kind of gross margin for the second quarter can we expect for the whole car?
A1: According to our new agreement with battery supplier CATL, we adjust the battery price based on changes in the price of battery materials. So from the second quarter, our battery cost increases are indeed relatively high. We have seen some price drops in May compared to April, so in terms of price, it is decreasing.But the pressure on gross profit in the second quarter is relatively high. Because we produce according to orders, most of these (price increase) orders need to be delivered in the third quarter. The orders we are delivering now are basically the ones before the price increase.
Our high-gross-margin product combination for NT2 will gradually increase. The production capacity of ET7 will increase in June. Normal production can be ensured in the third quarter.
Q2: Is it possible to achieve a total production capacity of 48,000-50,000 in the third quarter?
A2: The expansion of the first factory has already started to contribute to June. From the demand side, there is no problem. The main bottleneck lies in the supply chain’s production capacity improvement. Based on the current trend, we are very confident about the delivery volume in the third quarter.
Q3: Is it possible to launch a mid-term facelift of the old model in the second and third quarters? How is the ET5 order situation?
A3: Orders for existing models 866 and ET5 are still growing. A smart hardware upgrade plan for 866 will be released soon.
Q4: NIO already has 400 battery technologies. Will the future deepening of battery technology consider the market for batteries or seek assistance from foundries?
A4: For the core battery technology, we will redefine it in terms of cost advantage, performance advantage, and safety advantage. A new battery pack with 800V high-voltage fast charging technology will be put into production in 2024. In the long run, the specific manufacturing strategy will be a self-made + external procurement strategy to increase the competitiveness of the company and its products.
Q5: What will be the gross profit in the second quarter? When will the gross profit recover to normal in the third quarter? Will the gross profit continue to improve in the fourth quarter as the level of independent research and development improves?
A5: We need to wait until the third quarter to see price increases in effect since we are still delivering orders before the price increase. There is still some uncertainty about the third quarter. Currently, the increase in the price of raw materials is greater than 10,000. Our second-generation platform can add some gross profit to the third quarter, so it will definitely improve. But we are still uncertain about the level of improvement. The main uncertainty comes from the fact that the cost of our batteries is linked to this raw material cost, unlike in the past where we could predict a fixed price more accurately.
Q6: There are three new cars and three mid-term facelifts this year. Will 866 be replaced next year? Can you give us more hints about the product cycle?
A6: Next year, existing models will all switch to the NT2 platform.
Q7: Can you provide an outlook on chip supply from June to the second half of this year?A7: When it comes to chip supply, there will certainly be uncertainties, and the timing of chip shortages may differ. Therefore, we need to constantly find ways to solve this issue. We will start to increase production in the second half of the year, and the production in June is a normal climbing process and is not closely related to chips.
Q8: Can you provide some specific plans for the new brand?
A8: According to my current plans, we will deliver it in the second half of 2024, and it will be equipped with our NT 3.0 technology. Currently, we hope that the positioning of the end product price doesn’t differ too much, and the main product will be in the range of 200,000 to 300,000 RMB. We will use a replaceable battery architecture and a battery pack that is different from NIO’s, and it will be our own production that supports high-voltage fast charging.
Q9: Traditional NIO models take a long time from release to delivery. Why was the ES7 release earlier than the ET5?
A9: The research and development of the ES7 has been ongoing, and the whole rhythm of the ES7 is progressing according to plan. Due to the epidemic, the release event was delayed, so the release time and delivery time appear to be relatively close. The ES7 and ES8 have different positioning; the ES7 is a large five-seater vehicle with a price difference compared to the ES6. Currently, the 866 model is still very competitive.
Q10: After the ET5 is delivered, the demand for parts in the entire NT platform increases. What measures does NIO have now?
A10: We have been preparing for NT 2.0 on the supply chain.
Q11: Supply chain fluctuations will lead to cost increases. How much will cost overrun increase product prices?
A11: Actual costs and pricing strategy account for 85% of trading volume and profit margins. For example, we designed a 20% profit margin for ET7.
Q12: What is the current progress of NAD?
A12: NAD is developed based on the NT 2.0 platform, which is built on our stack self-developed technology. We can see the significant advantage of mastering data loops to quickly iterate assisted driving. Compared with the first generation, we have several times of performance improvement. In the third quarter, we will launch NOP Plus, an enhanced version of assisted driving. From a testing perspective, we are working with Tencent from a self-developed perspective on high-precision maps, and we are very confident in NAD with these foundations.
Source: NIO Official
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.