Quarterly Report of NIO in Q1 2022
Author: Mianwu Zhou
Editor: Zelin Leng
On June 9, 2022, Beijing time, NIO announced its financial report for the first quarter of 2022. The company’s revenue for this quarter was 9.91 billion yuan, compared with 7.982 billion yuan for the same period last year, an increase of 24.15% year-on-year.
In the first quarter of 2022, NIO’s vehicle gross margin decreased from 21.2% in the same period last year to 18.1%, and the company’s gross margin fell from 19.5% in the same period last year to 14.6%.
The operating losses in the first quarter of 2022 were RMB 2.1887 billion, an increase of 639.7% from the first quarter of 2021.
As of March 31, 2022, cash and cash equivalents, restricted cash, and short-term investments were RMB 53.3 billion (8.4 billion U.S. dollars).
Although NIO’s overall revenue is increasing, its delivery volume growth and revenue growth rate have slowed down significantly compared to many of its fast-rising peers such as Li Xiang, XPeng, and BYD.
In addition, NIO’s gross margin declined in the first quarter and its losses increased significantly year-on-year. The main reason for the decline in gross margin and the expansion of losses is highly related to the rise in the prices of battery raw materials and chips. April was the peak month for battery prices, which will put considerable pressure on NIO’s 2022 financial report.
However, Li Bin revealed that the industry generally believes that prices will not continue to rise, but will enter a downward phase. Some predict that prices may drop by 20-30% in the second half of the year. Even if raw materials do fall in price, Photon Motor, for example, speculated that automakers may not necessarily lower prices, but offset the impact of the full cancellation of subsidies next year.
Previously, when the prices of raw materials began to rise, Li Bin stated that he did not intend to raise prices, but later he could not withstand the pressure, and the gross profit margin remained bleak. Only 5,074 vehicles were delivered in April, and it seems that NIO is facing enormous difficulties, but in fact, NIO is quickly approaching a good period.
Strong ET7 Orders
In the first quarter of 2022, NIO delivered a record high of 25,768 vehicles with the delivery guidance for the second quarter between 23,000-25,000 units. Based on the delivery data of April and May, the delivery guidance for June is 12,902-14,902 units, which will set a new monthly delivery record, and at the same time, the orders in May also set a historical record. Li Bin highlighted in a conference call that the ET7 order performance continued to be strong but did not disclose specific order numbers.The main models driving NIO’s current sales are the 866 series (ES8, ES6 and EC6). As these three models were all launched and sold before 2020, their advanced features have been challenged by many competitors and consumers now have more choices. As of 2022, these three models have experienced a certain degree of sales decline.
Therefore, upgrading these three models is already on NIO’s agenda, and it is expected that next year, the NIO 866 series will switch to the NT2 platform for a comprehensive upgrade, achieving significant technological progress.
However, the most anticipated new models in the second half of 2022 are undoubtedly the ET7, ET5 and ES7, among which the NIO ET7 has already begun delivery.
We expect the strong order data for the ET7 to continue to increase in the coming months. In addition to its own product strength, policy factors will also have a positive impact on its orders.
On June 8th of this year, the Ministry of Finance issued the “Opinions on Financial Support for Carbon Peaking and Carbon Neutrality” which clearly stated that the new energy vehicle purchase subsidy policy will expire on December 31st, 2022.
Previously, thanks to the battery swap policy, NIO always had a subsidy of just over 10,000 yuan, but the publicly announced price has always been the pre-subsidy price. The cancellation of new energy subsidies in 2023 will not have a major impact on NIO’s expectations.
It is unknown whether the purchase tax will continue to be reduced in 2023, and NIO sales have already conveyed information to customers that the purchase tax may be canceled next year.
Regardless of whether the purchase tax changes, the expiring policy of new energy vehicle purchase subsidies will help NIO increase sales and have a positive impact on the orders of the three new models, especially the ET7 with expected delivery this year, while pre-orders for the ET5 may not be delivered until next year.
Based on what Photon Travel has seen at the 2022 Guangdong-Hong Kong-Macao Greater Bay Area Auto Show, NIO’s ET5 is likely to become a popular model, with universal recognition for its appearance and product strength.
A NIO regional city manager told Photon Travel that the three new models introduced by NIO this year will not be delivered on a large scale until the second half of the year or even the end of the year, so the contribution of new models to 2022 will definitely be positive but may not be fully reflected. A very obvious leap is expected to be realized by 2023.
Supply chain and production capacity have become the key factors
In recent months, NIO’s orders have been almost worry-free, but it still depends on delivery capacity.
Compared with its peers, NIO’s delivery capacity is not particularly outstanding. Excluding the Spring Festival, NIO has experienced three sudden and sharp declines in deliveries since 2021: 5,880 vehicles in August, 3,667 vehicles in October, and 5,074 vehicles in April 2022.
Fortunately, NIO’s F1 factory has resumed its pre-pandemic production capacity, and the F2 factory has been fully connected and is set to begin production in the third quarter of 2022. The F1 factory has a maximum production capacity of 300,000 vehicles per year, while the F2 factory is planned to have a capacity of 1 million vehicles per year.
With the full recovery of the F1 factory and the incremental production of the F2 factory, it is believed that NIO’s delivery capabilities will see a rapid leap in the second half of this year, as mentioned in a recent conference call.
Previously, Li Bin, the founder of NIO, stated that NIO would have 25% gross margin on the delivery of 300,000 units of the NT2 platform. With the 866 model switching to the NT2 platform next year, it is possible that we may see NIO’s annual delivery volume exceed 300,000 units with gross margins surpassing 25%.
Meanwhile, Photon Motor noticed that the ET5 and ET7 have gained real potential user recognition through various forums and offline communication channels, with order numbers and test drive bookings exceeding NIO’s previous expectations.
One user who was previously skeptical of the ET7 revealed to Photon Motor: “I didn’t think ET7 was a big deal – it’s just a car, right? But after sitting in it, I could feel the luxury, and the test drive exceeded my expectations.”
According to a Photon Motor source from a second-tier city, the order ratio for the ET5 and ET7 is 70:25.
As for the ES7, which is due to be released on June 15, it is expected to have a more competitive edge than the BMW X3, with an upgraded version of the ES6 equipped with laser radar. It is uncertain whether there will be a significant improvement in the interior and intelligent cockpit levels, but it is confirmed that mass production and delivery will begin in late August, much faster than the one-year period from launch to delivery for the ET5 and ET7.
From the above information, it can be seen that NIO’s difficult days are coming to an end. There is a favorable expectation for the second half of 2022 and 2023. In addition, the NT3 platform, equipped with 800V high-voltage fast charging and swappable batteries, will be launched in 2024. NIO’s sub-brands will also use the technology from the NT3 platform, with a price range of 200,000 to 300,000 yuan, and will not share the swappable battery stations with 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.