Just now, NIO’s Q4 2022 earnings call has just ended. Here is a brief summary that you can glance through.
Q1: The supply chain affected deliveries last year. How about this year?
A: Last year’s Q4 was affected by supply chain issues. This year, Q1 has seen the end of the pandemic and currently, the supply of components is not a bottleneck. New vehicle deliveries are ramping up, and the pressure on the supplier side has reduced greatly.
Q2: Gross margin decreased significantly in Q4. What about this year? The price of battery raw materials dropped. How will it contribute to the gross margin of each vehicle?
A: We still have confidence in rebounding to a gross margin of 18-20%. Battery prices have decreased rapidly. We understand the upstream situation and new factories will commence production this year. It is possible that the price of lithium carbonate could drop to RMB 200,000 per ton in Q4 of this year. Our Q3 deliveries will increase, and the cost breakdown effect will be better.
Currently, we have 866 vehicle models, and the national subsidies have a short-term impact on gross margin. The factory production line debugging also affects gross margin. Gross margin pressure will be greater in Q1 of this year.
Q3: Will the new EC6 and ES6 be delivered at the same time as the new ES8 this year? Are there any updated versions of ET7 and ET5? How is the sub-brand doing?
A: Four new vehicle models (originally planned for five) will be delivered in Q2 of this year, including the new ES6. NIO’s product development plan is conservative, and the same goes for its new brands.
Q4: Regarding the A1 delivery guidance this year, why set such a target?
A: We believe that this year’s annual target is achievable. Five NT2.0 products will be delivered this year, and we will enter a new and longer product cycle. After the model platform switch, we will cover 80% of BBA’s primary sales volume.
The second force of growth comes from our charging and battery swapping systems. We will add 1,000 new battery swapping stations this year, and this will extend to third- and fourth-tier cities. Half of our users are distributed in Shanghai, Zhejiang, and Jiangsu, and we have tremendous market space to tap into.
The third force comes from the empowerment of the NT2.0 platform, such as our NOP+. We have standard computing power and sensors and a closed-loop of overall data. Even the cabin experience is being improved, which will increase our product strength. The release of these features will add to our product strength.
Our overall profitability is undoubtedly related to gross margin. If battery prices develop as expected, we will achieve comparable business profits in Q4 of this year and consider investing in innovative businesses.### Q5: Delivery expectations and corresponding logic for ET5. Will cost changes be reflected in prices?
A: In general, the annual sales target is to double compared to last year, which will also contribute to the improvement of the gross profit margin. If the raw material prices decrease at the expected speed based on the current trend, we will not change the goal of achieving breakeven for the NIO brand by Q4 2023. After all NT2.0 products are released, all products can be divided into three categories: ET5+ET5 Touring+ES6, with a target monthly sales of 20,000 units; ET7, ES7, ES8, with a monthly sales target of 2,000-4,000 units per model, totaling around 8,000-10,000 units; EC6, EC7 mainly reflect the pursuit of design and taste, with a monthly sales target of 1,000-2,000 units. The current product portfolio can support a monthly sales target of 30,000 units.
Since the beginning of this year, lithium carbonate prices have been falling. We need to understand the upstream raw material input of domestic suppliers. The stable growth of domestic demand will narrow the gap between supply and demand. In addition, if this trend continues, the price will be more reasonable. For example, if the price of lithium carbonate reaches 200,000 RMB per ton, will it reach 150,000 RMB per ton? Then the profit will be higher.
Q6: The sales of the 866 model are decreasing. How are the sales of the vehicles on the NT 2.0 platform? Which areas need to improve efficiency? European market and battery swap stations.
A: In January, it was affected by the subsidy withdrawal last year, which is short-term and has less impact on us. Starting from February, the demand is increasing every week. ES7 and ET7 are competitive in the market. In addition to the impact of subsidies and the Spring Festival, we have confidence overall.
Improving efficiency is our priority. The expansion of personnel was very fast last year. This year, we will reduce projects and personnel, improve efficiency of personnel, including R&D, sales, management, and even evaluate the priority of investment.
Q7: Will the procurement contract with CATL be adjusted? Will it affect the signing of agreements later?
A: The battery pack for NIO’s cooperation with AVIC will be launched in March this year. We maintain a long-term cooperative relationship with CATL, but the agreement has not been signed yet. Battery manufacturers realize that they need to take on battery price fluctuations with car manufacturers. Our battery team is helping suppliers to land solid-state batteries, which will take several months.
The overall investment scale of new businesses is about 4-5 billion RMB, that is, an investment of about 1 billion RMB per quarter. The overall goal is to achieve the breakeven of the company by 2024.### Q8: How is the progress of our European business and what are our plans? When will our gross margin be restored?
A: The satisfaction of European users is within expectations. The progress of battery swapping stations is far behind expectations and the rollout of “Niuyou” stores is slower than expected. This year, exceeding 10,000 deliveries in Europe is not a key objective. Losses caused by vehicle repairs and maintenance have persisted, and improvement is planned for 2022. Expanding the charging network has also consumed a significant amount of money, and it will continue to expand this year.
Q9: Will we consider deploying stores in the lower-tier market, and what is our strategy for vehicle configurations?
A: We may not necessarily invest in stores in the lower-tier market. In a small town in Shandong where we have 500 users, we deployed two battery-swapping stations that have been proven to increase user data and are highly efficient. We will follow this approach this year.
Our pricing strategy has always been stable, and value proposition to our users has not been reduced.
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.