10 Key Highlights from NIO's Earnings Conference Call

The ten key points of NIO’s financial report conference call: (Attached with the conference call transcript)

  • NIO’s sub-brand will be released in Q2, products will be released in Q3, and will start delivering in Q4.

  • The sub-brand will use a shared battery swap network, other brands can also share it, and NIO can share it as well. However, some of the battery swap stations are exclusive to NIO.

  • NIO predicts that it can return to a sales volume level of 20,000 units per month.

  • The second vehicle of NIO’s second brand will be an SUV, it will be launched next year.

  • NIO will not launch a car cheaper than the ET5. It is oriented for gross profit, and will not use price wars to increase volume.

  • NIO will adopt a direct-sales model in China. But in overseas markets, NIO will respect the conditions of the overseas markets, adopt a more flexible, faster investment return approach, and cooperate with local companies.

  • From the industry perspective, the long lifespan of batteries, especially calendar life, is a very important issue. The next problem to solve is longevity.

  • So far, sales in first-tier cities account for 70% of NIO’s total sales. NIO needs to solve the problem of efficient market penetration. This is the opportunity and challenge for this year.

  • NIO’s second brand uses a completely new channel. NIO states that it has locked in enough resources, and this year’s goal is not less than 200 sales store networks.

  • 70% of NIO’s R&D personnel are related to intelligent technology.

The transcript of NIO’s financial report conference call is as follows, and we have edited it without changing the original intent.

  1. What are the plans for NIO’s sub-brand and related battery swap stations?

We will release our sub-brand in Q2, release the brand’s first product in Q3, and start deliveries in Q4.

In terms of opening stores, our sub-brand will have a separate sales network; in terms of after-sales service, a part of NIO’s system will be employed. The sub-brand will use a shared battery swap network, which can be shared with other brands, and NIO cars can also connect to it. However, we have some battery swap stations exclusive for the NIO brand.

Our 4th generation battery swap station can be compatible with different brands, which includes NIO and the sub-brand. Deployment of the 4th generation stations will begin in April, with most of this year’s stations being 4th generation.

  1. Will NIO maintain its delivery targets for 2024?

The market competition will be tough this year. Our 2024 product will still be globally leading in terms of performance. This year we will focus on software delivery, including our NOP+ pilot assistance and NOMI GPT.

From a channel perspective, we currently have close to 500 offline stores, and we will work on channel market penetration. Our recruited sales team has begun to mature. In February of this year, the performance of our sales team was good, proving an improvement in our sales capability.This year, our battery swap stations will be available for both NIO and Alpine brands. The deployment of our swap stations will be geared towards driving sales volumes up. We have great confidence in this year’s sales, believing that they will continue to grow and return to a level of 20,000 per month.

  1. What is the product planning for NIO’s sub-brand?

Our first vehicle for the mass market brand is undergoing various tests. Our second brand is more family-oriented. Depending on the family size, we will launch different products; we have a decided edge since our research into the family market is deeper and we have the advantage of late development. We believe our primary competitor to be Tesla’s Model Y, but with swappable batteries. We estimate our price to be about 10% cheaper than Model Y.

Our second car is an SUV and its research and development has been very smooth. We will launch it to the market next year. A third car is already in development, however, information is currently scant.

  1. How does NIO view the relationship between pricing, gross margin, and sales volume?

NIO will begin selling two brands in the second half of the year. There won’t be a lower-priced vehicle than the ET5 under NIO. It’s profit-oriented; we value gross margin over volume. The second brand is aimed at the family market which is highly competitive. It will adopt a strategy prioritizing volume over gross margin, leveraging our advantage in smart technology.

The two brands will follow different strategies, which I believe is a better approach for the company’s long-term development.

  1. How does NIO view and respond to competition and cooperation in the Chinese market?

NIO faces various forms of competition in China, including Tesla, as well as a number of private businesses and state-owned enterprises. China has a very open automobile market, where competition is good for the customers, but challenging for businesses. Companies that prioritize customer needs will ultimately win.

Apart from competition, cooperation is also important. We cooperate with CCAG on battery swaps, as well as Geely, Chery and JAC. NIO is a company that excels at cooperation. I believe that while intense competition persists, it’s also essential to foster external collaborations.

  1. What is NIO’s plan for international expansion?

Surely our focus is on the Chinese market, the most competitively intense market. However, we won’t stop exploring globally. Currently, we aim to fine-tune our operations in five European countries. This year, we will also enter some new countries including the UAE, thanks to investments from Abu Dhabi.

Strategically, we are going to evolve a bit. We will introduce two brands in the latter half of this year, and another one aimed at a market of tens of thousands next year. The second and third brands have more potential for a wider market.

While we operate directly in China, we respect local conditions in foreign markets. We will be more flexible and pursue faster returns on investment, collaborating with local companies without ruling out possibilities.7. How do you perceive ultra-fast charging technologies such as 5C fast charging?

From the perspective of battery technology, we have always approached from the aspects of supercharging (increasing charging speed) and rapid replacement (battery swapping). We also have the most charging station deployments in China. We will follow the fast charging technology trends of the Chinese market.

Regardless, no matter how fast the charging, the quickest is still battery swapping. We always emphasize; it should be rechargeable, replaceable and upgradable. Our emphasis on upgradeability is beneficial to our users.

From an industry standpoint, the longevity of the battery life, especially its calendar life, is a critical matter. The issue we are aiming to solve next is the longevity issue. We have conducted extensive research over the past few years, which is an issue the entire electric vehicle industry has to face.

Since a car is a 15-year product, there must be a solution for it. Therefore, the ultimate plan has to be considered, which is also why we are considering battery swapping. We will have a discussion with the market about this soon.

  1. How does NIO achieve a healthy cost through scaling?

We invest a significant amount in R&D, which can lower manufacturing costs.

Overall, we do not need a large volume to achieve the cost level I just mentioned. A factory can achieve healthy economic figures with monthly output of just 10,000 units . Hence, we don’t need a scale of 1 million to achieve such costs.

  1. How do you see the relationship between battery swapping and fast charging?

From a charging perspective, everyone is building charging stations, which is great. The more charging stations there are, the higher the usage efficiency of electric cars.

We have the most battery swapping stations. Some of our partners are also considering joining us, which is similar to what’s happening in the Cloud domain. We have never opposed battery swapping and charging. Charging has its advantages, such as arguably offering the best experience when at home. Battery swapping has unique benefits, like energy storage, upgradeability, and battery health.

  1. How does NIO perceive the lower-tier market?

The lower-tier market is certainly a problem we have to solve. So far, sales in first-tier cities account for 70% of our total volume. We need to solve the problem of high efficiency sinking. We also understand the importance of infrastructure to the lower-tier markets in third and fourth tier cities. This year, a significant portion of our charging and battery swapping infrastructure will be deployed to these markets, enhancing our competitiveness in these regions. We need to find some more efficient methods to increase sales in the lower-tier market.

  1. What are NIO’s brand and Alpine’s sales network and sales team expansion plans for this year?

From NIO’s perspective, we now have 500 stores, and what we need to do is to improve the store’s efficiency. Our staff already consists of more than 5,000 people, and our main goal is to enhance efficiency.

Our second brand will follow a completely new channel. We have already secured enough resources, and our goal is to have a sales store network of no less than 200 stores. As there is only one car model this year, its sales efficiency will be higher. We will also reserve some sales staff from the NIO brand. After the car model is launched, they will quickly catch up.Alpine will layout its sales network according to its target user group, adhering to independent site selection principles. Its efficiency will be higher as it doesn’t need to establish a sales network similar to NIO House. It will prioritize efficiency in the manner similar to Tesla.

12、What is NIO’s R&D investment plan for 2024?

Our R&D investment will remain consistent with that in 2023. It will primarily be basic R&D, some of which the brand can supply. Last year, we announced our 12-part technology stack and that 70% of our R&D personnel are involved with intelligent technology.

This article is a translation by AI of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.