NIO Releases Q4 and Full-Year 2021 Financial Report

Author: Xiaodong

Editor: Chris

At 6 am this morning, NIO released its Q4 and full-year 2021 financial report.

Let’s take a look at the data:

• In 2021, NIO delivered 91,429 new cars, a year-on-year increase of 109.1%.
• Full-year revenue was CNY 36.14 billion, a year-on-year increase of 122.3%.
• Full-year gross margin for vehicle sales was 20.1%, and full-year comprehensive gross margin for 2021 was 18.9%.
• Net loss was CNY 4.02 billion.
• R&D expenses were CNY 4.59 billion, a year-on-year increase of 84.6%.
• Cash reserves were CNY 55.4 billion.

The gross margin for vehicle sales in Q4 2021 was 20.9%, mainly due to the increase in single-car sales revenue and cost optimization from the 75-degree ternary lithium battery pack.

NIO’s R&D expenses for the full year of 2021 were CNY 4.59 billion, nearly doubling compared to 2020. Li Bin stated during the financial report conference that this number will double again in 2022, while the number of R&D personnel will reach 9,000 by the end of 2022. This is a very exaggerated growth, mainly covering long-term technology research and development, including autonomous driving, power battery, and the research and development of new car models that will be launched in 2023, as well as the adaptation of some models for the global market.

This is the first time that NIO has publicly mentioned power battery research and development.

Regarding profitability, NIO aims to achieve a balance between profit and loss in Q4 2023 and hopes to achieve profitability for the full year of 2024.

Although it will take some time to achieve profitability, NIO’s “pill” has become history.

775 + 866

By Q4 of this year, NIO will have six mass-produced models.

First, let’s talk about 775 (ET7, ES7, and ET5). The first batch of ET7 will be delivered on March 28th. As the first model of NIO’s NT2.0 platform and the first bridge car of NIO, the significance of ET7 to NIO is self-evident.

Thankfully, during the large-scale user and media test drive in March this year, ET7 performed well, receiving widespread praise for its interior design, power, cabin, mechanical quality, and NVH performance. Of course, due to the influence of the battery exchange system, the high ground clearance, and the design of the rear seat and trunk, are considered to be areas where ET7 can be further improved. If you would like to know more about ET7, you can take a look at our test drive video.

NIO officials have announced that the conversion rate of ET7 test drive orders has exceeded their expectations. Li Bin said that the number of ET7 orders was even greater than the media’s prediction of 15,000. However, the good problem is that ET7’s production capacity is under severe pressure in the current context of a widely stressed supply chain. ET7 and the 866 series (ES8, ES6, EC6) will be produced concurrently at the Hefei Jianghuai NIO factory, and ES7 will also be added in the future. In this way, the production line of the Jianghuai NIO factory will be responsible for concurrent production of 5 models. According to Li Bin, ET7’s production capacity will climb uphill slightly slower, and it is expected to reach normal production capacity in the third quarter of this year.

Speaking of ES7, it is worth taking a look at this model that competes with the domestic BMW X5L. ES7 is positioned as a high-end 5-seater SUV on the market, and it also carries the NIO Autonomous Driving (NAD) platform and the NIO Panoramic Digital Cockpit (PanoCinema).

By the way, the subscription for NAD will be launched in the fourth quarter of this year and will be opened to some users in certain regions (first-tier cities will have higher priority).

NIO announced that ES7 will be officially released next month and the price will be announced. The price is easy to guess, as it is bound to be positioned between ES6 and ES8. Li Bin said he is confident that ES7 can target the five-seat SUV market segment of above RMB 400,000, and believes that ES7 is an “incremental” product for NIO and will not impact the 866 series.

What about ET5? As the first model produced in the NIO Neo Park factory, it was unveiled at NIO Day last year. Let’s take a look at its birthplace.

Li Bin said that the Neo Park factory’s equipment is in place and is pushing forward according to its planned 60 JPH (production rhythm of 60 units per hour), while the Jianghuai NIO factory that produces 5 models concurrently will also reach 60 JPH in the middle of this year.

What does 60 JPH mean in terms of production capacity?
“`If it is 60 JPH double shift 4000 hours per year, the capacity will reach 240,000 vehicles. Under overtime, with 5000 hours per year, the capacity can reach 300,000 vehicles.

This also means that with both factories in full swing, the total annual capacity can reach 600,000 vehicles, essentially guaranteeing NIO’s two-year production capacity needs.

Restricted by the start-up time of the new factory, the ET5 mass production and delivery time will also be in the third quarter of this year. However, the production ramp-up of the new factory will be faster. Although it will be delivered in the same quarter as the ES7, it is expected that the subsequent delivery volume of the ET5 will rapidly increase.

After making great contributions, the 866 model has also received a configuration update. The cabin chip of 886 is still the 820 A in 2018. Nowadays, as the cabin system iterates and even NOMI keeps evolving, it indeed appears to be somewhat inadequate.

NIO plans to upgrade the intelligent hardware of the 886 model this year. Existing car owners can choose to pay for the upgrade. Due to the rise of upstream raw materials, the 866-year model will also make appropriate price adjustments while upgrading the intelligent hardware.

As for the sales issue of the 866, Li Bin also made a positive response: “As far as we are concerned, the orders in March are still in line with our expectations. We believe that there is no problem with the demand side.”

Comprehensive Acceleration

Here comes the “old chestnut” NIO Compass again.

The significance of this chart is that in the foreseeable future, NIO will continue to enrich it, making every part full-fledged. In Li Bin’s words, 2021 is the year when NIO starts to accumulate energy again, providing preparations for NIO’s next stage of development, and NIO will accelerate comprehensively in 2022.

In addition to new vehicles, production capacity improvement, and R&D investment, more infrastructure building, serving more countries and users, and building new brands have become the next goal for NIO.

New Brand

A very important piece of information in this financial report meeting is NIO’s new brand for the mass market. The core team has now been assembled, and the strategic direction and development plan have been clarified. The first batch of products has entered the “critical R&D phase”.#### NIO’s New Sub-brand

During the Q&A session, Li Bin also mentioned that NIO’s high-end market segment is primarily priced between 50,000 and 100,000 US dollars, but there is still a very large market across the 30,000-50,000 US dollar price range. It can be predicted that NIO’s new sub-brand will be priced between 150,000 and 300,000 US dollars.

As for the key R&D phase to delivery, it will probably take another two years.

There are many questions regarding NIO’s new sub-brand, including how to effectively differentiate and operate the independent battery swapping system and community from NIO, and whether they have the advantages of the current NIO service system. Due to price limitations, how will the positioning of assisted driving software and hardware be?

Every step will be a test for this “NIO-powered” new sub-brand.

Ecological Environment

Regarding the rumor that NIO will create a mobile phone, Li Bin confirmed this in February.

Li Bin mentioned that NIO will actively explore the possibility of interconnecting cars and mobile terminals. They share common ground in terms of intelligence, supply chain, and software.

For example, NOMI can easily become a voice assistant for smartphones. Similarly, the development of NIO’s mobile phone experience can also benefit the car machine system.

As a key part of the ecological environment, smartphones seem to be indispensable. Similarly, the AR/VR design showcased at the NIO ET5 launch event will undoubtedly generate many more new ideas in the future.

Overseas Markets

NIO stated that the first NIO model to enter the international market, the NIO ES8, has been well received by Norwegian consumers, with around 100 ES8s delivered in Norway each month.

In 2022, NIO will continue to expand into Europe, including Germany, the Netherlands, Sweden, and Denmark. The team-building and preparations for market entry are progressing smoothly.

NIO previously stated that the 866 model will not further penetrate the European market and that the European market will primarily focus on NT 2.0 platform models. In addition to car sales, NIO’s overseas expansion also includes the entire service system, including the NIO App, NIO House, battery swapping stations, and even mobile service vehicles, transferring the entire NIO service system to overseas markets.

Compared with 2021, NIO’s performance in overseas markets in 2022 is worth looking forward to.

Conclusion## At the earnings call, the most impressive detail was not NIO’s operational quality, but a tiny one in the QA session.

Regarding the recent hype “everyone is waiting for NIO’s price increase,” William Li, once again, gave a typical NIO-style perspective.

Simply put, NIO doesn’t plan to raise prices in a situation where “supply chain costs are increasing, but product configuration and experience remain unchanged,” even though it adds financial pressure to NIO.

Keep in mind that NIO is a company with listings in three regions and subject to global investor scrutiny. Instead, NIO chose to return to the user’s perspective. For example, the price increase will be carried out while updating the cockpit and other configurations for the ES8 model, making it a more friendly strategy for both new and old car owners.

The company’s persistence in positioning itself as a user-focused enterprise rather than making financial trade-offs is impressive.

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.