Overview
NIO just released its Q2 earnings report and had the earnings call, and I will list some crucial information about this call below.
In the beginning, William gave the opening remarks below:
- NIO will increase budget in autonomous driving in R&D;
- The number of preorders of EC6 beyond the internal prediction (no detailed numbers got disclosed);
- The production line has started to increase the production capacity from 15 jobs per hour (JPH) to 20 JPH and it will reach from 4500 to 5000 production capacity by the end of August;
- The announcement of Battery as a Service (BaaS) has been executed successfully, meanwhile, the first deal about the BaaS has been processed, including applying for a plate and insurance. Thus, the ultimate release for this service has been ready to be released this fall.
Next, Steven provided the summary of the Q2 ER, for details about the ER, please refer to the link below:
Q&A Session
- Gross margin between ES6 and ES8 / EC6:
The gross margin of ES8 is higher than ES6 — with the economies of scale, both numbers have been improved — did not provide breakdowns
- R&D expenses
NIO as a company, it allocates and tries to ensure that the annual budget on R&D is around RMB 3B. This year we will increase our investment in autonomous driving — the team has about 200 people, and we will focus a lot on the research and development in L4 autonomous driving. Generally, for the R&D budget, we plan to allocate RMB 500–600 million for each season.
- When will NIO release the NGP
This year.
- How many people have bought NIOPilot (RMB 39K)?
The ownership of NIOPilot for our very first group of customers who bought ES8 is 100% — everyone has bought NIOPilot. The ownership about other customers is around 25%, meanwhile, this year we released out a simplified version of NIOPilot (~RMB 10K-15K) and this product is more popular.
- Cooperation with mobile eye EQ5 chip and the delivery date of this product
No clues to be disclosed — NIO as a company does not distinguish autonomous driving in terms of L3 or L4, while, we’d like to value and measure by estimating how much efficiency and safety our products could bring to our customers.
- Enter into Germany market
NIO has started the business development and hiring in EU market, however, considering the current COVID-19 pandemic, we will not try to enter the market until maybe next year.
- Gross margin
It states that in Q2 ER NIO has almost been able to reach a double-digit gross margin for both vehicle gross margin and operational gross margin, so we are confident that we could realize our previous business outlook and achieve a double-digit gross margin in next seasons.
- Production capacity
Currently, the JAC factory could provide a production capacity of 150,000 cars annually with double shifts in the production line — thus, we are not too much worrying about our production capacity in the short-term and we don’t think we will have to invest more in the production line constructions.
My Thoughts
The above call should be able to satisfy lots of investors’ interests, however, the stock price later then plunged a lot — definitely a disaster for short-term speculators and day traders who have long positions, but I don’t think this will be a negative sign for long-term investors.
It is ironic to see such price movement — the company released its all-time best earnings report, but then its price plunged with a fair high volume within the very first 10 mins. I think for many retail investors, this is like a random guy comes by and says that “Sir, we are sorry to tell you that NIO just got cancer, you’d better sell ASAP”. Meanwhile, people said this might be related to the convertible bond NIO issued in the beginning of 2020 or it might be due to other big institutional investors’ tricky manipulations. However, as a long-term investor for NIO, I think this will not affect my future movement. Today, the fact happened and numbers don’t lie, but I believe NIO has its own vision to make the business great.
