Earnings Call Transcript — NIO — 2020Q4

Photo by NIO

Overview

  • Total Revenues reached RMB6,641.1 M ($1,017.8 M).
  • Vehicle Sales were RMB6,174.0 M ($946.2 M) with 17,353 total number cars delivered (7,574 ES6, 4,873 ES8, and 4,906 EC6), and the vehicle margin was 17.2%
  • Net loss was RMB 1,388.6 M ($212.8 M), which was decreased by 51.5% from 2019Q4 and an increase of 32.6% of 2020Q3.
  • Cash and cash equivalents, restricted cash, and short-term investment were RMB42.5 B ($6.5 B).
  • The monthly production capacity has reached 7,500 units per month in 2021.
  • Business outlook: 1) Deliveries of the vehicles to be between 20,000 to 20,500 vehicles in Q12021; 2) Total revenues to be between RMB7,382.3 million (US$1131.4 million) and RMB7,557.2 million (US$1,158.2 million).

For more detailed information, please review the Q4 earnings report here:

Q&A Session

Nio does not consider a mass-market — tried to do so with investment/funding to other business before, but it has pulled most of these investments back and kept them lower than 5% — however, it will still look for potential opportunities.

  • Expected/Guidance on sales in the EU and when to enter into the US market?

NIO will enter the EU market in the middle of 2021. It will enter the US market, but it does not have too much information to disclose right now.

  • The margin got improved a lot — what is the main driving power?

Sales of Es8 and ec6 contributed a lot to the vehicle margin, meanwhile, the material cost also dropped down a little. EV sales credit added on the general margin profits. At the same time, the margin in Q1 will also be kept improving.

  • Battery and chip shortage in the auto industry. How does NIO plan to handle this scenario?

For NIO, the current supply can satisfy the normal production requirement, but it will be hard to predict the future regarding the current global situation.

In Q2, because of the shortage of chips and batteries, NIO will be forced to only deliver around 7,500 cars, even the production capacity could be 10,000 cars. On the other side, NIO has locked down the cooperations with CATL, so the cost of battery materials will not greatly affect the cost.

  • Model Y reduced its price in China, does it affect NIO’s sales in Q1?

Q1 normally posts a weak demand for most EV sales because Q1 is a typical vehicle sales off-season in China. Model Y reduced price, but it actually does not affect NIO a lot, and NIO is always focusing on the sustainable sales market, and it does/will not reduce prices for its products.

On the other hand, the take-rate of BaaS has been to 55% for Feb sales — it goes up gradually and sustainably — BaaS could help to buffer the short-term price impact from the competitors.

  • Prediction on EV sales in 2021 and describe the cost-efficiency of NIO House.

ET7 will start delivery in 2022, which means EC6, ES6 and ES8 will still be the main products for 2021 sales — and these lines are still competitive — NIO in 2021 will proactively build/develop the sales network and charging infrastructure to support the sales.

NIO House — right now, its cost has been lowered a lot — 40% of the previous average investment and 50% of the previous average rental cost.

  • Will the new auto-driving system be onboarded to the current lines as well (BaaS + ADaaS)? Disclose more info on the monthly production/capacity.

Will onboard new AD system to all lines, no more info be disclosed, but this process will happen gradually. ADaaS will be the main strategy in the future because —more user friendly and reasonable for sales — this should be a trend and a good growth engine — BaaS has approved that customers do accept this kind of sales strategy.

Production capacity — NIO has the ability to produce +10k cars per month by doing double-shifts, but regarding the supply chain’s performance, so 7,500 will be the target for Q2— from July, the capacity will be improved again — NIO will reach the annual capacity at 150k (shift) and 300k (double shift) at the end of 2021 and the beginning of 2022. Also, based on the current data, ET7’s pre-ordering has outperformed all other lines.

  • Disclose more information on battery asset joint ventures.

There are eight legit investors gathered together and invested more than 144 million RMB into the joint group.

  • Expansion to more cities in China.

Nio has covered 121 cities in China, and it will add another 120 and 20 NIO Spaces and NIO Houses — will deploy business to cities where BMW/Benz/Audi have set up branches with considering the local demand in general.

  • Will the deployment of ADasS affect the vehicle margin due to new and better hardware installed?

No, NIO’s vehicle margin still targets ~20% in 2021.

  • How will NIO develop its Battery Swap Network in 2021, and how does NIO choose the spot?

NIO collects customers driving data/activities — will choose battery swap stations based on the analysis on the relevant data ~ peak time — it has 10k daily battery sawps. Generally speaking, BaaS and the Battery Swap Strategy combied as a good solution for customers in china — not everyone could install a family-based charging pile, so this could effectively solve their requirements.

Data Engineer. Interested in topics related to data engineering, marketing, and investment in general.