NIO Q1 2025 Earnings Call Transcript

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June 3, 2025
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Operator

Hello, ladies and gentlemen. Thank you for standing by for Neo Incorporated's First Quarter twenty twenty five Earnings Conference Call. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Ray Chen, Head of Investor Relations of the company. Please go ahead, Ray.

Rui Chen
Rui Chen
Head - Investor Relations at NIO

Good morning, and good evening, everyone. Welcome to NIO's first quarter twenty twenty five earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board and CEO and Mr. Danny Chu, Chief Financial Officer. Before we continue, please be kindly reminded that today's discussion will contain forward looking statements made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties.

Rui Chen
Rui Chen
Head - Investor Relations at NIO

As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U. S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward looking statements except as required under applicable law.

Rui Chen
Rui Chen
Head - Investor Relations at NIO

Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non GAAP financial measures. Please refer to NEO's press release, which contains a reconciliation of the unaudited non GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Hello, everyone. Thank you for joining NIO's twenty twenty five Q1 earnings call. In Q1, the company delivered 42,094 smart EVs, up 40.1% year over year. This includes 27,313 deliveries from NIO and 14,781 deliveries from Envoy. Since Q2, the company's deliveries have picked up pace month over month supported by a solid start of delivery, ETNAND and the five flag and the growing demand for Envoy IO 60. In April and May, the total deliveries were 946,231.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

In late May, we successfully launched and delivered the new ES6, EC6, ET5 and ET5P. We expect total deliveries in Q2 to be between 147,000, representing 25.5% to 30.7% growth year over year. On the financial side, the company continued the cost reduction efforts on all fronts, achieving year over year growth in both vehicle gross margin and overall gross margin. Now I'd like to share some updates on our products, R and D and operations. For the NIO brand, the deliveries of ET9, NIO's executive flagship sedan surpassed BMW seven Series and Audi A8L in China in the first four delivery months.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

This marks the first time that our Chinese brand has made a breakthrough in a premium executive segment long led by BBA. On May 16, we launched the new ES6 and EC6 and started delivery on May 20. On May 25, the new E85 and the E85T were launched and delivered starts on May 27. This upgraded model delivered greater perceived value and the product strength, along with major improvements in cost. For the new brand for the Angular brand, since April, Angular has rolled out a series of operational and organizational adjustments, significant improvement in the productivity and the operation efficiency of the sales force.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Such change also shifted Ango towards a positive cycle of brand awareness and the product reputation. With that, Ang's orders have been licensed steadily since late April. Ang's second product L90, a smart large space flagship SUV made its debut on Shanghai World Show. With the Class B in space, ultra low energy consumption and the extensive charging and the swapping network, ANPOR L90 has drawn strong increase from three row SUV buyers. This model will be launched and delivered in Q3.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

The smart electric high end smart small car brand five Life has started a product delivery in late April, Engineered for the five star safety in China and Europe and with the thoughtful space, smart digital experience and the vivid driving dynamics, Firefly stands out in its segment. In terms of tech innovation, NIO's smart driving chip, NS9031, has been deployed in the flagship model, E9, as well as the new ES6, EC6, ET5 and ET5T, and they will be rolled out on new more new models of NEO. These new models are also equipped with NEO's full domain vehicle operating system, SkyOS, and the intelligent chassis system. Such innovations not only enhance the product competitiveness and also improve the vehicle cost structure. As for smart driving, the first new world mode based version has been rolled out to vehicles on the Baiyang platform since late May.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

The new world model or NWM provides full upgrades in active city, urban and highway driving, as well as parking, especially in key areas of active safety. NWM brings enhancements in handling driver emergency, mitigating and preventing rear collisions and recognizing general objects. Based on NWM's comprehensive understanding and the reasoning of much model information in real time, Navigate on pilot plus or MOP plus can guide cars through toll gates across China with automatic navigation to frequent parking spots, as well as mapless and then non memory based way finding in parking lots. NMO P plus also delivers seamless point to point smart driving experience. Near the world model will continue to integrate, bring in safer and smarter driving cost scenarios.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

So far, NIO operates 184 NIO Houses and four sixty one NIO Spaces. And Envoy has four forty five stores in China. On the service side, the company operates three ninety one service centers and 66 delivery centers. We will continue to improve efficiency and the resource allocation through better operations and the performance evaluation across the SaaS network. As of now, the company has 3,408 power swap stations worldwide, including nine eighty nine stations on highway in China, and has provided over 75,000,000 swaps to users.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Besides, NIO has installed over 26,000 power chargers and the destination chargers. To date, NIO's post warp network has achieved country level coverage in Beijing, Shanghai, Jiangsu, Zhejiang, Guangdong and Tianjin. Next, we will continue to expand the coverage through partnerships with site operations, great companies and the capital investors. In international expansion, NIO has partnered with more than 10 local partners in over 15 core markets worldwide and is onboarding more partners. In Q3, Firefly will roll out in various markets, delivering global user experience beyond the expectations.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

On April 7, NIO completed a share offering in Hong Kong. We sent over 4,000,000,000 Hong Kong dollars. This financial round was over subscript much more times, and has brought in a number of global long term investors. Twenty twenty five is the hardest year for products. As multiple core models are to be launched in the second half, the company's deliveries are set to accelerate from Q3 with stronger sales, lower supply chain costs and the better efficiency from new products and the technologies.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Both vehicle and the overall gross margin will keep improving. In improving operational efficiency, since Q1, We've implemented strict investment and the return we built across R and D supply chain, sales and service functions under the SAP business unit mechanism. We have set clear goals for operational and ROI. We start the organization and consolidate teams, prioritize high value projects and introduce the plans to improve productivity and cost efficiency. These measures have taken hold in Q2 and we are continuously yet.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

With growing sales, improving margins and the better cost control, we are in improving the company's financial position starting Q2 and meeting our full year business targets. Thank you for your support. With that, I will now turn the call over to Stanley for Q1 financial details. Over to Stanley.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

Thank you, William. Let's now review our key financial results for the first quarter of twenty twenty five. Our total revenues reached RMB 12,000,000,000, increased to 21.5% year over year and decreased 38.9% quarter over quarter. Legal sales were RMB 9,900,000,000.0, up 18.6% year over year and down 43.1 quarter over quarter. The year over year growth was mainly due to higher deliveries, partially offset by a lower average selling price from product mix changes.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

The quarter over quarter decrease was mainly attributable to fewer deliveries impacted by seasonality. Other sales were RMB 2,100,000,000.0, grew by 37.2% year over year and decreased 5.9% quarter over quarter. The annual growth was from increased sales of parts after sales vehicle services and provision of power solutions, along with a rise in sales of used cars and technical R and D services. The decrease quarter over quarter was due to decreased sales in technical R and D services and auto financing services. Looking at margins, vehicle margin was 10.2% compared with 9.2% in Q1 last year and 13.1% last quarter.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

The year over year increase was mainly due to lower material cost per unit, partially offset by changes in product mix. The quarter over quarter decline was mainly due to the increased manufacturing cost per unit from lower production volume. Overall gross margin was 7.6% compared with 4.9 in Q1 last year and 11.7% last quarter. The year over year increase was mainly driven by first, higher sales of parts, accessories, after sales vehicle services and technical R and D services, which carry relatively higher margins second, higher vehicle margin and third, the reduced gross loss rates from power solutions as our user base grew. The decrease quarter over quarter was mainly attributable to lower vehicle margin.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

Turning to OpEx. R and D expenses were 3,200,000,000.0, increased 11.1% year over year and decreased 12.5 quarter over quarter. The year over year increase was mainly due to the incremental design and development costs for the new products and technologies, as well as the increased personnel costs in R and D functions. The quarter over quarter decrease was mainly driven by decreased design and development costs resulting from different stages of development, partially offset by increased personnel costs. SG and A expenses were RMB 4,400,000,000.0, up 46.8% year over year and down 9.8% quarter over quarter.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

The year over year increase was mainly driven by the increase in personnel costs related to sales functions and the increase in sales and marketing activities. The quarter over quarter decrease was mainly due to the decrease in sales and marketing activities and professional services, partially offset by the incremental personnel costs. Loss from operations was RMB 6,400,000,000.0, up 19% year over year and 6.4% quarter over quarter. Net loss was RMB 6,800,000,000.0 showing an increase of 30.2% year over year and a decrease of 5.1% quarter over quarter. That wraps up our prepared remarks.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

For more information and the details of our audited first quarter twenty twenty five financial results, Please refer to our earnings press release. Now I will turn the call over to the operator to start our Q and A session. Thank you.

Operator

Thank star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. And if you have additional questions, you can then reenter the queue.

Operator

Your first question comes from Tim Sayo with Morgan Stanley. Please go ahead.

Tim Hsiao
Tim Hsiao
Analyst at Morgan Stanley

Hi, William, Stanley and Tim. Thanks for taking my question. This is Tim from Morgan Stanley. I actually have two questions. The first one is about the volume sales because if you look at the announcement, the NIO's second quarter volume guidance of 72,000 to 75,000 vehicles.

Tim Hsiao
Tim Hsiao
Analyst at Morgan Stanley

I think that implies a more moderate sales increase despite the rest of launches of four new models. So looking forward how could NIO give the sales move they say, the five and six series and extra push in the following months to achieve our previous target of 30,000 monthly sales for the NIO's membrane by year end? That's my first question. Thank you.

Moderator

Thank you for the question. As we have stated, our quarterly guidance for the 72,000 to 75,000 units. In that case, we expect to deliver around 25,000 to 28,000 units in June. And in terms of the core volume driver for the new brand, as we have just recently upgraded and launched our all new 5,566, these are our new EC6, ES6, EE25 and EE25 team in late May, and we have just started delivery of these four new models, then they are going to experience their first full delivery month in June. As you can tell from their MSRP, there is actually no major changes with the selling price of this four models, yet considering that before the launch of this four models to clean up the inventories, we had provided some promotions on this four models in the previous generation.

Moderator

With that, the actual price increase is around 10% from last generation to this generation. So for the next step, we are going to stabilize on the prices of this four new models. And looking at the vehicle gross margin, actually, the improvement is more than 10% from last generation to the model year 2025. And also, the bigger principle for us is to realize a good gross profit than simply looking at the vehicle sales volume. As we also look at our overall performance from the P and L perspective.

Moderator

In that case, we really need to strike a balance between the sales volume and also the selling prices of our product. And also, in the meantime, we will keep improving our operational efficiency and the system. And going into the fourth quarter, we are going to introduce our all new ES8, the next generation ES8, which is a highly competitive product. With that, we believe that in Q4, for the new brand, the monthly delivery will be around 25,000 units. That's around 20% year over year growth from last year's Q4, which was around 20,000 units a month.

Moderator

In that case, while improving the sales volume, we are also going to improving our vehicle gross margin significantly for the new brand to be above 20% in Q4.

Tim Hsiao
Tim Hsiao
Analyst at Morgan Stanley

Thank you very much, William. My second question is about the cost reduction because we noticed that NIO has implemented a series of cost cutting majors over the past six months. So when are we going to see more meaningful contribution from such cost reduction effort? And could you please quantify and specify which categories we could probably see more significant improvement into second half? That's my second question. Thank you.

Moderator

Thank you for the question. As you've mentioned, since March, we have conducted a series of cost control and efficiency improvement measures. And here, would like to further elaborate on that from the following aspects. The first is regarding our short term work. Basically, when we view and sort out all the key matters, projects and organizations and to look at the things that are not going to generate positive return on investment within the year, and we have made determined actions in terminating or postponing them for the short term return.

Moderator

And the second is regarding the efficiency improvement. This is also mentioned by William in his prepared remarks. In terms of improving efficiency, we also conducted the actions in the following aspects. The first is from the R and D perspective. We have established a new mechanism called VCO product line.

Moderator

With that, we have majorly merged the R and D resources of the NIO brand, AMOLED brand and the Firefly brand to further improve the overall efficiency of our R and D activities. And the second is regarding the improvements in the industrialization cluster. We have optimized and restructured the logistics functions, quality functions and also supply chain functions by streamlining the team and also merging repetitive roles. And certainly, we have also made improvements in the sales and the service side. For the non frontline teams, we have also made major improvements and also consolidations on the teams, including their roles and also positions to better improve the efficiency and the productivity of the teams, especially the back end teams.

Moderator

With that, we are going to witness the savings from the operating spending perspective and such saving will be reflected in our Q2's earnings and also the corresponding results. And more specifically on the tighter control over the spendings. Regarding the R and D spending, in Q2, our target is after excluding the one off impact, we would like to achieve a 15% improvement or actually R and D expense reduction. And in Q4, as we also have the breakeven target, we aim to control our R and D expenses to be waiving RMB2 billion to RMB2.5 billion per quarter. That represents a 20% to 25% year over year decrease from last year.

Moderator

And regarding the SG and A expenses, as this is also relevant to the marketing activities and also the tightened competition in the market as well as our soft performance. So we will also manage the SG and A expenses in a very careful and prudent way, carefully balancing the return and also the investments on all these campaigns and activities. The target is to reduce the SG and A expenses quarter over quarter from Q2 this year. And by Q4, considering the breakeven target as well, our target is to control our non GAAP SG and A expenses to be within 10% of the sales revenue.

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

Thank you, Tim.

Tim Hsiao
Tim Hsiao
Analyst at Morgan Stanley

Thank you. Thanks so much.

Operator

Your next question comes from Ming Sun Li with Bank of America. Please go ahead.

Ming Hsun Lee
Ming Hsun Lee
Managing Director - Head of Greater China Auto research at Bank of America

Thank you, management. This is Ming. I also have two questions. My first question is related to your new award model. So after you launch the new award model, in May, what is the feedback from your users?

Ming Hsun Lee
Ming Hsun Lee
Managing Director - Head of Greater China Auto research at Bank of America

And also, compared to your original rule based autonomous driving solution, how more advanced after you launch your water model. And for your trip, because right now, in certain models, you are using your own desired trip. So you already save some cost. Do you also give up those benefit to the users? In the future, will Angou also use the same chips? Thank you. That's my first question.

Moderator

Thank you for the question. In late May, we have started to release and rolled out our first smart driving version based on the new world model NWM to the Banyan users. Those are the users who are running on our second generation platform products. And actually, in the previous versions, we have already released a series of active safety features based on our end to end architecture and solution. With that, we also see significant decrease in the accidents and also the avoidance of the accidents and a better driving safety with our active safety features.

Moderator

For example, for the new world model, we have also released the emergency safety pullover. This also is one of the first in the industry. Overall speaking, our vision for smart driving is to reduce traffic accidents. And in that case, our active safety and our smart driving feature in general has been leading in the industry. And the second key vision of our smart driving is to release the driving pressure and stress.

Moderator

In that case, NWM based version has also provided better experience across all scenarios. For example, we have we are also one of the first to release the point to point smart driving and also parking. Our overall experience is better than our peers in the industry. With NWM, we have achieved better experience in highways and also urban expressways. Our original experience based on the previous version was already good.

Moderator

And right now, we have made the overall smart driving experience even more seamless, for example, automatic pass through of the toll gates on highways. And in terms of the smart driving in urban roads, we have also achieved very good point to point smart driving. That's basically smart driving from a parking lot to parking lot with a high usability and good experience. So basically, we have achieved a good smart driving experience across three key scenarios of our users. For example, we have released this automatic wayfinding in the parking lot where our users can provide natural language comment to ask the car to navigate to a parking space across different floors or even regions within the parking lot.

Moderator

And this is just one of the many, new features that we are going to release based on the NWM, enabled smart driving features. And with that, we also see the possibilities, in improving the experience with the NWM. So overall speaking, this is a version that we have restructured the entire smart driving with our data closed loop and also feature closed loop. For the next step, we will keep improving and iterating this feature based on the feedback provided by our users to make the overall experience more seamless and also more useful. So that's the NWM based smart driving version released to the Banyan system.

Moderator

And in the meantime, as our third generation platforms, Sida and Sida on ET9 and also the new 5.5 and the 6.6 products, they are running on our in house developed smart driving chip, NX9031. And the NWM based version running on the NX9031 will be released in late June. That's our expected release date. But this that is around one month later than the release to Banyan platform and the specific release date will also be dependent on the actual approving process and the reporting process. The R and D process is actually in good progress.

Moderator

And for the long term, ARMOR products will also switch to the in house developed smart driving tools.

Ming Hsun Lee
Ming Hsun Lee
Managing Director - Head of Greater China Auto research at Bank of America

So our next question is related to Anvul brand. So after you have some management change, what is the strategy to enhance the volume sales of L60? And also, what is your expectation of L80 and L90?

Moderator

Thank you for the question. In April, we have made major organizational and operational adjustments to Anvil, including the adjustments to the core management team, sales team as well as the regional teams. As we were making major investments, the good sign is that we didn't see major impact or an active impact on the sales volume of L60. Actually, in late April, we witnessed the growing order momentum of this product. And in May, the monthly delivery of L60 is more than 40% higher than in April.

Moderator

And these are the positive changes that we've seen. And if we look at the actual product performance and competitiveness in the market regarding L60 in the first four months of this year, among the battery electric vehicles priced between hundred thousand to 300,000, our L50 has been the top three best selling product in that segment. And we also expect its performance to continue to pick up in May and June. And this has also demonstrated the strong product performance and strength in the market. However, the product competitiveness and performance is just one of the foundations.

Moderator

In the meantime, we also see the maturity with our self-service network. Ango now has more than four forty stores and many of the stores, including the frontline and the follow teams are also getting more mature and adapted to the job. In that case, for the next step, we will also as they are making major contribution or growing contribution to the sales volume, for the next step, we will also keep improving the operating efficiency and also productivity of the teams and stores. And the third key driver is regarding our battery swap and also battery charging and swapping networks. We need the battery swapping network.

Moderator

Right now, in China, more than 1,900 power swap stations are available for onboard users with more a lot more batteries available or circulating in the power swap systems for the onboard users. And in the meantime, we are rolling out this PowerUp content plan where we are increasing the content level coverage of our PowerSoft network. So far, in Beijing, Shanghai, Jiangsujiang, Guangdong, and Tianjin, we already see the content level coverage of our PowerSoft network. And for the next step, we will continue to increase such coverage across more provinces and counties, which will be actually even more important for the Amo users and the product. And in the meantime, in lower tier cities like third or fourth tier cities, we are also trying to use a power swap station as a window of opportunities or a point of sales for the sales and operations, but also lower physical cost than physical stores.

Moderator

So to put it simple, basically in some counties and also profecture level cities, we don't need to open up the actual stores or showrooms. Instead, we can use a power swap station as a point of sale to present our product and provide experience and the cluster drive sessions for our users supported and facilitated by the local sales team. This is actually a unique advantage of the of NIO as the entire company, especially to boost the sales in the lower tier cities. This will be very important and also a systematic approach to boost the sales of With that, we are confident that the monthly sales volume of L60 will be bouncing back to more than 10,000 units. And in the meantime, the second product of Anvil L90 will be released and delivered in Q3 this year.

Moderator

Since its debut at the Shanghai Auto Show, we have also brought the product to several cities for the showcasing, and our users are actually looking forward to this product as L90 comes with a huge flunk. This has also solved one of the biggest pinpoints of a three row of a three row SUV without enough space for storage and the luggages. And also in the recent information released by the MIIT, AMO L 90 also boasts impressive energy consumption and energy efficiency within its class. So basically, we believe that L90 will be a game changer in the large space SUV or three row SUV segment. And in Q4, we will also release the LAP product.

Moderator

Then by end of this year, there will be three products under the Envoy brand, and these three products will all be targeting family segments with high good qualities and experiences. And this lineup will also better will also provide better synergies. And in that case, our target is to realize a monthly delivery of 25,000 units of business grade products in Q4.

Ming Hsun Lee
Ming Hsun Lee
Managing Director - Head of Greater China Auto research at Bank of America

Thank you, William.

Operator

Your next question comes from Bin Wang with Deutsche Bank. Please go ahead.

Bin Wang
Bin Wang
VP - Investment Banking at Deutsche Bank

My first question is about second quarter because you've got a new festive product at a higher price and you'd say in house semiconductor. In any chance, you got a further margin expansion in the second quarter for vehicle margin, which will help the overall gross margin back to double digit?

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

Pardon me.

Moderator

Thank you for the question. As in Q2, we have completed the product transition for the new brand. We have successfully launched and started to deliver our new ET5, ET5T, EC6, and ES6. With that, we also witnessed the increase in the average volume price of the new models. And also, as the new models are equipped with the in house developed chip, this can also contribute around 10,000 saving and cost reduction per unit.

Moderator

With that, in Q2, the vehicle gross margin of the new brand will be improved to around 15%. And for the ARMOR brand, as in the second quarter, it will still only have a one product, L60, as the L90 will be released in Q3. Then with as we expect the growing volume for the L60, we also expect certain improvements regarding the manufacturing costs driven by the volume increase. But as it is only contributed by one model, the improvements from the manufacturing cost perspective will be limited. And the major gross margin driver for the Anhu brand will still be happening in Q3 driven by the launch of the new model.

Moderator

With that, we believe that the overall gross margin in Q2 will be coming back to double digit. That's our target. And a little bit more information on the new products. As our core volume products, five point five and six point six were having the vertical products transition during the April and May with that to clean up the inventories for the previous generations. We offer the promotions with that.

Moderator

The actual vehicle margin for that generation was relatively low. But starting to and as we are rolling out and delivering new products, we also witnessed better or improved margin on this product. For ES6, the vehicle gross margin will be around 20%. EC6 is slightly higher than the ES6. And also for the ET5 and ET5 Touring, we also expect to improve the vehicle gross margin.

Moderator

So overall speaking, for the new brand, the vehicle margin improvement is on the right track.

Bin Wang
Bin Wang
VP - Investment Banking at Deutsche Bank

My question is about the number four quarter breakeven assumptions. Basically, you just guided NIO brand will reach 25,000 mono in the number four quarter this year. Similarly, OVO brand will also have a 25,000. Let's assume they can sell 130,000 in the number April. We have RMB 250,000.

Bin Wang
Bin Wang
VP - Investment Banking at Deutsche Bank

Roughly, can reach 35,000,000,000 on top line. So until we got 18% gross margin, we can reach roughly 6,000,000,000 gross profit. You have mentioned you prefer you guided R and D expense will decline to point 5 billion dollars You also actually guided the same space will be around 10% on top line. So overall, the total OpEx will be around $6,000,000,000 And I assume this is roughly the assumption to reach a breakeven in number four quarter. Thank you.

Moderator

Thank you for the question. Actually, the equation you have mentioned is more or less our operational target internally as well. Regarding the monthly sales volume, slightly over 15,000 units a month, Vehicle gross margin, 17% to 18% combined margin. SG and A expenses within 10% of the sales revenues and for the R and D expenses also achieving that level of management and control. With that, we are able or we have the confidence of achieving the breakeven as we see also our peers who achieve the profitability running on the similar scale and also the similar numbers.

Moderator

Back in 2021, when we just had one new brand, we also managed to achieve a vehicle gross margin of over 20%. But back then, we haven't started the major investments in the R and D or the multi brand strategy. As starting recent years, we have witnessed quarter over quarter losses mainly because of our intensive investments into the R and D of the new products and technologies, multi brand strategy and also the network development, especially infrastructure network. But starting Q2 this year, we are also starting up a year of harvest or a period of harvest where we are going to see the tangible results starting Q2 and then towards Q4 this year, the results from our brand development, product development, network and also network development as well as the cost reductions and efficiency improvement. With that, I think your equation or your assumption is kind of also a guidance for us to achieve our operational target and also profitability in Q4 this year, and we are confident in that.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

You.

Bin Wang
Bin Wang
VP - Investment Banking at Deutsche Bank

Thank you very much. Thank you.

Operator

Your next question comes from Paul Gong with UBS. Please go ahead.

Paul Gong
Paul Gong
Head - China Autos Research at UBS Group

Hi, William. Thanks for taking my question. My first question is regarding the market feedback after the delivery of the five Series and six Series. I have seen some positive comments, but also have seen some disappointment among some of the car buyers saying it is still using like 400 volts battery instead of like the 900 volts on like the ET9. Do you have any plan to switch into the 900 volts battery system at certain points?

Paul Gong
Paul Gong
Head - China Autos Research at UBS Group

And what other feedback have you received from the car buyers? That's my first question. Thank you.

Moderator

Thank you for the question. Since the launch of our new ES6, EC6, ET5 and ET5 in late May, we have received quite a lot market feedback and mostly positive as people do see significant improvement in the product competitiveness, especially for the chip technologies, iOS vehicle operating system, and also active safety features we have debuted on the ET9 are also now available on the five and the six series models. And regarding the high voltage platform for the 5.5 and the 6.6, they are still running on the 400 volt. The overall feedback is also okay as we not only have improved the energy efficiency of these four models for extended driving range than the previous generation, we also have our power swap network that can ensure a good experience for our users. Especially, we have this chargeable, swappable and upgradeable network enabled by the power swap.

Moderator

We also provided the flexible battery upgrade vouchers to our users for the new 5.5 and the 6.6 models. In that case, they have the flexibility to upgrade to 100 kilowatt hour battery for longer range. And if they would like to have an even longer range, they can also choose to upgrade to 150 kilowatt hour battery with more than 1,000 kilometer driving range. So, overall speaking, with improved energy efficiency and also chargeable swappable network, the feedback on the high voltage system is fine. And for the short term, we don't have plan to upgrade these four models to the 900 volt architecture platform.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Thank you, Paul.

Paul Gong
Paul Gong
Head - China Autos Research at UBS Group

Yes. Thank you. My second question is regarding the channel network. Right now, you have the NIO and the Anvil two networks and Firefly is sold within the NIO system. And just now you have mentioned that there is some innovative and new exclusive solutions by leveraging with the battery swap station and to do the product demo and show up.

Paul Gong
Paul Gong
Head - China Autos Research at UBS Group

Do you foresee at certain points that you could further reform the channels and by leveraging with the synergies between the two network and perhaps some cross sell or sometime like yes, merger of the network? How do you think about the channel management?

Moderator

Thank you for the questions. Regarding the point of sale for the Envo and the new brands, we will still keep them separated. But in the mid and the back end, we are leveraging the synergies and also better integrate between these two brands, both in the headquarters and also in the regions. As actually in many regions, the general managers of those regions are taking the concurrent roles to manage the sales of both new and the envelop brands. So overall speaking, we will better integrate these two brands from the mid and the back end perspective for better efficiency and synergies.

Moderator

But in the meantime, we will also need to strike a balance between efficiency and the brand differentiations. So the longer term is to further integrate and leverage the synergies, that we will not be combining the point of sale. Regarding using power swap stations as a point of sales, we are doing some demonstrations and the pilot rounds in certain regions where we will not open the stores, but use the power swap stations as a window to get to reach out to our users and demonstrate our products and services. In that case, we will have the sales team and the fellows on-site, but they will promote the product without having the stores. This is actually a unique selling point or a unique advantage of the NIO company by leveraging the power swap stations.

Moderator

And especially for the onboard users, in our survey, we have found that around 60% of our users actually think power swap station where the capability of doing power swap is the top purchasing reason for them to buy the Envo product. This is also another demonstration of the significant value of a power swap for the Envo product and Envo sales. And the same actually happens to the new brand as there is a small county in Shandong called Xingfu County. And in that place

Stanley Qu
Stanley Qu
Chief Financial Officer at NIO

Town.

Moderator

Actually, it's a town. There's a town in Shandong called Xingfu Town. And in that place, we have no stores or showrooms, but only several power swap stations. Yet in that place, we have more than 1,000 new users. This is also a lively case showing how power swap station can contribute to the sales volume.

Moderator

In that case, we are doing a series of systematic measures and also designs centering on using power swap as a point of sales.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Thank you, Paul.

Paul Gong
Paul Gong
Head - China Autos Research at UBS Group

Thank you very much, William. That's quite helpful.

Operator

Your next question comes from Yukon Ding with HSBC. Please go ahead.

Yuqian Ding
Yuqian Ding
Analyst at HSBC

Yes. Thank you, Jean. I've got two questions. The first is continuous on the model. So the two new models is actually at a higher pricing point.

Yuqian Ding
Yuqian Ding
Analyst at HSBC

What was the key selling point against the current There seems to be a little bit of consumption downgrade this year. And roughly, what's the mix between sixty, eighty and ninety expectation, especially into by the end of the fourth quarter?

Moderator

Thank you for the question. Envoy L90 is a smart large space flagship SUV. It's a three row SUV and the L80 is a large five seater SUV and both models are for mainly for the family users. And almost became for the ARMOR's product, it is based out on NIO's technology and innovation innovation with a targeted design for the family users. And with that, we actually studied the mainstream family users in the Chinese market, and we have developed a value equation for the product definition and also development of the Angou brand.

Moderator

With that, design and also functionalities of the product will mainly serve the value creation for the family users. And as we have debuted the L90 at the Shanghai Auto Show, we have demonstrated how large the space is with this model, especially with its big trunk. With six occupants onboard, the car is still enough to accommodate 10 suitcases. Actually, this is an unprecedented functionality for a three row SUV, be it running on batteries or ice or range extender. This is actually a product innovation driven by our tech innovation and space innovation.

Moderator

And in the recent information released by the MIT people is also impressed by the low energy consumption and the energy efficiency of the l 90 because it's it's such a big three row SUV and running on 85 kilowatt hour battery, the car still manages to achieve 6,600 kilometer driving range. This is actually an impressive result achieved on this model and also a very important advantage for the family users considering the overall driving range and also the cost of their ownership. And actually driven by the tech innovation and also the lowering lithium price or in general battery costs, we are seeing a turning point for the growth of the mid and the large SUV battery electric SUV. If you look at the first four months of this year regarding the growth rate in the mid to large and also large SUV segments, the growth rate for the BAF models is actually 63% year over year. For the range extended version, it's only 1%.

Moderator

For P Hive, it's also roughly 60%. With this as a backdrop, we believe that L80 and L90 will be two game changers in this segment, And we have confidence for that as we are creating better experience and also more user value through our tech innovation and the product innovation. Plus, we have our nationwide available power swap network to help relieve the range anxiety of our users. With that, we believe that this year, we'll also witness the turning point for the growth of mid and the large battery electric SUV segment.

Yuqian Ding
Yuqian Ding
Analyst at HSBC

Thank William. While the company is heading towards the fourth quarter breakeven target, we're also conscious that gearing ratio is also running high. Could you share a little bit more about the cash flow improvements and the cash management?

Moderator

Thank you for the question. In Q1 this year, we see the lowering of our cash position. This is partially due to the seasonality of the car sales as in Q4 last year, our sales volume was 72,000 units, while in Q1, it's 42,000 units. That has actually costed the outflow of the working capital of more than RMB 10,000,000,000. And in the meantime, we also have some capital expenses as well as the one off expenses, for example, the put option for our convertible bonds, which is around RMB 2,700,000,000.0.

Moderator

But in the meantime, we are also raising funds in late March. We have completed the fundraising through our Hong Kong Stock Exchange and raising around 4,030,000,000.00 Hong Kong dollars. Yet this part of fundraising was not recognized until early April. So it was actually not recognized in our Q1 financial results. But as we have shared starting April, we are seeing our sales volume to pick up the pace.

Moderator

With that, this will also help bring our operating cash flow to the normal track. And as we have mentioned, our volume guidance for Q2 is between 72,000 to 75,000 units. This will help improve further improve our operating cash flow. And in Q3 and Q4, we have higher expectation and targets for the sales volume, which will help our operating cash flow to continue to grow and improve in Q4 this year. And for the full year, we also see the possibility of achieving positive free cash flow.

Moderator

In the meantime, we will continue our cost reduction and efficiency improvement effort to have a tighter control over our OpEx and the CapEx to make sure that our expenses are necessary. Thank you.

Operator

Your next question comes from Jing Chang with CICC. Please go ahead.

Jing Chang
Analyst at China International Capital Corporation (CICC)

Thank you for taking my question. I only have one question about overseas market strategy or target and especially for the Firefly Global expansion. So regarding to the overseas market. I think that the last year we have already achieved sales volume of several thousand units, especially in European market. So in this year, from the beginning, we see that several brands in European market, they expand a lot and grow rapidly.

Jing Chang
Analyst at China International Capital Corporation (CICC)

And also considering the potential adjustment of the tariff policies, where you can market our overseas extension become a strategic priority for 2024 and what's our overseas sales target for this year. And also, we see that we have mentioned the Fireflies global expansion. So, share more details including the timing of also region priority and also the pricing strategy.

Moderator

As mentioned, starting this year, we have started to change our global expansion strategy. Before in Europe, we mainly relied on our own sales and service network via the direct sales model. Starting this year, we started to switch to look for local partners for each country. And as I've mentioned, we have already partnered with more than 10 partners in more than 15 markets, and we are bringing more partners on board for more for broader market entry. And regarding the overall global expansion and the strategy, we actually have a pretty long term view for our international development.

Moderator

For the Firefly brand, it will be rolled out to several European countries as well as several other countries this year. And regarding the product from the Amo and the NIO brands, depending on the demands of the markets, we will also see if there are good products for some countries and regions worldwide. But overall speaking, we don't have a very aggressive volume assumption or target for the global market because we mainly look at this for a very long term perspective.

William Li
William Li
Founder, Chairman of the Board & Chief Executive Officer at NIO

Thank you, Tanji.

Operator

Your next question comes from Tina Howe with Goldman Sachs. Please go ahead.

Tina Hou
Tina Hou
Analyst at Goldman Sachs

Thanks management for taking my questions. I have two questions. The first one is as we are targeting to reach more than 50,000 monthly volume at the 4Q of this year, how are we planning our capacity? What kind of production capacity do we have now? And then what level will we reach by 4Q?

Tina Hou
Tina Hou
Analyst at Goldman Sachs

And then are we adding, new lines or adding double shift to achieve that?

Moderator

Thank you for the question. Our current production capacity will be enough to support our delivery assumptions for Q4 this year. We are preparing our third factory and it will be put in operations starting September year. And for certain production lines in some factories, we also have the flexibilities to arrange double shifts. In that case, production capacity won't be a problem for us.

Tina Hou
Tina Hou
Analyst at Goldman Sachs

Thank you. And then my second question is regarding our working capital, our cash conversion cycle, because we have observed that both if we look at full year 2024 versus 2023, the account payable days, account receivable, as well as inventory days have actually gotten longer. And if we look at 1Q twenty five versus 1Q twenty four, these days also got longer on a year over year basis. So going forward, I think for the full year of 2025 and maybe longer term, how should we think about these cash conversion cycle? What is the like optimal days for these working capitals? Thanks.

Moderator

Thank you for the question. As you have mentioned two key parameters, inventory level and also the accounts payable. Regarding the inventory level, as we see growing intensity in terms of the market competition, we are also switching our sales model from OTD, that's order to delivery model, to more inventory based. In that case, this is also a better practice to cater to the demand of the consumers where many of them would like to pick up their cars as soon as possible. So as now we are switching to the inventory based sales model, we also are seeing higher inventory levels regarding the vehicles as well as the production materials in comparison to the OTD mode.

Moderator

If we would like to continue to keep up the sales volume against the growing fierce competition, then we will also see the growing level of the inventory, but we will have a very and tight control over the inventories of both vehicles and the materials. Basically, the reasonable inventory level of vehicles will be around one third to half of the monthly sales volume of each brand. And regarding your second question on or the second parameter on the accounts payable, actually the payment duration we set for our suppliers has always been the same. That's around the ninety days. But due to the accounting and also financial releases quarter over quarter, there are certain fluctuations that is also mainly related to the use of the check for the payment.

Moderator

Within the ninety day payment duration, we normally will ask normally, we will pay half in cash to our suppliers and another half in check. But depending on the supply of the goods and also the urgency of the supply or the types of suppliers, they will also have a variety of terms and conditions for the payment. Certain receive 100% payment only 100% payment in check and certain will only receive or allow for 100% payment in cash within sixty days. So the payment terms and conditions also vary from a sub buyer to sub buyer, but the overall duration is consistent. As we see growing sales volume, in that case, we will also see growth in the purchasing value of these commodities and goods from our suppliers multiplied by the volume and also the duration, we will also see the rising level with our accounts payable.

Moderator

But overall speaking, that's actually normal as it's relevant to the volume, the sales volume of the product. Thank you, Regina.

Tina Hou
Tina Hou
Analyst at Goldman Sachs

Thank you. That's very clear. Thanks, William and Stanley.

Operator

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Rui Chen
Rui Chen
Head - Investor Relations at NIO

Thank you again for joining us today. If you have further questions, please feel free to contact our IR team through the contact information on the website. This concludes the conference call. You may now disconnect the line. Thank you.

Executives
    • Rui Chen
      Rui Chen
      Head - Investor Relations
    • William Li
      William Li
      Founder, Chairman of the Board & Chief Executive Officer
    • Stanley Qu
      Stanley Qu
      Chief Financial Officer
Analysts
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Key Takeaways

  • In Q1 NIO delivered 42,094 smart EVs, a 40.1% year-over-year increase, and expects Q2 deliveries of 147,000 units (25.5%–30.7% growth).
  • Vehicle gross margin rose to 10.2% (from 9.2% a year ago) and overall gross margin to 7.6%, with guidance for double-digit margin in Q2.
  • Launched four new models—ES6, EC6, ET5 and ET5P—with early deliveries gaining traction, and the ET9 executive sedan has outpaced BMW 7 Series and Audi A8L in China.
  • Q1 net loss widened by 30.2% year-over-year to RMB 6.8 billion and quarterly revenues fell 38.9% due to seasonality and product transitions.
  • Implementing cost-cutting and efficiency measures to cut R&D expenses by up to 25% and SG&A to 10% of sales, aiming for breakeven in Q4.
AI Generated. May Contain Errors.
Earnings Conference Call
NIO Q1 2025
00:00 / 00:00

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