NIO Inc Q1 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nick Lai - J.P Morgan - Analyst : Yes, good morning, William and Steven and management team. Congratulations for the great result. My simple two questions. The first one is on gross margin and the second one is really on chip shortage, a common question asked by many investors. Our gross margin indeed is a very good improvement from 4Q last year to 1Q this year. The vehicle margin increased from roughly 17% to 21%. Of that four-percentage-point improvement, I wonder if you could help us quantify a little bit the underlying driver? How much percentage driven by ASP, volume? On the flip side, raw material price, batteries and so on. The second question on the chip shortage, it is a common issue and I know the visibility is very low, two to three months. At the same time, we did revise down slightly our 2Q sales volume guidance from previously William mentioned 7500 per month in 2Q and right now it's roughly about 21,000 to 22,000 in 2Q. On the chip shortage, do we have any visibility on the potential easing of supply? Would that happen hopefully in 3Q? (Spoken in Chinese).

Question: Bin Wang - Credit Suisse - Analyst : Thank you so much. Actually, I have two questions. Number one is about, I found that you have an announcement about ESG. Can you elaborate what was the detail and why you host the an ESG, maybe for the first time. That is number one question - EGM, sorry. The second question is about the margin outlook. Actually I found out a few factors maybe impact the second quarter. One is the NIO Pilot attach rate. Second there was the penetration rate of 100-kilowatt-hour pack. Number three, I found that your offer a free interest rate on auto finance. Number four, maybe in a semiconductor pricing hike, because not just the supply but also the pricing also increase notably. Lastly is about the battery price. Can you provide guidance about the dilution about the margin and the other key parts movements? Thank you.

Question: Tim Hsiao - Morgan Stanley - Analyst : Thanks for taking my questions and congratulations on the result. So two questions from my side. The first question is about competition because as you may notice, that a lot of traditional players launched their models during auto show this year. So if we look at their product pricing, channel strategy, I think that they are quick learners and catching up rapidly. Meanwhile, several tech names and Smart Phone makers also announced their EV plans. So I think we may have shared a lot of initiatives during the call just now but what will really make NIO to be - stay differentiated in the following years? Are we going to change our pricing or product strategy in the mid- to long-term? So that's my first question. Second question is about the launch of ET7 because William just mentioned, I think the supply dynamics stay tight and they might be challenging throughout the whole year. Considering the more backloaded second half, do we see any re-set of launch of ET7 might be delayed or facing any production bottleneck? Especially I think ET7 carries quite a lot of new hardware and software features. What - where could be the potential bottleneck in your view? So thank you.

Question: Tim Hsiao - Morgan Stanley - Analyst : Thank you very much, William and Jade.

Question: Ming-Hsun Lee - BofA Securities - Analyst : Thank you. Thank you William and the management team and congratulations for the good results. So my first question is regarding the details of the Neo Park. So from the announcement that we saw that Neo Park, ultimately it will reach one million units capacity. So I want to understand that probably your near term plan for this Neo Park. Is one million capacity all for NIO or probably will have other EV companies and also for this Neo Park cooperation, will the current cooperation method continue? JAC build plant and hire laborers but NIO will purchase the equipment and mode et cetera. So that's my question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2021 / 12:00AM, NIO.N - Q1 2021 NIO Inc Earnings Call The second question is regarding the battery form factors. So we are seeing more and more auto companies start to apply LFP battery to further control the cost, lower the selling price and to increase the penetration rate. From the recent media we also saw that NIO will probably consider to use LFP battery by the end of the year, so could you give us more update regarding the potential plan? Thank you William and management.

Question: Lei Wang - CICC - Analyst : Good morning, this is Wang Lei speaking. I would say it is beyond our expectation to see the vehicle margin above 20% so definitely congratulations to the team. I think most of my questions have been probably answered. I only have one follow-up question regarding the collaborations with Sinopec Group on swap stations. So will Sinopec burden in some of the CapEx investment in the second generations of the stations or will Sinopec share some of the revenues as well? I'll translate my question. (Spoken in Chinese).

Question: Lei Wang - CICC - Analyst : Thanks William.

Question: Edison Yu - Deutsche Bank - Analyst : Thank you and congratulations on the quarter. Two questions from the competitive angle, sort of. First, coming out of the Shanghai Auto Show, obviously saw a lot of product, a lot of developments, has this influence or sped up your target about bringing in a mass market brand into the market, so a non-NIO brand? Is that effort been accelerated or any sort of change to those kind of plans for going forward? Then second question, it seems like a lot of auto makers now are also potentially considering doing chips themselves. I think it's reported that NIO has considered doing that as well. What's your latest thinking on moving away from Nvidia and doing the chips yourselves as well, or designing the chips yourself? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2021 / 12:00AM, NIO.N - Q1 2021 NIO Inc Earnings Call

Question: Paul Gong - UBS - Analyst : Yes, thanks Will and thanks to everyone. Two questions, the first one is on the R&D and second one a little follow up on the gross margin. On the R&D, I see in this quarter it's actually pretty moderate, even sequentially declined from the 4Q at less than USD700 million. I recall last time you said you are going to double down on the R&D activity in 2021 and significantly increase R&D budget. So can you give us a little bit of an update on this strategy and more importantly, which key areas is going to be the focus of the R&D and any rough breakdown, how much percentage goes to the vehicle development, what percentage goes to the maybe autonomous driving, et cetera. This is my first question. My second question is a little bit follow up on the gross margin. Obviously this is a pretty decent gross margin for a relatively young company like NIO. But in between of this margin versus market share, it is a little bit overly focused on the margin and a little bit under-focused on the market share, do you think? Will you strategically choose either add in higher specs or make the vehicle more competitive in the markets to balance in between this margin versus market share? And also, how do you think about the rising material cost impact in the next few quarters? Because some battery makers have indeed mentioned it's possible for the battery price to go up. I think I caught your comments just now that the 100-kilowatt-hours battery take rate is about 25% in Q1. What was the NIO Pilot take rate in Q1 please? Thank you.

Question: Paul Gong - UBS - Analyst : Thank you very much.

Question: Kelvin Lau - Daiwa Capital Markets - Analyst : Hello, actually it's Kelvin from Daiwa. So I have two questions about Company. So first of all, I want to know, I noticed that you have kind of Norway, launching in Norway conference next week. So I want to know, would there be any other overseas expansion plan that you can share with us? This is the first question. The second question is that can I know how -- because what we know is that the raw material cost and also auto chip costs are all increasing. Do we expect like a month-on-month or even week-on-week increase, affecting your component price? What's the trend or how fast is this accelerating? Thank you. Steven Feng: Kelvin, this is Steven. Sure, first, Norway is the first stop for our long term globalization strategy, but for the May 6 conference call, we will still focus on the Norwegian market. Just for your information, actually in March, we already set up our national sales company in Norway and we also have already built up a local team who will take charge of our local operation and service. In the end, actually we already selected location for our NIO House in Oslo and for more details about the Norwegian market, please do join our May 6 media conference to get more detail. Thank you. Unidentified Company Representative (Spoken in Chinese)

Question: Vijay Rakesh - Mizuho Securities - Analyst : Hi William and Steven. Good quarter and guide here. I just had a question on the longer term. When you look on your partnership with Sinopec, how do you expect them to roll out their stations? I know you have a 500 battery swap station target but any thoughts on how Sinopec would be rolling out their 5000 battery swap stations? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2021 / 12:00AM, NIO.N - Q1 2021 NIO Inc Earnings Call

Question: Vijay Rakesh - Mizuho Securities - Analyst : Also on the solid-state battery roadmap, on your own solid-state battery roadmap, can you give us an update? When do you see that in production or tests? That's it. Thank you.

Question: Vijay Rakesh - Mizuho Securities - Analyst : Thanks.