NIO Inc Q1 2024 Earnings Call Transcript

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

Question: Tim Hsiao - Morgan Stanley - Analyst : Hello and thanks for taking my questions and congratulations on the good feedback on ONVO and also some strategic breakthroughs for NIO Power. I have two questions; the first question is about the gross profit margin. Because as we remember, the Company previously guided vehicle gross profit margin would be back to mid-tens, and the strategic focus of NIO brand is profitability and cash generation, while ONVO would be the one going for volume. However, we saw increasing promotion for NIO brand in April and May, which worked pretty well actually and successfully boosted volume. Will management consider to continue this kind of more aggressive promotion on NIO brand for better [volume] (corrected by company after the call) in the upcoming months? Do we need to revise down our vehicle margin expectation? That is my first question.

Question: Tim Hsiao - Morgan Stanley - Analyst : Thank you, that's very clear, thanks for sharing all the details. My second question is about NIO Power. As William just mentioned, I think NIO Power secures the first round of strategic investment of RMB1.5 billion or around US$200 million. Looking forward, will NIO Power get and accept more funding support from other car makers in the battery swap alliance? Separately, in addition to NIO Power, are there any other business units within the Group that could follow or pursue to seek external capital injection and be gradually carved out? Could management team give us some examples? That's my second question, 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. JUNE 06, 2024 / 12:00PM, NIO.N - Q1 2024 NIO Inc Earnings Call

Question: Ming Hsun Lee - Bank of America - Analyst : Hello, William and the management team, this is Ming from Bank of America. My first question is regarding the ONVO brand. So right now we are close to the end of second quarter, so could you give us some guidance regarding your sales channel expansion and also CapEx expense related to ONVO brand? Also could you give us a rough product pipeline for the ONVO brand? Thank you, that's my first question.

Question: Ming Hsun Lee - Bank of America - Analyst : Could you give a rough pipeline for ONVO brand? For example, one model this year and then maybe two models next year. Thank you.

Question: Ming Hsun Lee - Bank of America - Analyst : Thank you, William. My second question is related to your third brand, because we read that in the news today that the Firefly brand could be launched or shown to the market probably by the end of this year. Could you also give us some latest update on the third brand? Last time during the earnings call you mentioned that probably Firefly brand product could be sold in NIO House or NIO Space. So, could you confirm this network channel? Thank you.

Question: Ming Hsun Lee - Bank of America - Analyst : Thank you, William.

Question: Bin Wang - Deutsche Bank - Analyst : Thank you, my question's about the margin. Because you will migrate to NT3.0 this year, so when all the NIO brand products migrate from NT2.0 to NT3.0, how much margin improvement can you achieve through a technology upgrade? At the same time, based on the NT3.0 technology, can you provide the volume assumption to reach the ONVO company break-even? That's my first question, 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. JUNE 06, 2024 / 12:00PM, NIO.N - Q1 2024 NIO Inc Earnings Call

Question: Bin Wang - Deutsche Bank - Analyst : Thank you. My second question is about the order backlog for ONVO. You actually in an interview, said actually you are very satisfied about ONVO's initial order backlog. Some market talk is that you already have 60,000 cancellable order right now. Can you comment on that number and how satisfied you are about ONVO's order so far? Thank you.

Question: Bin Wang - Deutsche Bank - Analyst : Thank you very much. Thank you.

Question: Paul Gong - UBS - Analyst : Thanks for taking my questions. Two questions. The first question is you mentioned that right now you have 2,400 swap stations. To my best understanding, only the third generation and latest battery swap stations could help ONVO to swap the batteries. Could you please remind us how many units of the later generation battery swap stations could help for the ONVO swap?

Question: Paul Gong - UBS - Analyst : Thank you. So my second question is regarding the level 3 license permit. I think you are among the first batch to receive the level 3 autonomous driving testing license permit. How do you plan to utilize this opportunity, and how should you further develop on the autonomous driving technology? 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. JUNE 06, 2024 / 12:00PM, NIO.N - Q1 2024 NIO Inc Earnings Call

Question: Yuqian Ding - HSBC - Analyst : Thank you, team. My first question is probably still an extra mile on the margin and the pricing. So second quarter, probably we're going to see higher economies of scale, almost doubled versus the first quarter, yet the promotion and also lower mix likely to remain as a dilution. So you talked about the flexible on pricing earlier. So could you put us in a bit more context about how we prioritize pricing mix and volume, and each of their weighting on the margin side?

Question: Yuqian Ding - HSBC - Analyst : Thank you. That's very comprehensive. The next question is on the overseas business, the European Union Anti-subsidy investigation towards China EV might come out as a preliminary result next week. So, could we have an update refresher on NIO's oversea footprint, including Europe and also the Middle East?

Question: Jing Chang - CICC - Analyst : Hi. Thank you for taking my questions. My first question is a quick follow-up question about -- so, can you share with us more information on the financial impact of the major, especially BaaS policy adjustment for first quarter, such as our BaaS rental fee adjustment, and also our four for one battery rental, and also our battery swap coupons, these financial impacts, especially for our income statement? This is my first 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. JUNE 06, 2024 / 12:00PM, NIO.N - Q1 2024 NIO Inc Earnings Call

Question: Jing Chang - CICC - Analyst : Yes, thank you. My second question is about -- also for our -- ONVO and also Firefly. So, this year, we will have ONVO's first car, and next year, we will have Firefly to be launched. Our three sub-brands, including NIO, will form a quite complete product matrix next year. So, can you share more information on these different positions and also the different relationships between these three brands, and also in what aspects can we collaborate?

Question: Tina Hou - Goldman Sachs - Analyst : Thank you for taking my question. So my first question is regarding actually just now William mentioned to keep the volume steadily increased and then to improve growth margins. (Spoken in Chinese). So can we interpret this as for the upcoming month we do expect the vehicle volume to be above 20,000 units per month? That's my first question. Thanks.

Question: Tina Hou - Goldman Sachs - Analyst : Thank you. Can I just have a quick follow up, so for the -- I think starting from September you will start to deliver ONVO. So does the 20,000 units forecast or target include ONVO or exclude ONVO?

Question: Tina Hou - Goldman Sachs - Analyst : Thank you. That's very clear. Thanks, William. Then my second question is regarding the operating expenses. So first on SG&A. In the first quarter we see SG&A actually increased by 22% year-over-year. So should we expect similar type of increase in the following three quarters, and also actually starting from September, since there will be 100 new stores for ONVO added, so in that like the last quarter, should we expect SG&A expense to grow even higher? Then in terms of R&D, on the other hand, I see it down 7% year-over-year. So for overall R&D expense, what kind of annual spending level do you think it will be like a sustainable or a steady state kind of expense for us to keep competitive in terms of our hardware and software technology? Thank you.

Question: Tina Hou - Goldman Sachs - Analyst : Thank you. Yes, I understand that in terms of SG&A as a percentage of revenue it's going to decline, but just in terms of the year-over-year growth for SG&A, shall we expect it to grow more than 22% this year?

Question: Tina Hou - Goldman Sachs - Analyst : Okay. That's very clear. Thank you.