NIO Inc Q3 2021 Earnings Call Transcript

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

Question: Tim Hsiao - Morgan Stanley - Analyst : Hi William and Steven and Jade. Thanks for taking my question. It's great to see NIO manage to navigate through the component crunch and production hiccup in first half. Just two quick questions from my side. The first one, we've seen restructuring and upgrades of the production lines cause around two rounds of disruption to your delivery and production this year. Just wanted to confirm if we have completed all the necessary restructuring for the three new models next year. Or should we expect any similar disruption sometime next year? My second question is about the details of the other sales. Could you share more information about NIO's third quarter other sales? Because they have been surging quite a lot. I think more significant revenue increase was attributable to the sales of NEV credits and the battery upgrade services. Could we have further breakdowns regarding the contribution from those items and what could be the scales of contribution into fourth quarter? Because if you look at the current fourth quarter revenue guidance it seems that it just merely reflects the contribution from vehicle sales. So should we expect the contribution from other sales to rise further? Those are my two questions. Thank you.

Question: Tim Hsiao - Morgan Stanley - Analyst : Sorry, just a quick follow-up. Could you highlight some potential contribution from the sales of credit into fourth quarter?

Question: Tim Hsiao - Morgan Stanley - Analyst : Thank you William.

Question: Nick Lai - J.P. Morgan - Analyst : Thank you for taking my question. It's Nick from J.P. Morgan. Good morning William and Steven. My two simple questions is number one, relating to margins and the second question is related to ET7, the new exciting model. First of all on the margin front. The vehicle margin in the third quarter was 18%, slightly down from 20% in Q2. I wonder how should we think about the margin into Q4 or first half next year taking into account of two factors. The first factor is the pricing dynamic of competition from peers. The second is raw material price, especially on the battery front. That's the first question. I think you answered part of my question earlier on the credit sales. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 10, 2021 / 1:00AM, NIO.N - Q3 2021 NIO Inc Earnings Call So the second question on ET7, it's simply a very exciting product. When should we expect the car to hit the showroom in the near term? And in the medium to longer term, after production is ramped up, how should we think about the volume and the possibility of ET7 relative to our current high-end product, ES8? ES8's current multi run rate sales point is roughly about 1500. So how should we think about the profit margin and volume for ET7? That's two simple questions. Thank you.

Question: Ming-Hsun Lee - Bank of America Securities - Analyst : Thank you. Good morning, William, Steven, and Stanley. My question is regarding your supply chain. Right now actually we are hearing some of the auto companies expect the chip shortage situation will not be fully resolved by the middle of next year. So, right now I want to hear your latest view regarding your chip supply situation and also the large-size battery pack supply situation. Also, right now for your consumers, if they place their orders to you, I think the waiting time is more than two months already, so how will you retain those consumers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 10, 2021 / 1:00AM, NIO.N - Q3 2021 NIO Inc Earnings Call Also, next year we expect the EV purchase subsidy to be cut further, so in this case if the consumer places an order before the yearend but they need to - we need to deliver the car I think in next year, so will we continue to give them similar subsidy amount, so we absorb the subsidy cut? These are my questions. Thank you.

Question: Bin Wang - Credit Suisse - Analyst : Thank you for taking my questions. I've got two ones, and the first one is about the application for IPO, because one of our key concerns that NIO seems to be the only one still just in the US. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 10, 2021 / 1:00AM, NIO.N - Q3 2021 NIO Inc Earnings Call Also, some media reports that is because of the NIO Users Trust. Can you explain it a bit why NIO Users Trust could be one of the reasons preventing you come back to Hong Kong for IPO? That is my first question. The second thing is about the gross margin. Actually, you mentioned one of the reasons because auto finance lead to the margin decline. However, if you have seen the demand has been very good and short of supply. I am just curious why we are in a very tight supply; we still increase the auto finance into the volume margin. Theoretically, it should reduce the auto finance, right? Also, some of my friends told me that you actually remove or reduce auto finance in the number 4 quarter. Can I confirm this is the case? If it is the case, can I assume the gross margin will have an increase in the number 4 quarter compared to number 3, because you don't provide auto finance anymore. The average ASP also were increased by auto finance seems to be one of the reasons for ASP decline in number 3 quarter compared to second quarter. Thank you.

Question: Bin Wang - Credit Suisse - Analyst : 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. NOVEMBER 10, 2021 / 1:00AM, NIO.N - Q3 2021 NIO Inc Earnings Call

Question: Edison Yu - Deutsche Bank - Analyst : Hi, everyone. Thank you for taking our questions. First question is on the ET7 ADAS capabilities. Could you maybe discuss what kind of features we could expect at launch and if you can't reveal that right now, will you expect to do any sort of demonstrations on the road in the coming months, similar to what other competitors have done? My second question, more longer-term, last year at NIO Day, you kind of teased a solid-state battery or a hybrid solid-state battery coming to the vehicles, I believe at the end of next year. Is there any update on this? Is this still on track? Any details you could provide there, that would be great. Thank you.

Question: Edison Yu - Deutsche Bank - Analyst : Thank you.

Question: Jeff Chung - Citigroup - Analyst : Yes, hi, William, Steven. I've got three questions. Number one, what kind of annualized total volume production from the NT2 platform should lead to the 25% GP margin according to your guidance? Secondly - second question is apart from the three brand new products launching 2022, how likely are we going to launch the facelift version of the existing product? The ES8, ES6 and EC6? So how likely we are going to launch six new products next year instead of three brand new products? Finally, it's the NEV credits. So could you guide us how many points we sold in the third quarter? So - and from which we can estimate the ASP of the NEV credit compared with our previous quarters. Thank you, William. Thank you, Steven.

Question: Paul Gong - UBS - Analyst : Yes, hi, thanks guys. I have two questions. The first one is regarding the Norway operation and obviously it has been more than one month and you just briefly mentioned 92% of the users' response and the order has been exceeding your expectation. Can you give us more color, like how the achievement was there and what is the challenges over there? Obviously, it is a rich country but the labor costs might also be much higher than in China. What can you share with us and after Norway, what is your next destination for the overseas operation? The second question is regarding your expanse spending. It seems like for this quarter, the increase in SG&A has been a bit faster than expected while the R&D increase has been a little bit slower than expected. What is the key rationale behind this and key reasons behind it? Do you feel you have so many orders undelivered because of the supply chain disruption or will you consider a slow down a little bit on the SG&A and instead put more budget into the R&D in the following one or two quarters? (Spoken in foreign language).

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

Question: Chang Liu - CICC - Analyst : Yes, thank you for taking my questions. My first question is regarding the capacity expansion. So could you give us guidance on next year's sales volume, especially for the new three models and also our current three models? So can our capacity meet the need next year? Considering the

Question: Chang Liu - CICC - Analyst : Yes. Thank you, William.