NIO Inc Q3 2024 Earnings Call Transcript

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

Question: Tim Hsiao - Morgan Stanley - Analyst : Hi. Good evening, NIO management team, this is Tim from Morgan Stanley. Thanks for taking my questions. I have two questions. The first one is about brand strategy alignment because we noticed since the L60, ONVO L60 was launched in September, the orders of NIO brands and ONVO brands have being see-sawing. Order trends of NIO and ONVO appear contrived. Should we be worried about the potential cannibalization between these two brands when it comes to the end demand brand position and the supply chain management? That's my first question. Thank you.

Question: Tim Hsiao - Morgan Stanley - Analyst : Thank you very much, William. My second question is about the production ramp up. Because we noticed the production ramp-up of L60 so far is still a little bit slow. What is the main reason to a more moderate ramp up pace would there be any impact to our current order backlog towards the yearend. And in the meantime, in view of the busy model pipeline, firefly and also the new ET9 in March next year, as William just mentioned and more upcoming models under ONVO and NIO. How would the group consider solving the bottlenecks into 2025? That's my second question. Thank you.

Question: Nick Lai - JPMorgan - Analyst : Thank you for taking my questions. Nick from JPMorgan. My first question is for William is how do -- strategically, how do you find the balance between profitability and volume. And, William just mentioned that in the third quarter in recent months, we reduced the incentive by RMB15,000 that obviously should support vehicle margin into yearend. At the same time, that's probably at expense of the slower sales volume. So longer term, can you share with us how should we think about the balance between profit margin and volume? Or in other word, do we have a desired vehicle margin in 4Q in the medium to longer term? I remember in the past, talk about a longer-term vehicle margin between 15%, 18%, or even 20%. Can you share with us the medium to longer-term volume and profit margin strategy? Thanks.

Question: Nick Lai - JPMorgan - Analyst : Thank you. My second question is related to CapEx and OpEx guidance. As we are launching new brand firefly into '25 also higher -- high end ET9 product and so on. So can you give us some guidance regarding OpEx -- in the OpEx ratio as well as CapEx in '25? Thanks.

Question: Ming-Hsun Lee - BofA Global Research - Analyst : Hi William, this is Ming from Bank of America. So my first question is related to the situation in Europe. I want to know that after the tariff in EU is increased. Do you change your pricing strategy? And currently, does this impact the demand in Europe? That's my first question.

Question: Ming-Hsun Lee - BofA Global Research - Analyst : Thank you. So my second question is related to the gross margin profile for ONVO brand because Stanley just mentioned the NIO brand in 4Q, gross margin will continue to improve to around 15%. But I assume you will deliver around 20,000 units ONVO in 2024, what is the rough gross margin profile for this brand. And when your monthly delivery reached 20,000 units for ONVO brand, what is the potential gross margin profile for the brand? Thank you.

Question: Bin Wang - Deutsche Bank - Analyst : Thank you very much. My problem is about the new products in the second half. You just mentioned we have a robust growth in '25 first half would be always niche products such as the ET9 and a new brand. However, what's the plan for the second half? Do you plan to refresh go-to-new generation for your volume products, such as the ET5, ET5 Touring, and ES6, ET6. All thefour products will go to new generation or not in 2025 second half? Thank you.

Question: Bin Wang - Deutsche Bank - Analyst : Thank you. I got a second question about your service margin because you actually have improving in the sales margin in the third quarter to hold negative 8.8%. Can you explain what's the driver for the margin increase in the third quarter in service? And what's your guidance for the number four quarters this year and 2025 for the service. Is it going to be single-digit net gross margin in next year? So what's your guidance? Thank you.

Question: Yuqian Ding - HSBC - Analyst : Thanks team, Yuqian here. I've got two questions. The first is on the autonomous driving. What the management would see -- would say the key milestone for NIO in the coming 6 to 12 months on this account? What's the key challenges at the moment? What is the biggest highlight of NIO's capability. Maybe give us a bit of a breakdown in terms of the user adoption end-to-end modeling, development, processing power and this cost. Thank you.

Question: Yuqian Ding - HSBC - Analyst : Thank you, William. The second question is on breakeven and capital requirements. It looks like next year is very exciting, fully loaded with a strong product cycle also coupled with CapEx and OpEx intensity. So do we have a refreshed breakeven timetable? And how do we look at the capital requirement in the coming 12 to 18 months?

Question: Chang Jing - China International Capital Corporation (Hong Kong) Limited - Analyst : Hi. Thank you for taking my questions. So my first question is a following-up question for the overseas market. So we actually -- our brand and automotive in Europe market quite early as a pioneer, but now we also see some peer brands, companies, they accelerate their exposure in the European market. So can you share our current, like European market strategies, whether we can differentiate our brands and also to further expand our volume. Also, especially combined with the launch of firefly new models next year, where there be aggressive overseas extension targets next year.

Question: Chang Jing - China International Capital Corporation (Hong Kong) Limited - Analyst : Okay, thanks. My second question is regarding to the other sales gross loss. So we can see the gross loss of other sales also narrowed significantly for the previous quarters, so which I think may be related to the increase in our sales volume and also the increase in our like charging and swapping charges and our services. So how do we look forward to the trend of the gross profit margin of other sales? And whether we have an expectation when they can turn positive?

Question: Paul Gong - UBS - Analyst : Hi, William. Thanks for taking my questions. Two questions here. The first question is regarding the demand visibility for the ONVO L60. You seem to be pretty confident with 20,000 units of the volume of the L60 delivery in March. That would put L60 on par to Xiaomi SU7 and Li Auto L6 for now. But when you consider right now, it is a peak season with the help of the stimulus. And moving to Q1 is going to be slack season with perhaps less policy support. How do you have such visibility? Will you carry over, let's say, a significant amount of the backlog you take from right now into the Q1 delivery? Or how do you have such kind of strong visibility for the 20,000 deliveries in March?

Question: Paul Gong - UBS - Analyst : Thank you. My second question is regarding the next-generation platform, NT3. I think the NT2 versus NT1 has a significant improvement of the autonomous driving calculation power, including the 4 orins and also has improved some of the powertrain efficiency. Right now, when you are thinking about designing the NT3, how do you think of the platform in terms of, let's say, the computing power for the AD, the battery size, the power of the motor and the system integration, architecture, et cetera. So can you give us a little bit color of the technology direction of the NT3 platform, please?

Question: Tina Hou - Goldman Sachs - Analyst : Thanks management for taking my questions. The first one is regarding operating expenses. In terms of R&D, I also see that usually in the fourth quarter, there is around -- about close to RMB1 billion of higher R&D expense versus third quarter. Should we expect a similar type of seasonality in Q4 '24? And also for 2025, as we continue to develop new products and then continue to invest in autonomous driving and other technologies. What kind of -- what level of R&D spending are we looking at? And also for sales and marketing in 2025, seeing that this year, we launched one model, the ONVO L60. But next year, we're going to launch four new models. So it doesn't seem like the sales -- the SG&A expense is going to slow down in terms of the growth. Is my understanding correct? Thanks.

Question: Tina Hou - Goldman Sachs - Analyst : Thanks, Stanley. So my second question is regarding the share of losses of equity investee. So we've seen over the past three quarters, that we have seen a negative number, and that number has been expanding. So is this related to the Battery as a Service operation? And then how should we think about this loss from the equity investee going forward? 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. NOVEMBER 20, 2024 / 12:00PM, NIO.N - Q3 2024 NIO Inc Earnings Call