On November 10, Chinese electric vehicle maker NIO released its financial report for the third quarter of 2022. The company achieved revenue of 13.002 billion yuan ($1.81 billion) in the period, up 32.6% year-on-year and achieving positive growth for 10 consecutive quarters. However, the firm’s net loss reached 4.14 billion yuan, up 44.9% year-on-year.
During the fourth quarter, NIO is expected to gain revenue totaling between 17.37 billion yuan and 19.23 billion yuan, up 75.4% to 94.2% year-on-year. The firm anticipates delivering 43,000 to 48,000 vehicles in the fourth quarter, setting the highest delivery figure for a single quarter. In October this year, NIO delivered a total of 10,000 new cars. Based on this calculation, the sales volume of NIO will reach 33,000 units to 38,000 units in the last two months of this year.
NIO is speeding up its launch of its new cars. William Li, the CEO of NIO, revealed, “We will launch five models in the first half of next year, and one of them will compete with Tesla’s Model Y. Our overall strategy is to meet the needs of high-end users in a more efficient way. By June next year, we will have eight cars on sale.”
As for the sub-brand’s models, Li said, “I just finished another conference and learned that a car with lower price can be sold for 50,000 units per month. We hope our sub-brand can achieve this goal. Different market segments should have different user interests.”
With the continuous introduction of new models and the expansion of business boundaries, NIO‘s R&D investment has naturally risen. In the next phase, NIO‘s R&D expenses will remain at about 3 billion yuan every quarter, and the systematic efficiency of R&D will be improved. In addition to the core business, NIO will also invest 3 billion to 4 billion yuan in new sub-brands, batteries, chips, mobile phones and others next year.
In October, NIO‘s automobile production capacity was challenged, and two factories in Hefei temporarily stopped production. In the third quarter earnings conference call, Li gave a detailed explanation of the issues. Affected by many factors, the firm lost revenue from thousands of vehicles that had not been produced, and suffered from insufficient supply of subframes. At the same time, the new ET5 model adopted a new EDS (electronic differential-lock system) factory which is in the stage of capacity building, so production was affected by about 2,000 to 3,000 vehicles.
Li said that the subframe problem had been solved and an EDS production line will be added in November. It is expected that capacity for the ET5 will reach a normal level in December.
Regarding the question of whether market demand for the ET5 will be disturbed by Tesla’s price reductions in China, Li replied, “The demand of the ET5 is undoubtedly very strong and in line with expectations. Tesla’s price reduction is nothing new and has no impact on NIO‘s demand. Tesla Model 3 and Model Y are not in the same price range as NIO‘s vehicles.”
At present, the two NIO factories have reached a production capacity of 150,000 units per shift, which can meet market demand in the short term. However, Li has adopted a more cautious attitude towards supply chains. He predicted that supply and vehicle production can support NIO‘s automobile production target next year, but the number of deliveries in December will be limited by a shortage of power semiconductors.
In addition, Li has repeatedly mentioned the irrational pricing of raw materials for batteries. He believes that the market price of lithium carbonate is not determined by supply and demand. The average battery capacity of NIO‘s automobile is now about 80 kWh, and the price of lithium carbonate has a great impact on the gross profit margin. Every increase of 100,000 yuan in lithium carbonate prices will reduce the gross profit margin by about two percentage points. If the price of lithium carbonate can be reduced from the current 600,000 yuan per ton to 400,000 yuan per ton, the gross profit margin may increase by 4 percentage points.