The Chinese electric vehicle manufacturer NIO Inc. (NYSE: NIO) reported late Thursday with better-than-expected first-quarter results and issued a positive revenue and deliveries outlook for the second quarter.
Here are the key takeaways from the earnings call hosted by the company.
Nio Says Chip Shortage Will Last Through Q2: Nio expects the chip shortage to persist through the second quarter. Notwithstanding the macro uncertainty, the company expressed confidence in the strength of its order book.
Nio’s monthly production target of 7,000-7,500 units is possible to achieve, though it could prove a challenge in the second quarter, Nio CEO William Li said.
“We are trying our best to secure the supply and to maintain the production speed. Of course, we are quite confident, but the challenge is still quite daunting,” Li said.
The turnaround could come in the third quarter, and the overall situation will likely improve by the fourth quarter, he said.
New Factory In The Works At NeoPark: Nio said it will plan and build a new factory in NeoPark,. which is being developed in the Hefei city in collaboration with the local municipal government. The company said it is in discussion with its partners about the detailed execution plan and the cooperation model.
The NeoPark will host several other companies, and Nio will be a very important company in the park, Li said.
Having the entire Nio team, including manufacturing and R&D, work from the same place will help significantly improve operational efficiency, he added.
Margin Lift From Nio Pilot, New Battery Pack: The quarter-over-quarter increase in the vehicle margin from 17.2% to 21.2% was facilitated by a higher take rate for Nio Pilot, the company’s autonomous driver assistance system, and the 100-kWh battery pack, Nio said.
Li termed the 20% gross margin as healthy, as he said it was achieved without cost-cutting. At the same time, he cautioned that such a rapid improvement could be challenging to achieve every quarter.
Related Link: Nio To Announce Norway Expansion Plan On May 6 – What You Need to Know
Nio Focuses On Premium Segment: Although several local players are mimicking Nio’s technology, user community contact and direct service model, it will be difficult for others to build a premium brand, primarily due to pricing pressure, Li said.
“Our focus at this moment is still in the premium market. In this market, we can see that the EV still accounts a small share compared with that of the gasoline cars,” he said.
The company said it is not seeing any serious competition in the premium segment right now.
Although legacy automakers have some premium brands, they are lagging in terms of the digital experience and autonomous driving capabilities, Li said.
ET7 Launch Schedule On Track: Nio’s ET7, the first product based on the company’s second-generation platform with advanced sensors, computing power, SoC chipset and other advanced technology, could make mass production challenging, Nio said. This is not a transitional technology, but a leap forward to next-generation technology made possible by a significant technological breakthrough, according to the company.
Although this has placed pressure on Nio’s team and partners, the company expressed confidence in staying on a launch schedule of the first quarter of 2022.
Nio On LFP Battery Adoption: Lithium iron phosphate batteries, though offering a cost advantage, come with shortcomings, including poor performance in low temperatures, the company said.
“If we can solve the performance bottleneck under low temperature, I believe it should be the right timing and the right choice for us to use LFP battery pack and form factor,” Li said.
Nio On In-House Chip Manufacturing: When probed about plans to manufacture chip in-house, Li said the company does not have any specific plans that it can disclose to the public or share with the public.
“We are determined to build our full-stack capabilities surrounding the smart electric vehicle technologies, including autonomous driving, and we believe that this is going to build the long-term competitiveness of the company,” he said.
Nio’s Overseas Expansion: Norway will be Nio’s first stop for its long-term globalization strategy, CFO Steven Feng said.
The company’s May 6 conference call will focus on the Norwegian market, he added.
Feng noted that the company has set up a sales team in Norway and built a local team to take care of local operation and service. The company has also selected the location for its Nio House in Oslo, he said.
NIO Price Action: At last check, Nio shares were adding 5.38% to $41.10.
Related Link: Investment Arm of World’s Second-Largest Reinsurer Swoops In On Nio, Tesla Stock In Q1
Photo courtesy of Nio.
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