NIO’s net loss widened to 6.056 billion yuan in the second quarter, and it is expected to ＂bottom out＂ in the third quarter

After experiencing a sustained sales slump in April and May, NIO’s second-quarter performance unexpectedly bottomed out again.

On August 29, NIO released the second quarter financial data show that the second quarter NIO operating income 8.77 billion yuan, less than the market expected 9.254 billion yuan, down 14.8% from last year, down nearly 20% from the first quarter of this year.

In terms of car sales, directly affected by the failure to control the rhythm of product replacement in April and May, NIO’s sales in the second quarter were 23,500 vehicles, down 6.1% year-on-year and 24.2% month-on-month. This is also the lowest quarterly sales of NIO since the second quarter of 2021.

With the decline in revenue and the continued expansion of R & D costs, NIO’s gross profit in the second quarter was only 87 million yuan, a decrease of 93.5% compared with the second quarter of 2022, and the same "halving" compared with Quarter 1 this year. In the second quarter of this year, NIO’s overall gross profit margin has declined to 1%, compared with 13% in the same period last year.

In the contrast of Li Auto has turned losses into profits for three consecutive quarters, NIO’s net loss is further expanding. Data show that NIO’s net loss in the second quarter was 6.056 billion yuan, an increase of 119.6% over last year and a month-on-month increase of 27.8%.

As of June 30, 2023, NIO cash reserves were 31.50 billion yuan, a decrease of 6.30 billion yuan from the first quarter. According to Horizontal comparison, Li Auto and XPeng Motors cash reserves were 73.77 billion yuan and 33.74 billion yuan respectively.

NIO CEO Li Bin said at the previous financial results meeting that in the first and second quarters of this year, new product launches affected the company’s operating cash flow. After that, some fixed asset investments and some R & D projects will be postponed, and in terms of going overseas, it will also focus on countries that have entered Europe. According to its estimates, with the rebound in sales in the third quarter, cash flow will improve.

In terms of cost expenditure, NIO R & D costs remained high, reaching 3.345 billion yuan in the second quarter, an increase of 55.6% year-on-year and 8.7% quarter-on-quarter respectively. The financial report pointed out that the increase in R & D expenses was mainly due to the increase in R & D personnel costs, equity incentive expenses, and the design and development of new products and new technologies.

NIO is the car company that invests the most in R & D projects among the "Wei Xiaoli" three. At present, NIO is simultaneously promoting the development of three car brands, and at the same time is conducting self-research on core components such as autonomous driving chips, batteries and motors.

Also in terms of sales expenses, NIO is also the one with the highest expenditure among the three new forces. As a user-oriented enterprise, NIO invests a lot in power replacement, sales channels, user maintenance, etc., which also leads to the problem of high operating costs for a long time.

Data show that NIO sales, general and administrative expenses reached 2.857 billion yuan in the second quarter, an increase of 25.2% and 16.8% year-on-year and quarter-on-quarter respectively. In comparison, Li Auto and XPeng Motors’ sales expenses were only 2.31 billion yuan and 1.54 billion yuan respectively.

NIO will further increase its sales staff to meet the need to sell seven to eight models simultaneously, Mr. Li said on a second-quarter earnings call, adding that channel sinking remains an urgent task.

"Since July, we have started to comprehensively improve our sales capacity. The goal is to lock in the sales capacity of 30,000 vehicles per month. The construction of this sales capacity will be completed by the end of September, and the results of the sales capacity building will gradually appear from October. In the lower-tier market, we hope that more experienced sales personnel can join."

Under the premise that these rigid expenses are difficult to compress, NIO needs to sell more cars and maintain a stable cash flow more urgently than other car brands. If the operating rhythm is wrong and there is a sales crisis, the cost of advance planning for forward planning may drag NIO into crisis again.

In the second quarter of this year, NIO was once in a dangerous moment. Fortunately, with the launch of ES6 and ET5T new cars, NIO returned to the "10,000-car club" in June. In July, NIO maintained its growth momentum, and the monthly delivery exceeded 20,000 for the first time, finally breaking the curse of "Wei 10,000".

According to the latest weekly report released by Li Auto, the cumulative delivery volume of NIO from August 1st to August 27th is 16,000. NIO sales in August will likely exceed 20,000 again.

However, according to NIO’s guidance for the third quarter, the number of vehicles delivered in the third quarter is between 55,000 and 57,000. This means that NIO’s average deliveries in August and September were between 17,300 and 18,300 vehicles. If NIO wants to achieve its goal of 250,000 vehicles for the whole year, it needs to sell at least 110,000 vehicles in the fourth quarter.

Li Bin pointed out that sales reached 20,000 in July, in part due to the decline in power exchange rights.Users who have rigid demand for power replacement will be released in advance. The preferential policy for power replacement ended in August, and it will take some time for orders to return to normal levels.

"The good news is that the number of test drives currently exceeds a record high, reaching about 10,000 every weekend, but it will take time from test drives to order conversion. In addition, considering the macroeconomic and external economic environment, we have comprehensively formulated this guideline target." Li Bin revealed that the next step will be to accelerate the conversion of orders through more channel coverage and sales capacity enhancement.

According to Li Bin’s estimate, NIO is selling ET5, ET5T, ES6 and EC6 will be listed in September, the sales of the four models are expected to reach 15,000 to 20,000, superimposed on the remaining models to increase sales, and monthly sales are confident to stabilize at more than 20,000.

With deliveries recovering, NIO expects third-quarter revenue to reach 18.90 billion yuan to 19.52 billion yuan, an increase of 45.3% to 50.1% year-on-year, the highest revenue guidance in history. From the guidance, NIO hopes to achieve a "bottoming out" in the third quarter.

NIO CFO Feng Wei said during the earnings call that NIOThe third quarter cash flow will be significantly improved, achieving double-digit gross margins, and the fourth quarter gross margin is expected to reach 15%.

It is worth mentioning that the NIO brand will not deliver new products next year, but there will be regular modifications. Alps will release the first product in the second half of next year. The test car has been rolled off the production line, and the second car of the brand is also under development.

In addition, the NIO phone will be released in late September this year. Li Bin believes that,The launch of NIO mobile phones will help increase the competitiveness of NIO models and better match the demand for mobile devices.

In terms of external cooperation, Li Bin revealed that he is initially discussing the cooperation of next-generation power stations and battery packs with external automobile companies. "Entering the power exchange network requires the re-development and transformation of the car, which is a major decision for the car company and requires time (consideration). "

(This article has been updated.)