NIO Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Deliveries: In Q2, 72,056 smart EVs delivered, up 25.6% year over year. Delivered 21,017 in July and 31,305 in August. Expected Q3 deliveries range from 87,000 to 91,000, representing 40.7% to 47.1% growth year over year.
• Product Launches: Envoy L90 launched in late July, new ES8 pre-launched in late August. ET9 has performed strongly in the executive flagship sedan market. Model year 2025 refresh of ET5, ET5T, ES6, and EC6 enhanced competitiveness.
• Financials: Non-GAAP operating loss narrowed more than 30% quarter over quarter. R&D expenses were RMB3 billion, down 6.6% year over year and 5.5% quarter over quarter. SG&A expenses were RMB4 billion, up 5.5% year over year but down 9.9% quarter over quarter.
• Service and Infrastructure: Operates 176 NIO Houses, 416 NIO Spaces, and 414 Amo stores. Has 3,542 power swap stations globally, over 1,000 on highways in China, and has provided over 84 million swaps to users.

Segment Performance

• Vehicle Sales: RMB16.1 billion, up 2.9% year over year and 62.3% quarter over quarter. Revenue contribution from vehicle sales is approximately 84.7% of total revenues (16.1 / 19).
• Other Sales: RMB2.9 billion, grew 62.6% year over year and 37.1% quarter over quarter. Revenue contribution from other sales is approximately 15.3% of total revenues (2.9 / 19).
• Vehicle Margin: 10.3% in Q2 2025, compared to 12.2% in Q2 2024 and 10.2% last quarter. Year over year decline due to product mix changes, partially offset by lower material cost per unit. Quarter over quarter vehicle margin remained stable.
• Overall Gross Margin: 10% versus 9.7% in Q2 2024 and 7.6% last quarter. Year over year gross margin stayed stable; quarter over quarter increase due to positive mix effect from used cars and technical R&D services.

Guidance

• Q3 Deliveries: Expect total deliveries in Q3 to range from 87,000 to 91,000.
• Q4 Targets: Average 50,000 units per month for all three brands in Q4, totaling 150,000 units for the quarter. Q3 will see vehicle margin improvement with full deliveries of 2025 models and L90 launch. Q4 vehicle gross margin expected 16%-17%, with L90 and ES8 aiming for 20% margin. Non-GAAP R&D expenses targeted at RMB2 billion per quarter, SG&A expenses targeted at 10% of sales revenue in Q4.

Risks

• No specific risks detailed in the transcript, but general forward-looking statement risks mentioned, including inherent uncertainties in actual results differing from forward-looking statements.

Question and Answer

Q: ES8 and L90 capacity ramp up and Q4 breakeven A: L90 supply chain capacity to reach 15,000 units per month in October; ES8 supply chain capacity to reach 150,000 units in December. Q4 non-GAAP breakeven target is on the operating profit level.

Q: Model pipeline and pricing strategy A: Prioritizing L90 and ES8 production. Q4 production capacity: L90 at 25,000 units/month, ES8 at 25,000 units/month, FarFly at 6,000 units/month. Long-term product margin target: group level 20%, Envoy 20%-25%, Anvil 15%, FarFly 10%.

Q: Operating expense control A: R&D expense non-GAAP for Q3-Q4 is targeted at RMB2 billion per quarter. SG&A expenses aim to be 10% of sales revenue in Q4.

Q: Impact of self-developed chips and battery changes A: Self-developed chips offer cost advantages compared to industry solutions. Making 100 kWh battery standard for 5/6 series had a positive impact on upper funnel leads.

Q: Cannibalization and long-term sales volume A: L90 boosted L60 order intake. ES8's pricing boosts brand awareness for 5/6 series. Long-term stabilization of ES8 and L90 sales depends on new sales paradigm implementation.