Earnings call transcript Q2 2023

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Operator

Hello, ladies and gentlemen, and thank you for standing by for the NIO Incorporated [First] (ph) Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Eve Tang from Capital Markets. ahead. go Please

Eve Tang

good XXXX and Welcome NIO's to Good conference evening, call. quarter earnings second morning everyone.

The and at release earlier website. company's the today in financial and operating results are posted the IR published company's were press

of today's of the and Chief Finance; Jade of Financial and On Founder, Mr. Stanley Steven VP Officer; Board we Ms. William Chief have Li, Capital call, Qu, Chairman Mr. Officer; Executive Markets. Feng, Mr. Senior Wei, VP

forward-looking Reform contain that reminded the that XXXX. Before the today's Harbor made we continue, be Safe will under please U.S. kindly discussion Private Act statements provisions of Securities Litigation of

statements may uncertainties, be and as expressed inherent from results different actual views the company's Forward-looking materially involve today. such, risks the

the the Further and Singapore to U.S. company information forward-looking not regarding Exchange and Stock Exchange is The does risks Limited, any applicable under of with assume Exchange Securities company Securities uncertainties and Commission, included law. Hong filings of statements required obligation Kong the Limited. except the as any Trading certain update in

release, of NIO's note measures measures. GAAP unaudited contains comparable conference this include call well also release NIO's and reconciliation non-GAAP GAAP earnings of Please information to press refer unaudited a non-GAAP discussions as Please the as financial unaudited financial press measures. which to that

will I over to William, ahead. our the that, now With call Li. turn go CEO, Mr. please William

William Li

Language] [Foreign

for Thank NIO's QX XXXX you everyone. joining [Interpreted] Hello, earnings call.

a smart total second XX,XXX vehicles. delivered the XXXX, of NIO In quarter of electric

the brand over electric the with growth and premium transaction ramp vehicle July, share. new monthly a of of NIO volume of XX,XXX delivery statistics units, high. According a In in retail to July to we [Cartrack] production claiming market of a new price best-selling the more grew XX% XXXX, segment was RMBXXX,XXX, (ph), the as XXX% in NIO's models, mass year-over-year up monthly started rapidly and representing

and has further the product plans, the of network network, and sales its [role service expected delivery between capability and -- marketing units. its NTX The and volume expands of] XX,XXX the the lineup, enhances been completes products all-around XX,XXX unleashed. NIO XXXX power in the of sales (ph) be As further competitiveness XX,XXX is sales to quarter and third the

would R&D like of operations. the now you recent I highlights share our to with and And products,

high-quality delivery the SUV Following the we ECX, flagship ESX earlier all-round flagship year, all-new models, all-new ECX, product June. of managing XXXX and SUV Touring NIO's achieved with the flagship the short, five of iteration started product second our This smart expectations. complexity. new NIO the in coupe to or and conducting SUV sedan for tour user new ESX satisfaction capabilities ETXT the quarter, deliver delivery ETX exceeding and this proves electric In the the fast of also

the segment deliveries. models, have better premium the different new to marks plan platform. NIO's With to mid-sized the market BEV the lineup, and we in completion the to premium our eight featuring September, transition the growth steady drive diverse product deliver of the that, needs and entered will SUV entire users product cater launch of which ECX, to of In coupe the NTX NTX

NIO's called and NIO product which new rating rating car XXXX. receiving ETX by the sedan brand mid safety July Euro SUV testing since the safety X-star electric smart authoritative first obtained adopted for has making mid-sized been ELX, XX, XXXX, both institutions X-star the from protocols is worldwide. NCAP in NIO's highly the large Euro On China, the recognized ESX NCAP,

over of NOP of reached NOP environments. and early Beijing users Plus, on grow. rate for it Shanghai in over and we XX%. carried Plus, on technologies Navigate multiple and stack full the XXX,XXX the NOP Plus meantime, In have Pilot in At engagement driven to driving. Plus operational have closed-loop million has urban NIO significant data and Enabled developed programs have management, made all rounds present, in by mileage and NIO has intelligent penetration assisted bird progress base or including in in-house the the User XX for continue activated The out kilometers. domains,

channels July, and In terms in in take growth. These further active our manner increase pop-up delivery as sales and the team so in and centers touchpoints in cities a we have far, Since and more sales to XXX China. of cities enlarging actions XXX capabilities propelling the started have NIO XXX House, as space service will well NIO we service and expanding user sales network, worldwide. the sales XX and stores XXX sales centers

charging the swap more network, swaps. than date, provided XX stations and worldwide installed for we power battery and to have swapping million As X,XXX

swap consists stations in battery also swap X,XXX power the major chargers. along cities. chargers most expressways, China In has chargers in third-party XX XX expressway map connected automotive chargers of China. Our connecting over public with charging most deployed NIO's X,XXX and NIO meantime, worldwide. network along XXX become with X.XX We've the over million brand major the charges and has destination expressways the the

service On with options users NIO fulfilling more day, the July announced and XX, more use flexible by battery upgrade cases. providing

Xi'an election In users as this NIO city city host the organized was year. city July, Day voted by XXXX, we and the host for of the new

parks photovoltaic of Moreover, system It blue initiated and shared vision National in engage a in partnered the Park Qilian of for establishment electric Mountain Scientist biodiversity we vehicles. we the for world's installing Fund Citizen conserving public to skies. power program the a with and and supporting striving Worldwide Clean battery more Parks system hope solar with national users chargers of features VXG volunteer August first Nature stations, the VXG On and self-consumption XX, in for capability.

strategic investment majorly package investment a the equity CYVN Holdings, received The NIO July, Abu vehicle US$X.X investment In by an Dhabi billion. totaled government. from owned

also will new opportunities with business. we investor strategic jointly pursue international in addition, the to In cooperate our

with increasingly Although of and optimizing logistics, all our NIO NIO's as the to continuous to manufacturing enhancing forward We and the marketing are is efforts steady with while rise market of smart half. challenge. well We we to focused EV portfolio, fully challenges the ready fronts. and product fierce, technologies, competition market look in believe on that and is the sales and core sales deliveries capabilities, full growth performance cost drive efficiency operating strong structure second in as further self-strategy execution, the can the

turn financial As you, Over for that, will the quarter. your you for thank Steven. always, who second support. now I will to With to provide call the Steven, over details the

Steven Feng

William. you, Thank

mindful in I I my will online encourage I which listeners posted call, is today. financial second RMB the length the go results to reference press key refer to discussion our our to only earnings this additional details. quarter now And XXXX. for be of of to over for of release, will

quarter second representing year-over-year a billion, of Our decrease were total RMBX.X and a of XX.X% quarter-over-quarter. revenues XX.X% the decrease in

sales. Our and total revenues parts: vehicle are other made sales of two

the higher XX.X% as due delivery decrease result RMBX.X battery average deliveries standard-range in decrease of proportion mainly in the delivery decrease decrease volume. a of billion, sales mainly and vehicle Vehicle volume. hour due a in quarter quarter-over-quarter sales and were of XX-kilowatt was in selling to The quarter-over-quarter. sales represent ETX XX.X% in to year-over-year The price lower second a year-over-year pack was vehicle decrease and

sales and of increase revenue due a of RMBX.X increase XXX.X% of sales was of as were result of the The continued quarter in sales of mainly in was power provision our auto of due our an of representing a other year-over-year power second partially in accessories the year-over-year as provision mainly provision increase billion, sales used in the and from users. to and result solutions, of in of quarter-over-quarter. financing offset growth users, other The increase continued decrease cars quarter-over-quarter X.X% services. increase Other to by used cars, growth solutions, sales in

vehicle unit. year-over-year in ESX, offset quarter-over-quarter The XXXX. Vehicle in battery quarter margin first compared ECX. XXXX the compared due attributed XX.X% was X.X% many margins previous for and X.X% margin the with of quarter X.X% discount of quarter increase the XXXX X.X% partially decreased XXXX second ESX generation and quarter to vehicle Gross in margin of second decreased the in quarter in cost the second first second The with quarter of XX.X% the promotion by in per in product to was changes mix, decrease and in in was was of XXXX. mainly of

and second products expenses second and quarter the functions of development of quarter and costs in X.X% the year-over-year technologies. RMBX.X research personnel The the in the first, and R&D attributed was XXXX; increase compensation and expenses recognized costs quarter-over-quarter. second, and were incremental increase increased and XX.X% mainly development billion, quarter-over-quarter an new increase to: year-over-year increased of for in design in representing share-based R&D expenses

The XX.X% was the personnel products; to: SG&A costs increase functions; increase including to increase second, the million, representing and increased in expenses related in launch service increase were activities, SG&A year-over-year RMBX.X of related the quarter-over-quarter. an year-over-year sales primarily to of and and second network XX.X% expenses of related company's quarter-over-quarter increase first, marketing sales expansion. due expenses and new quarter in and rental sales in third, and

quarter RMBX.X representing XX.X% year-over-year quarter-over-quarter. billion, of Loss from was operation in the increase XXX.X% and second of an increase

and representing loss of Net XXX.X% was XX.X% an quarter-over-quarter. RMBX.X second increase increase billion, quarter year-over-year the in of

restricted XX, Our as and was cash XXXX. deposits short-term June equivalents, balance cash, and time investment of billion RMBXX.X of cash long-term

call over Q&A to I session. turn operator our Now, the remarks. our concludes this prepared will now to facilitate the

Operator

from come Wang [Operator Thank Credit Bin ahead. go Suisse. And question of will first Instructions] Please you. the

Bin Wang

question few luxury and My as Audi. salesperson you you. structure. a your Recently, BMW, from network I is of brands Thank such heard the hired about other Mercedes sales

impact will actually for in compared your quarter hired you guidance, September the increase? third reason in July. be and the August implied found what's salesperson So, far also recently? how you sales lower so September, your to And is volume non-NIO that We

So, kind much. chain supply Thank of so because what's it? behind issue? you It's the reason

William Li

Language] [Foreign

[Interpreted] Wang. Well, thank Bin you,

we inside market. For as we number our in the of capabilities of products, the question, company your salespersons by well behind of as the June, around of competitors realized the that are first the lagged in selling have terms actually,

luxury seven and is personnel we cannot realize these orders. brands or a their sales good good size very sufficient For team touchpoint, times ours. of high very test user rate two to Mercedes, BMW drives the like realize from Without of satisfaction, conversion example, for or those six

that July be that, company to and increase. well be by have network starting as a we hope contributed June the support of XX,XXX our And the will and will improving able capabilities. per sales in orders with month units the we active sales August, our personnel So manner from that taken as -- new more

So that by will able the end of to target. be realize that September, we

takes and to also us really to it Of the find time for the locations. course, train personnel

in starting why the capability for we've So, don't September, and the expanding end network especially us October. and kick really secure have stores, sales is in networks will touchpoints, we effect we actions sales July seasoned we real our active That their to taking who with the already or August, of that and the bases have a and existing to and initial and hire experience salespersons facilities where will improvement. some measures lower-tier cities test. user ready in This then have help also plan from our hope by and is full-fledged been

And the July, second regarding adjustment our user in end have more power mainly have vehicles. to our we and delivery July, is by as the shown our announced question, This in benefits. guidance, because And delivered July. lower by than we swap in August September are that your of than volume XX,XXX

but all swap month, entitled with delivery demand also free anymore. orders enjoy volume per or to X, some also to in not This new this affected or August and has the are helped from in power Before six strong July. for entitled users ahead pull to starting swaps the swaps July, users us four orders or free

witnessed also believe during month. in significant order of meantime, of past in of the And the back to that and drive high August, be Average also more But converted to that we especially for the XX,XXX a take the well wait as for the stabilizing volume. take for a August, that. delivery understand orders have intake challenges are test the terms overall time will the intake into very in growth as time normal drives the drives. in understand the will new This But the the it from than environment. speaking, external represents meantime, we macroeconomic speaking, weekends, the In to we to test the meantime, numbers and some leads. we've test challenges, some In momentum and will and truly we need pressure we track. from confident it also be the the the order we

we speaking, that considered also have But confident volumes are we factors. guidance external and -- forecast our those provided. in So, overall delivery the

premium in over will must solid more segment, in Also, XX% buying we channels electric efforts inside segment. we the this understand July, ICE share. continue converting also segment, proven market make already the has at vehicle realized foothold this we In and NIO EVs a to in into users in the transforming have This very RMBXXX,XXX, priced in battery of of touchpoint. will make case, our expanding efforts premium and we that

Wang you, Bin. Thank

Bin Wang

Thank you.

Operator

comes Morgan Please question Hsiao of ahead. from Tim next The Stanley. go

Tim Hsiao

taking my for Thanks Hi. question.

So, my Because we first as just regarding sales sales basically, into team volumes second the up I successfully our to follow upgraded network. want half. mentioned, and William question, just sales

monthly stay we I that So, looking XX,XXX. sales quarter, expect into our fourth recall can above

could volume or you above into four contribution some look what update ETX, like fourth should volume? So, regarding to the And from we quarter, XX,XXX the to if models driving So, NIO that's provide like just the XX,XXX? ESX? expect could covering grow the further sales even case,

about gross to previous I my second the profit digit think half. in get margin. guidance, second double according could And the question profit is the margin back to vehicle Because gross management's the

view late cost Thank my in your So, do fourth quarter, still to half? second What margin question. previous expansion in would be That's into respectively? you sequential June, pace and you. on after the the RMBXX,XXX quarter second the stick

William Li

Language] [Foreign

[Interpreted] you, your Thank for question. Tim,

we In delivery that stabilize be personnels. the also capability, support QX of we our so can Regarding month. XX,XXX expanding the question, per your units we of sales case, units year. are above we this to our first preparing this our course, XX,XXX orders realize and target and But meantime, starting in monthly new channels to are also

we point. sales be we and of will the believe and October and from November the mentioned, We progress for kicking from As improvement will positive occurring of some end by our take September, time the that time capabilities will be initial ramp-up. these with capability preparation in effect that

to product the we on around we've monthly take to reference product it years one NTX a and the realize sound reach the of for a volume terms will In experienced, to stable two that basis. new normally,

has monthly and our was in that for first launched it ESX, generation it a until was XXXX sound stable example, not it For delivery. rather XXXX, and

very our we are products. So, confident with new

of the terms volume ETXT, ECX, volume ESX including In products, X ETX, products. and these are

But will be own delivery the be will for take starting dominating the time delivered market production within and the it its ECX, will share. segment, major September the some it and For ramp it up.

stabilized So, its believe with these XX,XXX at four models units. combined, we around XX,XXX that monthly volume will be to

volume well higher on ECX, are expecting of increments also terms In sales and as service higher products volume. ESX ETX we their ESX, like -- as

Stanley second answer Yes, the will question.

Stanley Qu

Hi, Tim. Yeah.

of volume manufacturing and are is and shown lower margin gross production promotions profit allocation the cost The QX the driving users as double-digit with to our sales and profit X.X%, and But control period. our transition product gross margin, with in other NTX we also our and well. similar achieve the sales if the vehicle and other QX, in Regarding our key in target along product, reasons and financials, all also XX% QX at more QX. can battery higher our during a level, the to cost efforts costs -- costs marketing margin volume ramp-up

William Li

[Foreign Language]

[Interpreted] the digested the have we price impact reduction. already So, of

Tim Hsiao

William and Got very much, Stanley. Thank it. you. Thank

Stanley Qu

Thank Tim. you,

William Li

Tim. you, Thank

Operator

ahead. go of question Please comes Yuqian HSBC. next from Ding The

Yuqian Ding

here. Yuqian team. Thanks, I got two.

have and is, First then on are the newly is we a pretty refreshed platform question coverage. models practically based all model launched comprehensive X.X now

How we a the how product XX comprehensive XX be do is next visible in new growth of expect We looking coming leg in the months, in terms key to the we're expecting strong of if But software months the already do growth? fill in portfolio product? ramp-up especially be to or will going at six drivers, we way. the

The second question is on the OpEx side.

dialed absolute have we the have when rolling new see next upgrade. this bit? next we year, and OpEx year, launches But the year, sales could value we little Thank So, we're you. model a into down channel

William Li

[Foreign Language]

your for you Thank question. [Interpreted]

electric our platforms on to know models several short this first changes the In needed its the new has a September, of to a smart as from by the the deliveries question, the This all timeframe, very starting challenge launched we realize that model. we And short also execution. over the the catch facelift. that NTX you all market. months, the we smart vehicles high-quality the in the to brand meantime, five R&D past your market. to demonstrated as a to with technologies. also realize strong may efficiency our launched as ECX up will we it's plus such entire And Regarding the be that brought timeframe, models of to are industry will a as But into well in we need have launch able

the meantime, all NTX But at more products, features looking updated for software in and we the are be to released.

and For assisted driving. new intelligent example, our

we For out product. competitiveness the sales of the so us coming as will also can This and concrete we XX,XXX some and improve also, months, the new are to features foundation new to the month. channels and the a of more we will the services. out help of developing the sales deliveries units inside And coming orders growth will reach mentioned, continuous we've of company rolling capabilities the the that with for months. broader also very in support be be per This salespersons

also structure of our And the in at the XX% also, the If quarter. have from are you the NTX models look third premium they platform, organizational adjusted we starting needs market. on eight already covering our

across model sales and This made headquarters will dedicated also life marketing the the and perspective. we've the efforts managing from teams be the having of companies, for the we from that is each the regional So responsible to cycle.

Stanley Qu

Yuqian. Hi,

year budget has the us not ready. Regarding the been next of OpEx for next year,

not I moment, able to give the be feeling. precise may this you you but I number, can give at So some

introduced R&D non-GAAP will investments last for this this the RMBX Regarding the as quarters, be billion quarter R&D expense, year. each average, year, RMBX.X billion in on to

I activities. think similar R&D for year, we next the like investment will keep --

aggressive relatively the next think, be by And as I we a SG&A the half more sales explained year. second should expense, have for year, regarding this for William, of targets

accordingly will -- first SG&A of more the of think, also I whole efficiency. need absolute market for and volume since grow I events. also year activities you, improvements both, So percentage the But will the and and with revenue, total compared in sales value Yuqian. decline year the we operating think, this the think because delivery I whole the of of Thank XXXX, half

Operator

The comes of from Please question next Citi. ahead. Chung Jeff go

Jeff Chung

[indiscernible] Hello. I have questions. two

First going forward. flow cash question our is plan question quarter projection is our third fourth the into the and And refinancing second quarter.

So, why to the but second second the quarter, a delta we billion, outflow receivable the cash was And asking stable. account account of of RMBXX.X Q-on-Q also the -- inventory because the cash saw saw billion, payable is remained this outflow billion am we net around I in RMBX improved RMBX.X first the within quarter. quarter, while

the see the should hike, volume said, quarter cash the with whether if is we that operating down my be a question. came first So leverage third further? significantly narrowing inventory plus outflow should This

guidance? Thank or the question me. guidance. return second third quarter you. fourth GP as quarter of from and as the my SG&A And to double-digit level That's well the When can is fourth as quarter a percentage revenue all a we third quarter, XX% about margin

William Li

please Jeff. first you, question. the Thank Stanley, Okay. answer

Stanley Qu

volume the and in a we this One CapEx be and certain the William's out and significantly our sheet flow Yes, compared QX of And strategic explained of also cadence improved the control And regarding as also This refinancing we also several flow, US$XXX Yes, year, operating offering we prudently this. ABS QX. our year. CapEx series plans, also the manage measures as will regarding think flow CYVN. also points operating investments. I think flow. million with comments, cash delay this about I regarding our investment in cash delivery of the will flow, from -- us ramp-up from to investment QX investment received cash carried QX the cash of I is sorry. think And to completed like manage first healthy off-balance additionally, the cancel or help cash

(ph). and channels keep those I our think company. development dollar [undrafted] will position business healthy remain cash and all support the U.S. RMB also enable a financing And ongoing of us to both the

-- comment first this plan, the refinancing will And accordingly we is we moment, you. regarding at if to have any that's with there cash also market-related capital refinancing plan. the Yes, updates. regarding and our the flow disclose precise the plan financing question don't I But think information

margin? for second is The year's this

Jeff Chung

Yes.

Stanley Qu

XX%. margin, think we I target profit volume our this sales think gross have the QX with delivery of previous market QX, growth, change the marketing SG&A of For along our guidance, double-digit to dynamic. percentage adjustment achieve our explained the I And year's and is will grow margin the to the but strategy questions. in quite revenue for But is total for absolute and will value and situation, according be decrease. the the And will

precise moment, guidance revenue. Thank you give the sales So at I the Jeff. this you, percentage SG&A of over about cannot

Jeff Chung

you. Thank

Just mentioned Thank inventory my was delta only very the RMBX wrong. a billion, which billion. I here. correction Thank just checked much. was you. Q-on-Q from RMBX That's data you side. I it Q-on-Q was that the

Stanley Qu

you. Thank Yes, welcome.

Operator

Please comes of America. question from ahead. Bank next Ming-Hsun of Lee go The

Ming-Hsun Lee

[Foreign Language]

So I have two questions.

you the car question segment. majority first products currently, cover eight have The the of to luxury is,

you well could any brand? guidance plan year give the brand next the So, under as more new ALPS of product the as on NIO

your what for is business? is, business question latest second the Thank mobile progress the you. And

William Li

Language] [Foreign

question. [Interpreted] for Thank you your

actually, For any of we in new NIO to products launch brand, don't XXXX. the year plan

that think qualities more NTX improve continuously also performance. roll out platform focused product facelifts to some will stay on but eight existing for products Of market any it's or new course, on our haven't us upgrades, year, because and we routine for we planned its products next to important still we the

very launch margin, quality realized good XXXX, Just any like as but performance. have didn't as volume we a new gross in models, well we sales still

of brand plan NIO. the for So that's the

next first its ALPS, have Right plan highly our will half model according this Actually, first brand, to plan. the very from model verification second to proceeding product the of model ALPS terms out be competitive year. the segment. launch and we of ALPS in rolled now, the of the activities from build just In R&D market the are mass we in

also NIO. that for targeting is is from ALPS in at It have of different philosophy it's will R&D the targeting personalization And ALPS. is differentiation the the the for segment market, where its and ALPS, But of products about of the and at mass the lineup we many the premium for NIO, different. brands not we products. care more also

like will selling they XX for of ALPS, Just in Mercedes That sales mass volume by China, segment. will more and more for models. BMW it the on unique But each and launched are we ALPS. oriented the XX, a premium family of also is be model the market, care character

centering the In our and phone phone is the products. the our especially itself will And business, vehicles, mobility users terms better developed connectivity mainly our mobile of experience. but phone of be new for users, NTX with on developed our

and carrier between underlying vehicle as quite software experience to Moreover, a logic We vehicle the are a we cars actually to our it like to with business those would believing to the of our us help can that phone phone with phone compete use phone products, the business, because users. makers. similarities. is of provide for the Instead, competitiveness shares the lot not improve best the phone underlying the our the and

half for in second first the our the late terms or in introduce plan In phone plan product to the we launch September. phone, of

Operator

UBS. The next Paul question ahead. of comes Please from go Gong

Paul Gong

taking for Thanks questions. my

two So here. questions

is question regarding sales first channel. The the

to You mentioned you going expand it. that are

as to Are sales we how Currently, the But You fair it's start-ups? mentioned have terms feel XX,XXX going we in of is the the Is of of does that improvement? BMW and question. monthly also the compared channel a store it work? be expanding think EV to network to reach assume? sales, how sell about compare sales given And today? or and behind? the ahead in And we versus personnel you How to today as mathematics you How monthly Mercedes compare efficiency achieved behind we the that person. are expansion do the this about sales and well are other Benz already This capability you XX,XXX. sales XX,XXX to first to does my that to does XX% would capability. July much

batteries, charging seems is the regarding as the How the semiconductors piles, even as I question versus stations, fast the to DC second these understand out the charging rolling -- swap well battery industrial be given weak the well it's all The efforts. charging would to good have you. charging fast the rolling charging, cars? the fast Thank battery of but the out consider swap kind you swap edge of both and as competitive NIO's as of and battery convenience the with

William Li

[Foreign Language]

for you questions. your Thank [Interpreted]

is only June, other of the EV sales of sales look the you our half the in to of size If China, of those comparison team of teams at end other companies. start-ups in actually, size the by

the the have Of at houses. we course, new for stations, roadside of the teams services network, and in the terms well as working swap as specialties power service

bigger comes in and our sales service community it fellows. when we But them the start-ups. for the person, call other a So team have part, EV to actual we company, than

fellows, the -- In than much team a all number of are smaller of industry. terms other we the have companies the actually in

In April we the ramp channels satisfaction affected any our the including July, gradually why drive very also sales taking starting as as and sales many execution the importance really delivery and actions. was and as June, up capabilities. May the we well order the high. this things, team. We're delivery of we sales we the has didn't volumes, insufficient year, to from sales test our that also starting conversions. develop But That's teams of volume realize then, our from By not realize have started

course, For comparison, of to people working around corresponding them to have need the with takes side, team. many that up capabilities. team us comparable X,XXX the that also to we on believe on it train But for people we the ramp and time sales the to

the of XX,XXX our more than which deliveries, terms July, that but delivered demonstrated easier capabilities. we have of cars, terms volume, capability delivery the sales than relatively realizing In in is in

And is another about the channels. thing

outside is at Fujian] But our city look our sales contribute contributing basically largest opened for Shanghai, in efforts as they Anhui around outside sales NIO you the these in need of Anhui distribution, opened of three in volume -- volume. or other we've the cities province an and in stores of province that our just half Wuhu. our And -- Anhui like sales take in Hefei. increasing their XX% we is dealership in [Jiangsu, cities in will have other by House of itself In in capital the Anhui contributed Anhui like into city provinces cities. sales to Province. XX% we penetration volume. us, for Mercedez, this all Anhui, case, we the of the (ph) for If take places BMW sorry, basically If half to lower-tier brands is second And example

developing expanding In addition to our power are and also into sales channels, networks the cities. we swap more

developing we more we swap For in manner. we've the XXX power past expect install August, a stations. several in will And our than deploy stations power faster much that months, been and swap

in, but our time for it to all Of these be this for take investment will course, long-term very kick will capability. important measures

and in use we opening and And the about swapping are cases. power are been our China, swappable the power second our question the also our as most we chargeable, we've of the with and been in my always power brand actual upgradable as automotive for the as faster choosing mentioned, experience we've optimal mentioned best I've versus users also scenarios public chargers and remarks. that charging, have your Regarding solutions, the solutions network, developing swapping philosophy based the on

development of swap. the the it with that power installed of swap help it fast operations the as as Not can believe to service chargers featuring stations improve as we've charging will of also we are course, the as us power many stations technology, both with swap Of well today mention the integrated stations. the of that capacity

and much than charging, unique experience and many the continue believe these we've the power it better so that, of will of power terms had having very a faster charging, a swapping far, in So, technologies, NIO. competitiveness also be and we is advantage to swapping two between discussions but faster still the

Paul Gong

helpful. very William. That's much. very Thank you, you Thank

William Li

Thank you, Paul.

Operator

comes question The go next of ahead. Jing Chang Please CICC. from

Jing Chang

Okay, thank following-up two have I you for questions. your sharing.

is and about sales other revenue first margin. The profit our

of profit the As gain for our can after adjustment, see our swapping first And other positive? will the is battery our battery that sales the revenue for we internal do policy and business? sales is margin is profitability And turn for quarters? swap my the in the started upward to in what gross margin following when question. expectation after of also of So, other This what profit have future few our trend it profit? any we calculation particular,

second And my about the is improvement. technology

We have accumulation. been R&D more technology and focused investment always also on

next regarding areas forward the you. effort our major is to share information our (ph)? What what you platform, of so can Thank generation NTX, to are insights of [proceed] This expect? that? So, two can looking just improvement questions. we about a So, my few

Stanley Qu

Jing. is This Hi, Stanley.

we policies mentioned, we and in revenue sales, other the as QX. about question first margin, swap free canceled battery the your Regarding

be think revenue can swap so be to and there battery of some change. time one sales we the more as more policy assess observe to swap from only still the pay battery therefore, adjustment, for need service realized. impact we the But services. So keep it's since this will And growing, policy users month

the with deployment will we But at And X,XXX April, year, in be into is generation this current the utilized. operation of this third stations. starting the build our plan stations put Second accelerate the following swap fully quarters. to for power won't capacity the from power swap the is stage, station,

the from station power construction losses will the increase. swap So, accelerated of

guidance think that's the for revenue. I basically other sales the So,

William Li

Language] [Foreign

Actually, the pretty the is high. efficiency power business swap inherent [Interpreted] of

offering part, negative separately. mainly because were this costs have when on electricity it's charging power swaps, the also free we But were we that are now margin in that we Before included offering.

users using we service. we a are addition, as the are growing swap charging swap for In power service also are actually car RMBXX seeing used demand Especially charged many users, Actually, per such our they fee. services.

So, the users and is a for the to existing percentage swap mainly the business the paid also for existing use population. growing. It's users service

stations power calculation. third-generation be realize service its third-generation we've covering completes can basically it even, XX% breaking and per our its Right also around operating capability. a it revenues When to performance the costs. swaps stations, will For done are and of be now, swap day, XX able rough such

that business. So, also for swap power we is long a sustainable believe run, the

power business As diversified leverage the other can in swap have storage. services, addition we energy to offering also like we models

believe also the and Regarding us the the your strong And also to we continue give core that, investment the the operations us into experience second continuous of question a worldwide. With competitiveness and of our well about and our that as improve leveraging vehicle full our be as development improve R&D. this products. the will our technologies next-generation technology, efficiencies help and of optimize will we course, margin product we performance to will the And capabilities the also improving of in-house. research stack will developed

Thank you, Jing.

Jing Chang

Okay, question. thank That's Thank my you. all you.

Operator

The of next Bank. Deutsche from go ahead. question Yu Edison comes Please

Edison Yu

strategic more Thank wondering trying obviously some last OEMs management many Hey, OEMs thank closer context about we I lot what the And there? a embarking the Can supply had actually talked think seen year, I -- sales, you. related has benefit the openness team's some is We of the more one some which out of some from of we of today, to actually European force relationships auto revive a have China We've activity are issues the in lot efforts. also to action? NIO of I to I'm more from their strategic made think question. perhaps in traditional or side. sales on lot restructure you. mistakes. with having a

William Li

Language] [Foreign

all swapping much speaking, look But you. update cooperations as Edison, as But entire of are technologies don't our have we your the peers and aim charging our smart you, if to to with networks, share we with of technologies transformation very [Interpreted] industry. or information question. well in kinds you at these for actually, so the the use to catalyze open to we industry. Overall far, Thank

battery our entire we Power with as the our make up to But As their to time Day willing products the thinking adapt need to Right But they we in are using all take our open to to some open for They networks. overall now, well some about also industry. the at swapping can are communications to speaking, technologies, final XXXX, initial that and technologies kinds very we've to our are OEMs. certain also for announced next-generation standards, are swapping battery networks we technologies use them decisions. which charging of as cooperation.

non-NIO a non-NIO you've speaking, users access our EV actually are to chargers network, news popular non-NIO also at our the read that recently for terms of caused Maybe we the it's many also public charging timeframes, far, are complaints existing Sayram limit so this electricity tourist some overall not charging our facilities charged good the of And spot, to Xinjiang, existing users. showing in just because our a users. of Lake example XX% users, in and such the NIO. certain it's by helping But for and from very user have swapping

Edison Yu

Thank you. Great.

William Li

Edison. you, Thank

Operator

remarks. the for closing back over As I'd there like now, any no questions to company call turn the are to

Eve Tang

once again today. for you Thank joining us

concludes please This feel through call. contact the free information conference If to Investor website. you team have questions, Relations contact provided NIO's on the our further

you. Thank now disconnect may your You lines.

NIO (NIO) 29 Aug 232023 Q2 Earnings call transcript