NIO, a prominent player in the electric vehicle (EV) market, recently unveiled its financial performance for the second quarter and the first half of 2024. Following a period characterized by substantial struggles marked by dips in growth, the company's latest report illustrates an impressive turnaround, showcasing record delivery numbers that reflect heightened consumer interest and confidence in its products.

The report indicates a substantial revenue of 27.355 billion yuan (equivalent to approximately $4 billion), of which 24.061 billion yuan stemmed from vehicle sales, accounting for nearly 88% of the company's total revenueThis growth trajectory can be predominantly attributed to a significant leap in vehicle deliveries, with NIO achieving a cumulative delivery volume of 87,400 vehicles in the first half of the year, which represents an impressive 60.07% increase compared to the previous year

The second quarter alone saw deliveries soar to 57,400 vehicles, a staggering increase of 143.93%, making up a substantial portion of the revenue generated by vehicle sales during this period.

The upward trend in deliveries coincides with a strategic adjustment to NIO's Battery as a Service (BaaS) platformIn March, the company revised its battery rental pricing policy, significantly reducing costs associated with battery leasingNotably, this change resulted in the selection rate for the BaaS becoming notably favorable, jumping from a prior 20%-30% to an impressive 60%-70%. This strategic maneuver has had a direct and positive impact on sales volume and order intake, allowing NIO to capitalize on its innovative service offering.

As the months of July and August passed, revealing consistent delivery figures, NIO's Chairman, Li Bin, conveyed an optimistic forecast during the earnings call, expecting an estimated automobile delivery volume of between 61,000 to 63,000 units for the third quarter, illustrating an annual growth of 10%-13.7%. With the July and August delivery figures reported at 20,500 and 20,200 vehicles respectively, projections for September fall within a range of 20,300 to 22,300 vehicles, demonstrating an ongoing commitment to maintaining a monthly delivery figure exceeding 20,000 units.

NIO also anticipates third-quarter revenue between 19.109 billion to 19.669 billion yuan, showcasing a minor annual increase between 0.2% and 3.2%. Market analysts have predicted profitability from ancillary business operations may add another 1.9 billion yuan to the revenue stream, suggesting a realistic expectation of achieving a vehicle sales price of approximately 282,000 yuan per unit, which would halt the decline observed in the first half of the year.

The expected increase in vehicle pricing for the third quarter is correlated with the completion of new model launches throughout the first half of the year

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All vehicles sold in this third quarter will be 2024 models, effectively eliminating the burdensome impact of outdated models which may have been subject to price reductionsAdditionally, a temporary rollback of the “pay 4 get 1 free” promotion for the BaaS program during early September had minimal repercussions on vehicle pricing for the quarter.

The winter quarter saw improvements in gross margins, with NIO's figures rising to 8%, marking a 6.7% year-on-year gainThe pivotal factor behind this growth stems from an enhanced automotive gross margin of 11.1%, indicating a 5.5% improvement as wellIn the second quarter alone, gross margins expanded significantly to an impressive 9.7%, featuring a quarter-on-quarter advancement of 4.8% and a year-on-year increase of 8.7%. Notably, the automotive gross margin returned to double digits at 12.2%, highlighting a rebound of 3 percentage points compared to prior figures.

This upward momentum in gross margin is largely credited to the expanded scale of vehicle sales which has introduced economies of scale, paired with effective supply chain management and enhanced production efficiencies

NIO's Chief Financial Officer, Qu Yu, expressed optimism about the forecast for gross margins moving forward, aiming for a notable 15% margin by the fourth quarter as a realistic target.

The second quarter also saw a reduction in vehicle costs, which dropped by 13,000 yuanThis reduction was achieved by renegotiating supplier contracts to secure more favorable procurement costs, playing a fundamental role in lifting the gross margins for the quarter.

Despite the favorable performance indicators, NIO's first-half net loss amounted to 10.231 billion yuan, although this represented a smaller dip of 5.2% relative to the same period last yearThe company reported that sales, general, and administrative expenses rose to 6.754 billion yuan, climbing by 27.38% due to heightened sales volumes and increased marketing efforts, while research and development expenses receded marginally by 5.26% to 6.083 billion yuan, reverting to a normalized level.

NIO's top executives provided insight into anticipated expenditures moving forward, projecting quarterly investments of around 3 billion yuan in research and development

They anticipate a rise in sales-related expenses due to new product launches at the conclusion of the third quarter, yet expect that as sales volumes increase, the overall percentage of sales expenses will decrease over time.

Looking forward into the second half of the year, NIO is strategically aligned to tie its performance closely to the success of its second brand, EasingThis move comes amid intensifying competition within the renewable energy vehicle sector, where competitors such as Xpeng have also introduced new sub-brandsNIO's second brand, launched on May 15, 2024, aims to fill a significant void in the mid-range electric SUV market, with an initial pricing set at approximately 219,900 yuan, positioning it to compete directly with Tesla's Model Y.

Four years in the making, the Easing L60 was officially launched on September 19, following the rollout of production models on August 15 and the opening of 105 dedicated Easing stores on September 1. This new strategic brand could be pivotal in NIO achieving the sales increases it needs in the coming months.

Li Bin expressed strong confidence in the market potential for the Easing brand, emphasizing its ability to tap into a customer base exceeding 8 million

With BaaS and an extensive battery swap network, Easing stands to be extraordinarily competitive with an unbounded growth potential in terms of sales.

However, Bin has tempered expectations for initial sales forecasts, projecting a modest target of about 10,000 units monthly for the Easing L60 by the end of the year, with a gradual ramp-up projected to reach 20,000 units monthly by next year as the supply chain stabilizes to meet increasing demand.

The challenges of scaling production for new models have historically plagued many automakers, with several brands unable to meet market demand due to production limitationsAddressing this concern, Bin highlighted NIO’s strategic advantages with two manufacturing facilities, already operating on double shifts and expected to reach dual-shift capacity in September or October

Additionally, NIO is in the process of establishing a third factory poised for production by September of the following year, setting the stage for the 2025-2026 product lineup.

Regarding the NIO brand itself, Bin noted the company's commitment to focusing on the market segment beyond 300,000 yuan, with ambitious targets of achieving monthly sales figures of 30,000 to 40,000 vehicles, while striving for a gross margin target of 25%. Together with contributions from the new Easing brand, this could elevate overall monthly sales around 50,000 vehicles in the future.

Furthermore, NIO has plans to introduce a lower-priced third brand named Firefly, expected to hit the market next yearLittle is disclosed about the Firefly brand as of yet; however, Bin has suggested that both Easing and Firefly will work in tandem to enhance overall efficiency and ensure positive financial impacts for the company.

With the introduction of these three brands, NIO intends to cover a price spectrum ranging from 140,000 to 800,000 yuan, utilizing BaaS offerings that span segments from 100,000 to 700,000 yuan