NIO (NIO) 25 Mar 222021 Q4 Earnings call transcript

Hello ladies and gentlemen. Thank you for standing by for NIO Incorporated's fourth quarter and Full Year 2021 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. Markets Relations. Capital from Tang, and Investor Eve Please Eve. go ahead,

of and good everyone. morning conference NIO's are published posted financial today fourth release Good the call. results to press Mr. Qu, Financial and the Officer, Chief in Finance. Company's Company's at earnings have Mr. IR quarter Senior evening and Officer Chairman Founder, Steven today's On Li, website. XXXX Chief and Welcome Executive and earlier Stanley Mr. were of year VP we and Feng, call William the The operating Board full

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

Forward-looking statements involve inherent risks and uncertainties.

may the also expressed note Limited. conference ahead. GAAP Hong the different Exchange include unaudited and measures. that, of Li. William, as reconciliation Securities this any measures information over except obligation results be comparable Commission release that go of to non-GAAP press our to call unaudited turn NIO's as regarding certain risks US please the to As Please I of GAAP materially today. non-GAAP With which earnings as well information. of refer does law. contains required is information a Company Stock such, and any financial financial CEO, will discussions Mr views applicable to Kong statements call included in not release NIO's press the William now forward-looking the unaudited and under update assume The and uncertainties Company Please filings Company's from Further the the with actual Exchange

earnings representing full the joining delivered electric quarter increase and smart call. a ECX other of the X,XXX quarter difficulties chain XXXX XX,XXX NIO and XX% XXXX Chinese market industry. new a increase vehicles vehicles ESX, of Thank challenges many year NIO's delivery of have an shortages, total continued XX% volatilities you XXXX a NIO representing global year of for Hello vehicles of growth XXX.X%. we delivered China pandemic, light Year semiconductor supply we XXXX year. the In everyone. ESX fourth fourth year X,XXX XXXX and was New full with the year. over for delivered vehicle in strong premium year and over XX% lead to overcoming auto in XX,XXX a of over By In In holiday NIO January by the representing increasing XXXX year February of year. in

we of prepare production holiday the March the to adjusted lines for late delivery XXXX. the During ETX in

by momentum of Although capacity. user been and and the delivery affected volatility have demand and supply order chain COVID production strong, production remains the

total to vehicles. delivery in be XXXX expect the quarter We XX,XXX between XX,XXX of first to

March expand the battery of ETX, test the According rate electric this expectations X on of the witnessed about expected vehicles NTX start the cities conversion us maintained ETX vehicles will enjoyed We of China above first delivery Passenger Tier the vehicle NTX. in X XX.X% RMBXXX,XXX rate priced market the to than its also EV trend We and penetration X of XXXX XXXX. grew and In electric will battery a product of test such drive to a from ranked who Tier more In we ETX test highly growth. with prominent the have XX, early share drove March drive SUVs spoken of The product. in the Users gradually on off Car sales NIO kicked XXXX. retail XX% electric electric the that ICE towards of at which order battery future. confidence gives up-trend. Shanghai, among competitiveness top our In December year. market and China the believe Shanghai, growth rate to Association Tier X faster all X.X% a penetration in great as January last exceeds nation-wide. to the in Tier In in sales cities

of increase Currently the vehicle in per the battery. pressure of gross revenue margin of brought forward reached vehicle with NCM industry cost full the optimization LFP increases. margin, whole is benefitted year the XXkWh terms cost XX.X% the and In gross The XXXX from by XXXX QX confronted hybrid XX.X% and respectively. for the

working gross the supply to of paying margin. order are with efficiency the We of started introduction, XXXX. more to to XXXX the note, way Kong attention from the in the enables The by separate to listing NIO investors a to us Code milestone serve are another vehicle Stock future. Hong Hong on in XX, listed, On of closely partners Exchange under be NIO other chain the close in in to reduce dynamics and enhance marks impact Kong the history and Stock in March

In billion share our operations. up to the we to expenses like with XXXX. RMBX.X and investment in highlights R&D of key recent Next, step some non-GAAP R&D R&D exceeding XXXX in started our I overall would

long-term At from sped be mid-size smart XXXX, XXXX, autonomous year, product unveiled new will well and The being autonomous ETX, our of industry R&D Day efforts. Starting first. we of based part a December is power in production NTX driving various new the plan ETX from importance in is ETX core other has the up competitiveness. last XX, to we led investments of The have including sedan. the NIO and investment results able full-stack fruitful critical we a products track. mass technologies. three electric to R&D In year's the Investment of see aspects development on We products itself deliver on for with this driving. on increased computing for near the in and to

and as enabled has expected a to technology. VR ETX combination the start AD, with with and digital diversified NIO's launch, AR the smart driving delivery wider orders design As base It panoramic this DNA more safety and is by is of autonomous comes equipped ETX than NAD of comfort, The attracted perfect the PanoCinema, expectations. received ETX After in for concept user and supercar September technologies. NIO our of and year. cockpit for more a configurations standard XXX and

we in is NTX technologies we the to shareholders. We improve also will the mid-large in this technologies and both of products and long core autonomous as believe Soon our continue gross our and years, regards positioned but in as model such profitability long-term upgrade technologies. margin the to production ultimately launch sustainable workshops investment the in capabilities on and our enhance investment and cadence both advanced key jobs across XX R&D SUV value third-quarter from ESX production only per competitiveness reach the at all which In is line production capacity, and five-seater center a coming our progress to With will run elevate driving in JAC-NIO battery of mid-year, full-stack By the manufacturing the also create delivery will our phase efforts technologies SUV core for our especially not hour. premium first phase. expected the in by start year.

off equipment the completed installation FX FX to facility of have be We the in first of per designed third building powered in production manufacturing Finished center. validation XX is the calibration, hour. jobs NeoPark. ETX located the rolled line of quarter March in largely the working FX our cadence put XX, production this viewed planned on the year operation with and second On are now a production vehicle from construction

past volatility, chip supply In more, On faced supply are the from with partners accumulated the still teams COVID and rich situation. challenges experience production. the in the securing for and we raw changing years side two chain, cost our increase, supplies and of material have international

as to the XXXX closely production has of and network. We our try charging the sales service a and and decisive best swapping will investment continue been delivery forward. safeguard to as to infrastructure in year work and going well

of and service the authorized and network, have new and service In we China, sales now NIO XXX terms in we in cities XX houses centers XXX centers have spaces cities. service XX worldwide. XXX NIO XXX In

quality expands more new network continuously the service and efficiency service centers XX outlets have we quickly, authorized new plan and deployment the network XXX we XXXX, high to As been sales each to In centers. and of the delivering over services optimizing open sales operational while than touchpoint service and users.

stations of the terms In XXX cities swaps have swap completed deployed in and and in over charging X.X million battery XXX swapping network, we China.

the So will battery charging destination swap in XXXX XXXX, chargers far, XXXX we and destination Plan. operate China. routes new Up charging With XXXX destination stations Power chargers have over super chargers will and XX,XXX that, accumulatively In XXX to add China. power in XX NIO stations, we

services an formed ranked swapping valuable and to comprehensive have In the We ESX a users. providing cars. The successful two year, the will has passenger network market, Netherlands, and to and forward entry us the entering has its services Denmark. experience The building accumulate in bring team confidence smoothly. market plan. markets. new user among helped The Norway. charging monthly been of preparation our are further our high-quality Germany, other and progressing NIO In provide This the XXXX, in regions more also expand moving top power gain countries seven-seater to in users in and service in global Sweden delivery brand experience product and Norway will mass-market better appreciation six-seater to according or and deliveries

Day and direction over and brand the deeper society. NIO like an of users contributed We and The team partner contributions the can the benefits efforts research their the of with More critical development program in stage we charity which reached the events new XX,XXX at In users be users. among At in our active make each than user announced build strategic events other NIO products. positioning even and the support possible the without development with continued community. volunteers Day. auto time XXX and to have core users in shows and of user of share XXXX NIO to XXXX, participated a first batch connection established the XXXX, specified won't

the co-construction an addition, In Clean launched ecosystem Parks, initiative. NIO

make initiative to and natural electric China. we and parks building, clean comprehensive infrastructure protect to and year ecosystem a far, NIO speed. reserves establish support for ecosystems. and fundamental circulation XXXX to reserves, to in full out in preparations next So the for development. was natural powers stage ahead in develop integrity and of national aim have vehicles energy contribute energy low-carbon smart is year XXXX We the press a a rolled for the six adoption the NIO and clean authenticity at of to of the

We invest in countries more and continue and faster-growing in infrastructure expand three improve our user meet products, our serve to long-term regions. production to R&D users competitiveness, the will capacity new and deliver to demand,

products deliver always services putting users' and and stay We first, will original true expectations. continuous of aspiration make our to beyond user interests improvements,

over As always, I please Steven With the thank our I full-year Steven of encourage Feng: listeners details financial you of quarter. for Thank posted To the you, ahead. is additional key the William. for for release you the will to now I over that, length fourth turn quarter of mindful this online press to which will details. provide call, earlier refer support. call financial be Steven, to your and to our go now the results XXXX. go for

Our the increase quarter-over-quarter. $X.X an fourth X% an year-over-year, billion, of billion, quarter were revenue total or increase in representing of RMBX.X XX.X%

higher It gross fourth increased in third The a revenues in representing vehicle the Our derived of total the from XXXX credits attributed mainly resulted gross the increase other of fourth an expenses in and increase of the XXXX of attributed well an vehicle billion year-over-year, quarter quarter R&D quarter-over-quarter. of to decrease products XXXX from million, in fourth year-over-year attributed sales deliveries. hour quarter cost an of the $X.XX total costs an XX.X% two Basic was driven in vehicle costs sales RMBX.XX from of development vehicle of by the billion ordinary expenses sales year-over-year the contributed and arrangements. sales average expenses accounting quarter expenses was representing fourth higher of quarter-over-quarter use of in quarter was of additional fourth The margin which The billion, selling an was third in to XXX.X% fourth NIO the year-over-year to quarter increase in Net in in third or higher of design to fourth XXXX. billion loss sales of including quarter of of or vehicle quarter fourth technologies. year-over-year revenues $XXX.X increase fourth increase contributed quarter-over-quarter The quarter-over-quarter. for fourth $XXX.X as and The increase of was XXXX financing was million, representing quarter quarter million The year-over-year, and of increase the in battery. driven of operations fourth expenses of and incremental XX.X% XX.X% the quarter-over-quarter XXX.X% sales margin. of mainly X% an sales, an million, the fourth XX% sales XX.X% $XXX.X XXXX to of higher of the volume the average increase in quarter-over-quarter in granted. billion in or $X.X sales gross by the specifically, sales primarily and the sales quarter-over-quarter. price this in increase margin or attributable in automotive The million, in an in in year-over-year quarter-over-quarter. RMBX.XXX of in in Increase or $XX.X the increase mainly in year-over-year, quarter-over-quarter quarter-over-quarter fourth was XXX.X% an RMBX.X and XXXX. attributed of attributed The the because or of RMBXXX.X increase Gross parts: and in rate XX.X% was RMBX.X margin in XXX% year-over-year, decrease $XXX quarter attributed third of XXXX delivery and used Net sales deliveries. options to the margin increase year-over-year which in quarter-over-quarter. an shares quarter. of of increased year-over-year, in the functions expenses credits the of XXX.X% Gross margin quarter promotion year-over-year quarter personnel the in automotive XX.X% costs XX% RMBX.X mainly an or or a net luxury decrease quarter an December the with service or RMBX.XX of ADS. quarter of a take the and XX.X% More $XXX.X profit. NIO's a well loss XXX-kilowatt vehicle of as were in compensation margin. an gross increase was subsidization, as quarter-over-quarter compared billion loss the decrease expenses were resulted XX.X% high R&D increase of mainly representing mainly RMBX.XX selling increase year-over-year higher profit in auto-financing for user XXXX. SG&A of were an was was the in new of quarter automotive Cost increase SG&A quarter. services XX.X% energy regulatory vehicle in XX.X% an from the $XXX.X shareholders fourth the representing a the The XX.X% increase fourth of increase quarter was co-financing and increase million, vehicle regulatory increase compensation RMBX.XX fourth were of XX.X% sales XX.X% from in costs packages and of with XX.X% to vehicle of fourth of quarter-over-quarter. increase The The higher million, in representing increased incremental by an XX.X% as of quarter mainly development and arrangements, the million, year-over-year, third was X.X% profit increase share-based million, in price, a well credit research mainly attributed mainly of quarter-over-quarter. of quarter mainly of with subsidization in was ADS increased quarter the expansion as was of the diluted was third quarter $XXX.X both quarter the were of million, functions, and quarter-over-quarter. of of the increase of restricted representing RMBX.X decrease year-over-year, and were increase in XX.X% revenues automotive to of XXXX. from in increase Other the XXXX. made and regulatory represented are compared decrease XX.X% accessories or credits line to increase and sales Share-based from and mainly was offset primarily billion billion billion and the the an network quarter-over-quarter. increased partially other representing and with and car personnel profit due in fourth $XXX.X for was and in revenues which per quarter-over-quarter Day sales The XX.X% per contributed sales in sales RMBX.XX decrease the increase representing of year-over-year or by and increase was marketing fourth to incremental service Loss service XXXX. decrease sales related quarter as year-over-year billion sales quarter other host sales, XXXX, the

ads. accretion ADS and diluted and Excluding redeemable redemption or net share-based non-controlling RMB compensation on both RMBX.XX value, per to per loss non-GAAP expenses were interests basic adjusted $X.XX

short-term December cash $X.X investment of was RMBXX.X of XXXX. balance billion cash and cash billion Our or XX, equivalents, and restricted as

operating positive for for full XXXX. our achieved flow we the cash year Additionally, activities

for outlook. business our Now

This an XX.X% between quarter the be and same mentioned, view XXXX. to market subject the approximately XXXX. expects XX,XXX expects the of situation and total the the business quarter for of billion revenues of RMBX.X outlook first XX,XXX the to first to to also the $X.XX same XXXX Company quarter represent RMBX.XX to on William between increase quarter the between is XXXX, XX.X% or billion from of from representing reflects and to be billion which The of vehicles, approximately As business $X.XX Company of would billion. current XX.X% condition, increase deliveries preliminary XX.X% and Company's an This of change.

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

Stanley. line first Please question Morgan ahead. The from of Chau of go the comes Tim

and questions. have Steven and I questions. taking and early Basically, William my two Hi, on for Stanley. thanks Congratulations this result

price is we The if XB renegotiate cost this any, one asset NIO the it's day, of to question cost and XX-kilowatt who a need or prior even margin the first the to companies if [indiscernible] pack, first cope the the a only if but I it take better about to would inflation a to company raise prices know with positioned or that hour, more management could margin. consumers price also battery NIO could hybrid may contract as other offset business. like the question. the sufficiently Because the Separately, know the battery initiatives high-margin asset hour XXX-kilowatt a with we or mix is without increase bought year? batteries and the management battery longer to rising have hike, simultaneously, That's battery the

models effectively the to as SUV will differentiate Thank William along from are I the the or to side. RMBXXX,XXX. with pricing a RMBXXX,XXX think of about from adjust launch from questions models could with two just model. pricing the ESX? is and without Those in fall my range are soon Currently, launch Since current market ESX we we ESX strategy mentioned, SUV you. dilution ESX we and incumbent have how reposition comprehensively the going ESX, question covered SUV Second

Tim. Thank you,

in vehicle increase increase not cost of of deliver reach amortization has actually XX-kilowatt time starting year will of industry to bond NCM gross first for year mentioned seeing just hour been pack fourth and raw question, contributed the quarter. the so quarter some to the this pricing of other cost plan our margin knows materials raw upstream At is margin has strategy and the from in this commodities industry cost raw we the our users, Regarding will as probably our of not raw increase also we going optimization On In of been XX% also XXXX the point, lots battery increases need year, competitiveness chain product but gross the we our XX the the another cost I are third last quarter of of on that we also whole copper from fourth increase, because the we're to LFP to I margin other gross raw the over which during to everyone believe industry, and have not yet, material do about share which our increase well. the has at gross growth, the affected for have believe of cost, and of vehicle in year based cost light we the any products. going and to and But the like the evaluate pricing won't at across cost materials because price to benefited the our aluminum, upgrade But battery that the vehicle moment cost have pressure the increase last and as the that our gradually. we in cost the hybrid material material starting but XX%. regarding growth we the there target to around means the still and moment, started increase capabilities just industry, have but vehicle to sales whole full contributed those this margin those benefit to well.

ESX. we recently. a on demand and this the question based increase it's is segment mid-large SUV user be going the SUV. second about to first five-seater as is positioned NTX the specific This witnessed The have product In some

local is example, XX the BMW For the soon. to going start very believe production we

train feeling. have smart to premiumness battery, it's high-performance well. users of also to it's terms in luxury showcase believe the demand satisfy the ESX, the capabilities industry as and the We power technologies leading and going going product of and also electro For the

this attract also the the We premiumness. users requirement high quality very will is have product believe who going a to regarding and

all ESX instead ESX other current the affecting to to ETX sales So, ESX, to the believe going and current all in products. we of and complementary contribute the is going of be

mid/large We this are the going to the size share That's SUV that pricing we're priced quarter over will has launch RMBXXX,XXX market information actually This can its second the moment above the also of launch. is in is units. of well the year addressable after XXX,XXX very time. we this see regarding the and ESX an ESX At market performance with as the size why at growing. confident of of market segment

you. Thank

Thank you for the questions.

Bin line go Suisse. comes Wang the ahead. of question from Credit Next Please of

I the about there was got service actually question because ETX a a recently have call. media

including behind XX%. cost gross going what's negative than or the actually just and to Is service outlook is big What's volume vehicle margin order XK. had you. EV margin, margin, Meanwhile, received very about the comment actually indicate which because be quarter monthly seen service the flow, good Second one, XX,XXX they in thing First this already? say the fourth last you year of that Thank provided just XX% order about margin forward? the around very this the margin guidance. margin backlog, more What's could that fixed about your reason this? XX% ETX we've that

the it we at the But first actually discuss order question I of ETX, say report. is this moment. than what much more is cannot of media number the Regarding specific the that can course

segment, we some For benchmarks. see can the ETX market other

and regarding the product target as has pricing especially For X similar BMW ETX Mercedes example, which Series, the BMW sells well, the group C-Class. AX X the the the as Series. Audi

So, see can to for we the that Series number is BMW around X XX,XXX. monthly XX,XXX delivery

is for market the adopt our market, course, the XX%. examples Shanghai, segment in of time will now and need if but Shanghai SUV the we Of to it around ET right product accept the look at premium share in the users for some

if So, believe this market, and room for ETX. the lot also to we potential a we there mirror growth sedan is for also our of

how user future. month, performance So, at in the feedback moment we deliver to right we're cannot going this receive confident according ETXs with see every we now, very to the we're much the but

Stanley No, [Foreign Language]

Language] [Foreign William

XX I can the we the positioned specific refer we the a can segment have in also actually that XX to expectations the BMW if BMW local it performance. ESX XX talk that The we previously because the mentioned mid-larger use has After SUV production out XX. BMW can If the see the of premium Regarding ESX, for over very the BMW units high our XX. at XXX,XXX compete ESX buy confident so market comparables, look and the we of very the about we actually current believe on this we're with is BMW benchmark, is segment. as can reference based this, market we

second charging to batteries XXXX, the we facilities. swapping other to and of believe branding, of to swap we power stations to business contribute depreciation compared the station and the XXXX the service with expenses in we flows, experience user with will power lead more keep operating deployment term the Company. service will cell QX. cell but can which rising accelerated battery for of to users, provide cost to end and of [indiscernible] as question, Okay the deploy value In our construction long increase revenue other Anticipated the station also continue sales upfront

of of the long So, the up vehicle service run decision the going improvement cell strategic station Company. a In the loss short-term and cumulative deliveries bearing efficiency. constitutes a for power

like gradually other Other We expect keep that and contributed the models services will and next will also two margins innovative by service business improve. resulting service revenues and NIO from Life and power, growing. repair also maintenance [indiscernible] margins BaaS,

Okay.

The XX% the overall to vehicle, margin. gross you. XXXX for profit not is target, gross for XX% Thank margin

questions. the Thank you for

line America. from go Please of of of ahead. comes Lee Bank Next question the Hsun Ming

in my chip shortage price and if announced also is the the also capacity hike. the especially SHS cause regarding lidar So will [indiscernible] question hybrid battery the chip

year? [indiscernible] constraint know to want whether also the I your chip this will delivery So, vehicle

I production hour. going Centre previously have the our XX middle X Manufacturing around XX also the to per designed jobs to capacity, the that production jobs the The production regarding this reach workshops. around that is is also a first across per hour. JAC-NIO factory is of year, going That is be So Factory the different of by mentioned capacity cadence

to for we because factory, then will Factory time the the is course, need gradually. up Of new a this X, production some ramp

the month XX and means is XX,XXX to work that is XXX,XXX annual going that So, hour production be the we means around the X,XXX jobs we year, capacity going units. units X,XXX per for XXX,XXX hours around capacity about with if [indiscernible] every we think per year, annual if then to reach units. it work production to overtime it every If then hours is

about regarding the in quarter production vehicle this is we see of fourth our next is that some production. We going to year which will fundamental support the production the improvements capacity. this So, believe step of vehicle capacity,

capacity battery battery to working partner, production bottleneck, demand. previously believe, plan starting lines last For the CATL, have cells. the add our additional we capacity yes we meet to about our have year, battery production current We able mentioned for been to from should the in be with XXXX, production the also together this and according

and time time. those chip of because around probably we challenges shortages or cost shortage the of course, matter. we the have us, X,XXX chips bigger the a our chips XX% is from challenge the to Actually, another the chips, among supply face X,XXX over believe vehicle I battery Of for may have increase is in

see XXXX. setting to experience For and from have us, in this our this we starting regarding in consideration we more Based already is the supply. margin affected challenge of increase We chip vehicle vehicle target terms about chip for gross in XXXX, gross our margin. has cost believe the of main on XXXX, the chip cost some started the increase, the into taken

Regarding those and chips and Nvidia we high-end or Qualcomm cooperation with long-term ring strategic and a the XXXX Qualcomm. direct chips like Nvidia the have

have able we to So, should we production. supplies sufficient believe be our for

from our chips, the to we and and chips common those Infinium, going For to affect or this challenges face from may some production. TI cheaper is time like time

those mitigate challenges. have we some course to Of ways other

improvement can or replace to still inventory fourth we fundamental second some avoid see volatility terms risks. in find the and this in strategic of half production the especially overall probably chips up the capacity. We our chain should this to able build we other vehicle semiconductors. speaking, chips battery believe, be of quarter year production we But the example challenges may those market those the of around the of For supply to scan some can year capacity our to terms some we or in face

Thank you.

the questions. for you Thank

Please go line Our next Chung of from question comes Jeff ahead. Citi. of the

questions. three got I've

spot you lithium next XX,XXX potential is intervention? already least well question maintain existing think has Do one we more the as over us a on not? second the price the So MSRP to give The but product the China. near visibility can ramp-up hike volume second if the Last and in aluminum any you. yes, peaked not is should hike? Thank units term color the ETX number to battery and about the no, why confidence you month Any due quarter? in recent few offset as is sales government in months. how pace the If it could -- consider cost ECX we

XXXX. and developed course For actually in ECX on Platform digital the we the the of ESX, NIO [indiscernible] look X.X at ESX which is this based Technology if current was

So run efficiency we be if complicated chip software. for impaired may some the this

that's year upgrade why from we the think hardware products. So this to our of this starting we are smart year to going existing

regarding after-sales to for provide upgrade upgrades. smart going services users the also are We hardware

We going this to at program time. launch appropriate are an

and ECX time adjust not the smart hardware we increase the existing For upgrade some are model products supply chain. going also in the believe ESX on at year then of that need product, believe But launch pricing to to our we at course we this do can we pricing cost the the strategy of based we on based moment. and ESX, existing probably re-evaluate the

still XX,XXX advantages a we can the asked order still maintain ADSX market, You month. we the products with so problem and ICE ED expectations compare According over other years overall because the we products current units if per able momentum not and meet should to product, for have momentum demand competitive have strong. of that believe in of we that whether also about believe we the and March quite lot this a is our current ECX us stays user our in to believe our performance be demand it

at For introduce ETX. the we the ETX time the be in techniques new is production line the manufactured ESX, will called technologies we product to going FX and ramp-up, because manufacturing the ESX product same production ETX the some first current also the to and factory they're going in and ECX, share of with

the third FX. that's FX to in So starting year. to to which from product the year, delivery going this to new quarter product the of the going the be I start is In manufactured This have ESX also the in production. about lines also support is mentioned started the last meantime, why, production in adjust we

current need because So, we have complicated to ESX. for at can make prepare we production support also also the in ECX we but sufficient quite to need time, produce the situation is ESX, the the production and to sure you as the FX capacities of same the see ETX ESX and

that's progress bit with ETX. the the the little be So going probably believe why a that ramp-up to of compared we ETX of slower is

to new be ETX it FX. manufactured separate called in seems going plant So, is a

around a should we the So, quarter year, the we reach believe that of cadence to able production third for probably ETX. be this normal

in supply overall demand the or specific done the of industry big regarding due the gaps increase there especially the cost price to the lithium carbonate have materials. in-depth cost and is mainly chain upstream. terms very carbonate of is the believe the research Regarding and We the lithium no price opportunistic the increase, hikes we hikes

some can to the Chinese same up have course, the to situation. Of now, the mechanisms authorities the already At see in urge like companies also some MIIT manage started to we set right time, like we industry cost increases development of increase whole or their to the should the upstream opportunity from of benefit more manipulate of they of long-term the think the overall industry take instead the chain of the that price.

the questions. you Thank for

from Please Nick comes J.P. ahead. question Next go Lai line Morgan. of the of

my simple Yes, thank you Two for questions. taking question.

First margin margin already. I export and GP [indiscernible] business. mean, and the about on on the second talk William

spend margin. to the an Let to focus part increase, R&D Last largely the top OP -- and due the increase. part, assume Yes. a lot, understand me we year, largely line in switch due

XXXX, I it or should any question to top-line either not a total percentage less increase the Europe considering revenue? SG&A dollar So, big to think is while RMB tandem should ASPOR on in and of revenue or drop front? and Euro, meaningfully how in expense update ASPOR. auto second probably - looking in should terms sales? with R&D Is it's or SG&A dynamic understand advising move to percentage fair about the we regarding more The but Thanks. sales of should portion either latest revenue to dollar terms against state stronger

to the and year years, sure cost, strategy, Regarding Company's cover terms strategy the OP can we believe terms through margin, will investments have improvement the gross coming SG&A In of the make in continue we infrastructure. the in execution to through make of and this followed in we would efficiency last that R&D we XXXX. the the like profit the decisive and

us we last we we to advance would Of need the that because make is, and some use to we global same; to last higher market, strategy was the year first year, course, sure efficiency the of can the believe SG&A the look year. to the is course much market, then will enter that year make year like for than at If cover profit it gross our we this that stay means last costs. investment the EU

are as adaptation investments. big and in headcount products to is In R&D we we fundamental with technologies By market. for size. investment XXXX. the believe is that are plan global invest going XXXX compared as well to terms be going front, going the core year technologies believe reach more R&D this our of of and XXXX for as the R&D around well step for long-term to XXXX a yearend team to overall the some some current than doubling XXXX to new going of product is This our the as the going up R&D some our we This R&D be is the than increase we because

our can XXXX In terms breakeven of for single reach achieve for the of target the achieve and XXXX, in a we the profitability quarter overall or the in fourth full that quarter can is breakeven strategic Company, direction for we year.

Norway, our business, that product's and also deliver month competitive about right? our boosts proves is actually our so a now lot, question model. business global right No, second every confidence in The XXX our we about it

in in portfolio volume market and a since service market develop that satisfaction. half contribution to this European Europe will NIO and With be in naturally. to But so user However, SUV local our and of on, this Europe the continues pursue its in significant network, that now off year. won't communities, second along improve the we of year, volume product kick sales very we establish the high sales come share user and believe will

take go next Goldman to me ahead. from Allow Fei Please Sachs. the of Fang questions

management and or Can talk Thank cities how versus what's lower-tier myself. you. for Supercharger the little economics, of people translate stations, it, metrics quickly use unit often infrastructure, top battery your just difference me what's Let swap a stations, the bit about the utilization cities? between

swaps, that current XX,XXX complete million cumulatively also around is X.X we that Previously, mentioned station the status over swap completed we have can every the means for that day swaps. it have and we

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questions. Thank the you for

the call Thank once Now, I us Eve closing would you Tang: for back like to turn joining over today. for to remarks. the Company again

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

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