On November 18, Nio rose more than 3% before the market opened. Credit Suisse: Upgraded Nio Motors' rating to outperform, with a target price of $60.
Fighting back against Citron's short selling, Nio achieved double-digit gross profit margin in the third quarter
After being shorted by Citron, a well-known short-selling agency, Nio Motors fought back strongly with an "unexpected" third-quarter financial report.
On November 18, Nio released its financial report for the third quarter of 2020. Data show that Nio achieved total revenue of 4.526 billion yuan in the third quarter, a year-on-year increase of 146.4% and a quarter-on-quarter increase of 21.7%. The net loss in the third quarter was 1.047 billion yuan, a decrease of 58.5% compared with the same period last year.
In the third quarter, the gross profit margin of Nio's automobile sales further increased, reaching 14.5%, and the comprehensive gross profit margin was 12.9%. Looking back at the first quarter, Nio's overall gross profit margin was-12.2%. In other words, Nio's gross profit margin has increased by more than 20 percentage points this year, and it has gradually stepped out of the dilemma of "losing money and making money".
At the second quarter earnings conference call, Nio founder Li Bin once stated that the gross profit margin target for the second half of 2020 is to reach double digits in both automobile sales gross profit margin and comprehensive gross profit margin. Looking at it now, Li Bin has fulfilled his promise. JPMorgan analysts have also predicted that Nio's gross profit margin will further expand to 12%.
Nio seems to have finally come out of its darkest hour. You know, in March this year, when the financial report for the fourth quarter of 2019 was released, Li Bin was still under pressure. He once admitted that Nio's cash flow could not last for 12 months.
Now, Li Bin has regained his confidence. As of the third quarter of this year, Nio's cash reserves on its books reached 22.2 billion yuan, and it has sufficient capital reserves for new product research and development. In the opening speech of the earnings conference call, Li Bin introduced that in the third quarter, Nio once again achieved positive operating cash flow. "We are confident that we can achieve positive cash flow from operating activities in 2020."
However, in the face of the "siege" of Tesla and traditional car companies, Nio is far from relaxing.
The "secret" behind double-digit gross profit margins
For Nio, the positive gross profit margin means that after excluding operation and management expenses, it has got rid of the dilemma of "selling one and losing one".
In the earnings conference call, Li Bin attributed Nio's continued positive gross profit margin to two points: first, the steady growth in quarterly deliveries and the increase in the proportion of high-priced models; The second is the continuous improvement of material procurement costs and manufacturing cost efficiency.
Official data shows that Nio deliveries continue to rise. In the first three quarters of 2020, Nio delivered 3,838 vehicles, 10,331 vehicles and 12,206 vehicles respectively. Especially in the third quarter of this year, Nio's delivery volume surged by 154.3% year-on-year and 18.1% month-on-month.
Not only that, Nio's sales "gold content" is also very high, and the sales proportion of high-priced models is constantly rising.
Qu Yu, vice president of finance of Nio, revealed in the earnings conference call that overall, the gross profit margin of Nio ES8 is greater than that of Nio ES6. In April this year, Nio's new ES8, priced at more than 400,000 yuan, began to be delivered to the market. Since then, the delivery ratio of Nio models has continued to rise.
In the third quarter of this year, Nio delivered 3,530 ES8 vehicles, accounting for 28.9%; There are 8,660 ES6 vehicles, accounting for 70.9%. In contrast, ES8 deliveries accounted for 17% in the fourth quarter of 2019, 21.9% in the first quarter of 2020, and this proportion has increased to 28% in the second quarter of 2020.
In addition, according to Nio: "The increase in the number of users with optional NIO Pilot has also caused Nio's bicycle revenue to continue to rise." According to data disclosed by Nio at the end of September, the optional proportion of NIO Pilot selected packages and full package collections is 50%.
On the expenditure side, Nio continues to "live frugally."
The financial report shows that in the third quarter of 2020, Nio spent 590.8 million yuan on research and development, compared with 1.0232 billion yuan in the same period of 2019.
Sales and management expenses also continued to decline, from 1.3199 billion yuan in the first quarter of 2019 to 940.3 million yuan in the third quarter of 2020. Nio bicycle sales expenses dropped from 330,880 yuan in the first quarter of 2019 to 77,040 yuan in the third quarter of 2020. According to Nio, "This is due to the significant efficiency advantages of the direct sales model in the sales process.
Source: Nio 2020 Q3 financial report
After continuous increase in revenue and expenditure reduction, in the third quarter of 2020, Nio's operating loss further narrowed to 946 million yuan, a month-on-month decrease of 18.4% and a year-on-year decrease of 60.7%.
Tesla price cuts have no impact on Nio
Nio, who wants to compete with Tesla, is finally qualified to compete with it.
In the conference call after the financial report was released, Li Bin "ridiculed" Tesla: "Tesla and us are indeed a different company. They will keep cutting prices, and they have lowered prices many times in the past year.".
Li Bin revealed that Tesla's first price cut at the beginning of this year did have an impact on Nio's orders. But each price cut after that basically had no impact. For example, during the National Day, Tesla cut prices on a large scale, but Nio's delivery volume in October reached a new high, reaching 5,055 vehicles.
When Nio released the 100kWh battery pack not long ago, Li Bin revealed that in the Chinese market, the average sales unit price of Nio is 150,000 yuan more expensive than that of Tesla. "The users of Nio and Tesla are no longer the same type of users."
In terms of gross profit margin, Li Bin said: "We count new car points in other income, unlike Tesla, which includes carbon emission points income in the gross profit margin of the whole vehicle, so what (Tesla) improves is the gross profit margin beyond the whole vehicle."
In terms of production capacity and product matrix, Nio is also accelerating to catch up.
Official data shows that Tesla's Shanghai factory in China has a weekly production capacity of 3,000 vehicles. In the third quarter earnings conference call, Li Bin revealed that Nio has reached a full supply chain production capacity of 5,000 vehicles in September, and is expected to increase the full supply chain production capacity to 7,500 vehicles per month in January next year to meet the growing user demand.
In addition, Li Bin said that Nio will also enter the car market and will soon release a car product. The second new car developed based on Nio's second-generation technology platform NT2.0 is also a car product. "After the release of the two new cars, Nio's product matrix is relatively complete."
More importantly, Nio, which is deeply involved in "user operation", has found more labels.
At the end of September this year, Nio announced the pilot assistance function NOP (Navigate on Pilot) based on high-precision maps, becoming the second car company in the world after Tesla to launch such a function and complete large-scale user push. According to Nio, pilot assistance can realize functions such as automatic entry and exit of ramps and automatic overtaking of local trains according to the path planned by navigation. It supports expressways and urban elevated sections, and is optimized according to Chinese road conditions.
In the earnings conference call, Li Bin revealed: "Nio is accelerating the development of the second-generation technology platform NT2.0. The core of this platform is mass-produced autonomous driving systems. We will share more details at NIO DAY."
Nio predicts that the number of vehicle deliveries in the fourth quarter of this year will reach a new high, reaching 16,500-17,000 vehicles, and the revenue is expected to be 6.2587 billion-6.4358 billion yuan, a month-on-month increase of 38.3%-42.2%.
"Still a startup"
Although the development momentum is fierce, there is still a big gap between Nio and Tesla.
The reason why Citron shorted Nio is that Nio's relative valuation is twice that of Tesla, but its sales performance is far inferior to Tesla's.
Official data shows that in the first 10 months of this year, Nio's cumulative delivery volume was 31,400 vehicles, a year-on-year increase of 111.4%; During the same period, Tesla's cumulative sales were approximately 92,400 vehicles, nearly three times that of Nio.
Turning positive gross profit margin is only the first step towards profitability, and Nio still has a long way to go before actually making money, however, Tesla has achieved profitability for five consecutive quarters.
Tesla's third quarter performance report for fiscal year 2020 shows that not only did its revenue increase by 39% year-on-year to US $8.771 billion, achieving the highest quarterly revenue level in history, but it also achieved a net profit of US $331 million.
In terms of income structure and globalization, Nio still has room for growth.
Nio's third-quarter financial report shows that its car sales were RMB 4.2668 billion (approximately US $628.4 million), accounting for 94.27% of total revenue.
Tesla's financial report shows that its auto business revenue was US $7.6 billion, accounting for about 91% of the total revenue for the quarter. In addition to the automotive business, other businesses such as the sale of software also bring more revenue to Tesla. Tesla CEO Elon Musk (Elon Musk) previously revealed that the deferred revenue generated by the fully autonomous driving system in the third quarter was approximately US $10 million.
In addition, reports from many securities companies show that after the localization of Tesla Model 3, the total production cost can be reduced by 20%-28%, and its gross profit margin will reach 35%. Tesla is also maximizing the dividends of China's supply chain, supplying Chinese-made Model 3 to Europe, covering more than 10 countries including Germany, France, Italy, and Switzerland.
Many traditional auto giants have also launched an electrification offensive.
Recently, Volkswagen ID.4 series models officially entered China, and officials revealed that their domestically produced prices will be within 250,000 yuan. Earlier, the Audi e-tron made its debut in China in November 2018, the Mercedes-Benz EQC was unveiled in China in April 2019, and the Volvo XC40 RECHARGE also officially came to the Chinese market to "report" during this year's Beijing Auto Show.
"Nio will celebrate its sixth birthday on November 25th, 2020. With the support of users and the efforts of the team, we have achieved milestone performance. But we are still a start-up company with a short history, facing fierce market competition and challenges."