To The Moon

Of the 3 Chinese EV makers - $Li Auto(LI)$ , $XPeng Inc.(XPEV)$ and $NIO Inc.(NIO)$ that debuted (in China) around the same time, two have reported their Q3 2023 quarterly earnings.

Li Auto - quarterly revenue - Upwards Trajectory

Li Auto - Q3 2023 earnings. (see above)

• Revenue: Was RMB 34.68 Billion, exceeding market expectations of RMB 33.641 Billion.

• Earnings per share (EPS): Was $0.45 per share vs -$0.09 YoY. EPS also exceeded market expectations of $0.37 per share.

• Year 2023 is a breakout year for Li Auto, a very formidable performance.

• Outlook: Li Auto will begin delivery of 100% EV in 2024.

Xpeng - quarterly revenue - Recovery trajectory

Xpeng - Q3 2023 earnings: (see above)

• Revenue: Was RMB 8.53 Billion vs market expectations of RMB $8.58 Billion.

• Loss per share: Increased to -RMB 4.49 per share, from -RMB 2.77 YoY.

• Look carefully, you will see that Xpeng’s Q3 revenue is still below its Q4 2021’s.

What Will It Be For NIO?

To make an educated guess about Nio’s Q3 2023 earnings, it means looking at Nio’s EVs delivered so far.

• In 2022, Nio delivered 122,486 EVs.

• By Q3 2023, Nio has delivered 110,911 EVs., with 11,575 EVs to be delivered to match 2022 total delivery.

• It should be a simple feat that is achievable.

NIO - Q2 2023 revenue

• In Q2 2023, Nio delivered approx. 23,520 EVs. (see above table).

• In Q2 2023, Nio’s revenue came to about RMB 8,770 Million (or RMB 8.77 Billion).

• In Q3 2023, Nio delivered approx. 55,432 EVs (see above table), that is +2.3568 times more EVs than Q2 2023.

• Apply the ratio to Q2 revenue, it works out to be about RMB20.67 Billion.

• However, in a bid to remain “competitive”, Nio reduced the starting prices of its entire vehicle lineup by RMB30,000 from June 2023.

• Also, in August 2023, Nio also announced several limited-time purchase incentives, including (a) coupons for battery replacements and (b) discounted prices for home charging stations.

• Above promotional activities will definitely chip away into Nio’s net income.

• Conservatively, assume the discounts erodes about 20% of total revenue, final total revenue comes up to approx. RMB15.54 Billion.

• This is still +77.19% more than Q2 2023’s revenue.

• Revenue and Loss per share for Q3 2023 should improve, compared to its YoY data.

• Research & development (R&D) is another expense that chips away Nio’s net income, big time. (see above).

• In 2018, it began with slightly above half a million spent on R&D.

• 4 years on, in 2022 — R&D expenses came to a staggering $1.57 Billions.

NIO - 2023 R&D expenses for Q1 & Q2

• Cue to 2023 - Q1 & Q2, Nio’s management team has already burnt through $909 Million on R&D. (see above)

• Assuming Q3 & Q4 2023’s R&D budget remains status quo @ $909 Million.

• Tallying up 2023’s R&D expenses, it will be approximately $1.82 Billion, exceeding 2022 R&D expenses of $1.57 Billion.

• This will definitely not go down well with (a) Wall Street analysts and (b) shareholders.

• Honestly to me, there is no significant or visible results from the monies spent in R&D.

Q4 Outlook and Challenges:

• This is another area that NIO’s management team will need to address during Q3 earnings press conference.

• Nio finally decided to curtail expenses by trimming its workforce by 10%, saving about RMB 2.0 Billion a year.

• Is this “for show only” in light of the coming Q3 2023 earnings reporting?

• Surely, the Management team should have realized long ago that Sales vs Expenses did not tally up?

I honestly think that NIO’s management has been too ambitious and spread themselves too thin, leading to the current predicament.

• It is all their fault.

Instead of focusing on ramping up volume (supply) to meet demand like Li Auto, they went onto:

• Develop their own solid-state battery.

• Launch a white elephant mobile phone that is slated for a new model each year.

• Build their own autonomous driving app.

Perhaps another major failure is the ability to crack the European market.

• It has been 1.5 years since NIO first landed in Norway, its first European city in May 2022.

• To date, its presence in continental Europe has hardly made a dent in the EV market there.

• Neither did the Management team bother to give an updated report on its foray into EU? Responsible management team?

• Is it a case of wrong hire to help Nio expand its EVs in Europe?

• Is it a case of EU bureaucracy?

As a responsible (??) Management team, this “elephant” in the room” should be accounted for.

It is not going to boost investors’ confidence by sweeping all these under the rug.

On a “brighter” note, Nio management recent action is making a lot of sense:

• Halting some pipeline projects until later.

• Bringing a more budget conscious EV (Alps - brand) into the market next year. (see above)

• Originally, Alps was supposed to be a spin-off brand. However, seems like there is plan to launch it under the Nio brand.

• This should help boost revenue and EV volume sales instead of spinning it off.

• Its acquisition of JAC manufacturing plant - lock, stock & barrel should benefit from some costs savings. (see above)

• However, having a manufacturing staff pool brings with it, its own inherent issue/s eg. outflow of talents, attrition rate etc..

• Looking into dealership in Europe to help “sell” Nio’s EVs makes more sense instead of building the network from scratch, given the red tapes in Europe, a totally unfamiliar ground.. (see above)

Overall NIO’s Q3 earnings should come in better than a year ago and better than XPEV but not as good as Li Auto. This will be my take.

• Do you think NIO will report a better than expected Q3 2023 results?

• Do you think there is hope left for NIO; given its weak management team in & out of China?

Please give a “LIKe”, “Share” and “Re-post” ok. Thanks. Rating is very important (to me).

Do consider “Follow me” and get firsthand read of my daily new post/s ok. Thanks.

@Daily_Discussion

@TigerPM

@TigerStars

@Tiger_SG

@TigerEvents

@Blackrath @albee_9279 @XiAoBlAcK @porgumf29 @VickyNicky