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The morning news of November 18th, Beijing time,Wei LaiAutomotive (NYSE: NIO) today released the company’s third quarter 2020 earnings report as of September 30th. According to the report, NIO’s total revenue in the third quarter was RMB 4.526 billion (approximately US $ 666.6 million), an increase of 146.4% over the same period last year and an increase of 21. 7% compared to the previous quarter; the net loss was RMB 1.047 billion Yuan (approximately US $ 154.2 million), a decrease of 58.5% over the same period last year and a decrease of 11.0% over the previous quarter; the net loss attributable to the common shareholders of the company was 1.187 billion RMB (about 175 million dollars)), which was reduced by 53.5% compared to the same period last year and by 1.6% compared to previous quarter.
After the financial report is released,Li Bin, founder, president and CEO of Weilai, Feng Wei, CFO, Qu Yu, vice president of finance, Jade Wei, assistant vice president of capital markets and investor relationsShe attended the subsequent conference call, interpreted the financial report, and answered analysts’ questions.
The following is part of the analyst question and answer session:
JP MorganAnalyst Nick Lai:The first question is about capital expenditure, capacity and cash consumption. I just said that our monthly production capacity will reach 7,500 units in January next year, so with our current design capacity at JAC, should we consider the issue of increasing capacity in the next year or a year and a half? How to deal with capital expenditure? At the same time, based on the same capital expenditure, we will add more substations and more NIO centers next year, so how do we view next year’s production capacity and investment? The company has funding from the first half of this year to the first three quarters, so it shouldn’t need to go to the capital market for funding in the next year or two. The second question concerns the autonomous driving strategy. You can understand that our long-term strategy for autonomous driving is basically buying excellent chips, but independently developing algorithms and calculation examples?
Feng Wei:As for the capital expenditure to increase the production capacity, most of the expenses are borne by Jianghuai and Weilai will bear only a small part of it.
Qu Yu:The company will continue to expand its sales network and power plant network, but progress will be constant and there will be no significant cash consumption next year.
Li Bin:From the current development plan and liquidity perspective, there is no plan to continue financing in the short term, which can support our entire short term development. Another problem is autonomous driving. As mentioned above, we will obviously improve our self-search ability in the whole section, in fact we have always had that ability. Of course, we have recently expanded our entire algorithm and data team and strengthened this team. From the system point of view, our current NIO Pilot automatic driving assistance system started in 16 years and the whole R&D system was made entirely by us, but for the first generation our chips and algorithms are tied together. So, starting from the second generation, we will have independent research and development capabilities for algorithms, data and systems, this is one of our directions.
Citi analyst Jeff Chung:The first question is that there will be an expansion of production capacity in January next year, but February is the Lunar New Year. How will our sales increase in the first quarter compared to the fourth quarter of this year? There will be some unknowns here, it could be the battery power bottleneck. The second question is that in the third quarter, the gross profit of our vehicle grew faster than the gross profit of the incomplete vehicle. Will this momentum continue in the coming quarters, ie will the gross profit of whole vehicles be much faster than that of incomplete vehicles?
Li Bin:It is too early to provide guidance for the first quarter. Obviously, from a production capacity point of view, we have to do a good job of meeting order requirements. From the point of view of a development trend of current orders, we believe that many orders this year will have to be satisfied by the production capacity in the first quarter of next year. Because from a company point of view, we do all to order, which is different from traditional car manufacturers. We are talking about the depth of the order, other companies may be talking about the depth of the inventory. From the point of view of the depth of the order, we hope that it is at a reasonable level. Too long a time will affect the user experience and users will have to wait too long. Therefore, we hope that thanks to the increase in production capacity, the depth of the order can be within a month. This means that if a user orders a car to deliver the car, we hope to be able to deliver it in about 3 weeks, 3-4 weeks, as long as the production capacity is sufficient, so the user experience is still a lot good. Sure, to achieve this it seems like it will take a long time to wait, this is a happy annoyance, but we believe that increasing production capacity will greatly improve the user experience. It is still too early to look at the first quarter of next year, but from the perspective of current trends, we are still very confident.
From the point of view of improving gross profit, it is true that in the past the gross profit of our incomplete vehicle was generally lower than that of the complete vehicle. However, in general, we have seen that in the last few quarters both the gross profit of the complete vehicle and the gross profit of the incomplete vehicle are continuously improving. Of course, it has been said earlier that our double-point revenue will be included in the gross profit of incomplete vehicles, so in China this year the market value of the points has actually been revealed. I believe that from the fourth quarter of this year to the full year of next year, in the distant future, points revenue will significantly improve our gross profit of the incomplete vehicle. Another point is that as the revenues from our services and current power plants increase, the loss of bicycles will gradually decrease. So overall, our gross profit from the incomplete vehicle will continue to increase. In the long run, battery upgrade services can also significantly improve the gross profit of incomplete vehicles. In general, we believe that everything is proceeding according to our plan.
Also, let me add that the point revenue we got in the fourth quarter of this year was actually generated by the cars we sold in 19 years. So the number of points for cars sold this year should be at least 2.5 times that of last year. And the unit price of points, from the current point of view, we think will at least double, and probably double. So overall, we can expect points turnover for next year. From a market projection point of view, this year will be about 4 or 5 times points turnover, which is generally such a level. Many car manufacturers are now in contact with us, eager to purchase our points for next year. We believe the double points will actually promote the next development of the whole new energy vehicle.
Analyst:The first question, can the company speakTeslaSome considerations on model Y. Is its impact on order momentum positive or negative? The second question, can you talk about our internationalization plan, how the calendar of the different phases of internationalization, where our main market will be, the possible models and how to recruit a localized and capable team.
Li Bin:Tesla has made it clear that the Model Y will be made in China. In general, we believe there are more products that users can choose from in this market, which will certainly have great benefits in promoting the popularization of electric vehicles as a whole. Of course we also see that Tesla is really a different company from us. They will continue to reduce prices, many times over the past year. They are generally a cost-based pricing logic. From a factual point of view, their first price cut late last year and early this year impacted our orders at that time for nearly a week. But each subsequent price reduction has virtually no effect. The last big price cut was about 10%, the price cut on October 1st on National Day. In fact, we set a historic order record in October. The average invoice price for buying a car in China is generally more than 100,000 yuan more expensive than Tesla. We believe our products and services have their own unique competitiveness. We believe that after the Tesla Model Y launch, it will have a positive impact on the market as a whole. From our point of view, I think Model Y may be more competitive with Model 3. There is still one significant difference between us and Tesla: From a product and service perspective, we have a competitive advantage. From an overall market perspective, the whole market pie is getting bigger and our main competitor is still a gasoline truck. We believe that China’s high-end automotive market is a scale of several million vehicles. We might not add up to Tesla. So okay, this market is still pretty big, and we still areChangheTo face the competition is still very confident. Again, I think our real competitor is still a gasoline truck.
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