NIO's revenue was lower than expected, and Li Bin made efforts to sell cars: the target is to sell 30,000 vehicles a month and dig sales from Mercedes-Benz BMW
For the challenging third quarter, NIO, a new automaker, gave the highest delivery volume and revenue guidance in history.
On August 29, NIO (NIO.US; 09866.HK) released its second quarter 2023 financial report. According to the financial report, NIO achieved revenue of 8.772 billion yuan in the second quarter, down 14.8% year-on-year, and the market expected 9.15 billion yuan; net loss of 6.056 billion yuan, an increase of 140.2% year-on-year.
It is worth noting that NIO expects that in the third quarter of 2023, NIO will deliver 55,000-57,000 units, a year-on-year increase of 74%-80.3%; The revenue guidance was RMB18.9 billion to RMB19.52 billion, a year-on-year increase of 45.3% to 50.1%, which is NIO's highest delivery and revenue guidance in history.
In the earnings conference call on the evening of August 29, NIO CEO Li Bin said that the current market environment is full of challenges, the smart electric vehicle market competition is increasingly fierce, NIO is ready in terms of core technology, product layout, sales capabilities, manufacturing and supply chain, focusing on the implementation of market sales strategies, and promoting the steady increase in delivery.
In response to the widespread concern of analysts and investors about the expansion of sales channels, Li Bin also revealed that NIO is expanding sales personnel and sales outlets according to the monthly sales volume of 30,000 vehicles, and also hopes to increase sales and expand the sinking market by calling the former Mercedes-Benz and BMW sales personnel into the team. At present, the adjustment of sales channels has begun to bear fruit.
In the first half of the year, the performance did not meet expectations, "selling more cars" has obviously become NIO's most important task at present.
NIO's main financial data for the second quarter comes from the official website
The NIO brand will not release new cars next year
It is not difficult to see from Li Bin's answer in the earnings call that NIO's goal now is to "sell more cars".
In the second quarter of 2023, NIO delivered 23,500 units, down 6.1% y/y and 24.2% m/m. The decrease in deliveries directly led to a decline in revenue, and NIO said that the decline in selling prices and deliveries led to a decline in revenue in the second quarter.
Gross margin was also affected. NIO's gross margin was 6.2% in the second quarter, compared to 16.7% in the same period last year and 5.1% in the previous quarter. NIO said that with the increase in sales, it expects the gross margin to rise to double digits in the third quarter of this year, and the target of 15% can be reached in the fourth quarter.
Looking back at the first half of the year, NIO experienced a short period of pain due to the generational switching of products and the small number of models on sale. In fact, this is not the first time that NIO has encountered sales decline challenges due to product iteration.
In this regard, Li Bin also gave a simple and clear solution, that is, not to issue new cars, focusing on the sales of the existing 8 models.
Li Bin introduced that NIO plans to release and deliver the newly upgraded mid-size coupe SUV EC6 in September, in this regard, NIO will complete all product switching based on the second-generation technology platform, and by September, eight second-generation models will be fully launched, which can cover 80% of the user needs of the high-end market.
"Next year, there will be no new product deliveries for the NIO brand, but sales performance will improve. It's like we don't have new product deliveries in 2021, but sales, gross profit, product quality, etc. have reached a better state. Li Bin added.
For NIO's second brand and mobile phone business, Li Bin also made a brief introduction, its mass market brand "Alps" will release the first product in the second half of next year, the development of the product is currently progressing smoothly, and the second car under the brand is also under development.
Li Bin stressed that the brand development concept for the mass market is different from the NIO brand, and will pursue the sales of each car more, the number of models will not be large, and it will focus more on the household market, while NIO will meet the more personalized needs of the high-end market through 8 models.
For NIO mobile phones, he introduced that the launch of NIO mobile phones is very meaningful to increase the competitiveness of cars, NIO is not to enter the field of mobile phones, but to meet the needs of users for mobile phones to better match cars, NIO mobile phones will be delivered in late September.
In July this year, NIO's deliveries stabilized and rebounded, and it broke the delivery record, successfully crossing the 20,000 mark. Delivery data shows that in July, NIO delivered a total of 20,500 new vehicles, a year-on-year increase of 103.6% and a month-on-month increase of 91.1%, a record high.
Channel sinking is an urgent task
"Sales channel" is the hottest word on NIO's second-quarter earnings call. Previously, it was reported that NIO is recruiting sales personnel on a large scale, and a large number of new employees come from traditional luxury car brands such as Mercedes-Benz and BMW. During the earnings call, the issue also received attention from several analysts.
Li Bin bluntly said on related issues that this move is to make up for NIO's lack of sales capabilities.
He said he realized in June that NIO's sales force was lagging behind competitors in terms of numbers and capabilities. For example, Mercedes-Benz and BMW's sales staff are 6-7 times that of NIO, and NIO's sales staff is only about half compared to some of the better-performing new automakers. The insufficient number of salespeople affects consumer satisfaction and conversion rates.
"Since July, we have begun to fully increase our sales capacity, aiming to reach 30,000 units per month, and will complete the construction of this sales capacity by the end of September, and the results of sales capacity building will gradually appear from October. In the sinking market, we hope that more experienced salespeople can join. Li Bin introduced.
Li Bin said that the sinking of NIO's channel is imminent.
He said that Jiangsu, Zhejiang and Shanghai accounted for more than half of NIO's sales. Taking Anhui as an example, the provincial capital city of Hefei accounts for about eighty to ninety percent of the province's sales, compared with brands such as Mercedes-Benz BMW, which accounts for only about 50%. Therefore, channel sinking is very urgent for NIO.
At present, NIO's sales channel expansion layout has achieved initial results. Li Bin revealed that the number of test drives at NIO in August has reached a record high, and the number of test drives every weekend can reach 10,000. The improvement in sales capacity is expected to see positive results in October and November.
In June this year, NIO lifted the binding relationship between vehicles and free battery swap rights, and free battery swapping is no longer a standard car entitlement.
In response to the profitability of power exchange, Li Bin introduced that after the adjustment of user rights, the proportion of paid power exchange is increasing, and now a service fee of 30-50 yuan is charged for each power exchange. The third-generation station changes power about 60 times a day, and the station can reach breakeven, and about 20% of NIO's replacement stations have reached this level.
As of the close of U.S. stocks on the 29th, NIO fell 1.27% to $10.88 per share.