On November 20th, NIO (NYSE: NIO; HKEX: 9866); SGX: NIO has released its Q3 2024 financial report, with sales reaching a record high of 62000 units, a continuous increase in vehicle gross profit margin to 13.1%, and a research and development investment of 3.32 billion yuan. It is worth noting that thanks to the positive conversion of free cash flow, NIO's cash reserves have increased to 42.2 billion yuan.
Li Bin, the founder, chairman, and CEO of NIO, stated during the earnings conference that starting from 2025, NIO will enter a new product cycle, with new product deliveries from Ledao and Firefly brands, and the entire group will enter a new high-speed growth cycle. With sales doubling next year, overall operations will continue to achieve positive growth, and losses are expected to narrow next year. The goal is to achieve profitability by 2026.
In the most fiercely competitive first three quarters of 2024 in the industry, NIO not only maintained stable financial performance, but also achieved fruitful results in technology research and development, including the successful chip production of the world's first 5-nanometer intelligent driving chip, the Shenji NX9031, and the full release of the vehicle wide operating system SkyOS · Tianshu, making the Chinese automotive industry "chip and soul". In addition, NIO has released two new brands this year, with the second brand, Ledao, selling its first car immediately after its launch.
Through its current financial performance, multi brand layout, and technological achievements, a NIO with deeper R&D thickness, higher safety margin, and stronger system capabilities has appeared before our eyes.
The 'strongest guide' of the 'technical faction'
As a technology driven force in the new car manufacturing industry, NIO's ability to achieve "core and soul" relies on ten years of continuous investment and cultivation in research and development. Data shows that NIO's cumulative R&D investment has exceeded 53 billion yuan. The construction of the technological foundation has laid a solid technological foundation for NIO's multi brand strategy.
In addition, due to the decline in battery raw material costs, battery costs have also decreased, while delivery volumes have significantly increased, unleashing economies of scale. NIO's overall gross profit margin has increased by 0.9 percentage points month on month to 13.1%. As a result, NIO's overall gross profit margin returned to double digits, increasing by 1 percentage point month on month to 10.7%.
More positive news is still being released.
NIO's free cash flow turned positive in the third quarter, indicating that it has entered a positive business cycle. As of the end of September, NIO's cash reserves have risen to 42.2 billion yuan, an increase of 600 million yuan compared to the previous quarter.
Based on the current stable development trend, NIO has provided the "strongest" quarterly guidance in history.
Li Bin stated that the delivery guidance for the fourth quarter is 72000 to 75000 vehicles, a year-on-year increase of 43.9% to 49.9%; The revenue guidance ranges from 19.68 billion yuan to 20.38 billion yuan, a year-on-year increase of 15% to 19.2%, both of which have reached historic highs.
Multi brand efforts
Strive to double sales next year
Facing the approaching end of 2024, NIO has chosen to end with a new high guidance. Looking ahead to the next two years, Li Bin has put forward many small goals, showing the outside world a "profit roadmap".
In October of this year, NIO's second brand, Ledao, welcomed its first full delivery month, achieving 4319 deliveries that month. In Li Bin's view, this is just the beginning. During the third quarter performance conference call, he stated that the production capacity of Ledao is still in the climbing stage, and it is expected to deliver 10000 vehicles in December this year and 20000 vehicles in March next year.
At the same time, Ledao will launch two family SUVs next year, one is a mid to large SUV with 6 to 7 seats, and the other is a large five seat SUV. Li Bin revealed that Ledao's two new SUV products will have strong competitiveness in terms of price.
The performance of the Ledao brand has once again raised expectations in the market for the development of the third brand. Li Bin confirmed in the phone conference that NIO's third brand will be officially named "Firefly", and the first product will have the same name as the brand. "The Firefly brand and the first product will both be released and unveiled on NIO Day 2024, which is positioned as the MINI brand of BMW Group in the company.
The first model of "Firefly" is expected to be delivered in the first half of 2025. According to Li Bin, "Firefly will exceed user expectations in design, safety, space, intelligence, and energy efficiency, and usher in the intelligent electric era of high-end small cars worldwide
In addition, the first flagship sedan under the NIO brand, the NIO ET9, will be officially released on NIO Day this year. This model is the first model under the NIO NT3 platform. Li Bin revealed that by 2025, all products under NIO will gradually switch to the NT3 platform.
At this point, NIO has once again expanded its product matrix, covering the market of 100000 to 800000 yuan. Among them, "Firefly" focuses on high-end small cars priced at 100000 yuan, "Ledao" focuses on the pure electric SUV market priced at 200000 to 300000 yuan, and NIO brand covers the high-end and luxury car market priced at 300000 to 800000 yuan through its 9 products. By specializing in different niche tracks, NIO's three brands have clear directions, reasonable positioning, and collaborative operations.
Li Bin said that using two to three brands to face different users is a relatively successful strategy, and next year the entire group will enter a new high-speed growth cycle. Firstly, the gross profit margin, NIO brand gross profit margin, needs to reach 20%. Li Bin bluntly stated, "We are very confident in achieving 100% sales growth
Based on confidence in future delivery performance, Li Bin proposed that the company's loss situation will continue to narrow next year, and NIO aims to achieve profitability by 2026.
Channel acceleration layout
Blooming in multiple locations overseas
For the NIO brand, Li Bin stated that it will adhere to a high-end positioning and continuously improve its profitability. We are confident that NIO's vehicle gross profit margin can increase to 15% in the fourth quarter of this year. By 2025, NIO's vehicle gross profit margin will gradually increase from 15% to 20%, "said Li Bin.
At present, NIO brand is performing well in the high-end market. Data shows that from January to September this year, NIO's market share in the high-end pure electric market with an average transaction price of over 300000 yuan reached 41.87%, which has attracted many luxury car dealers to overturn the deal.
At this year's Guangzhou Auto Show, Wei Jian, Senior Vice President of NIO, revealed that 40 traditional luxury brand dealers have rebranded NIO from last year to this year, including the first Audi 5S store in southern China - Guangzhou Jingxi Audi. This store was once Audi's largest store in the Asia Pacific region.
It is understood that among the stores of the rebranded NIO, there are also dealers of traditional luxury brands such as Porsche, Maserati, BMW, Mercedes Benz, etc.
With the strong growth of new energy vehicles, the rush of traditional luxury car dealers continues, coupled with NIO's own store construction, its channel layout will continue to deepen and grow.
Not only that, NIO's overseas layout is also accelerating.
Since 2021, NIO has entered the markets of five European countries through its entire system, focusing on products, services, and communities. On October 4th this year, NIO announced that it will officially launch business in the Middle East and North Africa region, and plans to enter the UAE market in the fourth quarter of this year.
On November 15th, NIO announced that it will officially start business in Azerbaijan and begin product delivery in the second quarter of 2025, further accelerating its global layout.
Li Bin revealed during a conference call that NIO's first store in the Middle East and North Africa markets, the NIO Abu Dhabi Center, will officially open on November 28th, and sales and delivery work has already begun. Starting next year, with the delivery of Ledao and Firefly brand products, NIO will accelerate its entry into more global markets.
In the face of changes in tariff policies in various regions, Li Bin frankly stated, "European tariffs will definitely affect our pricing strategy. After adding tariffs, NIO's prices in Europe will even be similar to Porsche's, and the market size will be limited. However, NIO will still maintain long-term investment and increase the priority of Ledao and Firefly. The above two brands will enter more countries and markets
At this point, NIO's "profit roadmap" is clearly visible: by 2025, through long-term investment and layout in technology products, services, and communities, NIO will achieve a positive transformation of free cash flow, form a self-sustaining positive cycle, and become a support for multi brand development and global layout. By 2025, through the joint operation of three brands, we aim to achieve a rapid increase in sales, drive revenue growth, continuous improvement in gross profit, and narrowing losses, laying the foundation for profitability in 2026.
On November 25th, on the occasion of NIO's 10th anniversary, Li Bin released an internal letter to the team, stating that the most intense and brutal stage of the intelligent electric vehicle industry qualification race has arrived, and only a few excellent companies will survive in two or three years. What we will face next is a higher dimensional competition. We cannot have any weaknesses, nor can we win quickly