8 Takeaways From Nio's Earnings Call: Overseas Expansion, EV Brand Positioning, Margins, R&D And More

NIO Limited NIO shares were sliding Tuesday in reaction to the Chinese electric vehicle manufacturer's quarterly results.

1. The Long, Short Of Nio's Q4: The company reported $1 billion-plus in quarterly revenue for the first time, but the loss per share was wider than expected.

Deutsche Bank Securities analyst Edison Yu attributed the below-par bottom-line performance to forex losses amid the weakening of the U.S. dollar.

Also weighing on sentiment is the sharp month-over-month drop in deliveries for February. The weeklong Chinese New Year holiday between Feb. 11 and Feb. 17 apparently slowed the pace of deliveries down, as evident from the softness reported by peers including XPeng Inc. XPEV and Li Auto Inc. LI.

Nio's guidance for the first quarter was robust, with the EV maker issuing above-consensus revenue forecast and strong deliveries estimate.

Apart from the headline numbers, Nio's management team shared viewpoints on several key issues on the earnings call. Here are the key takeaways from the call: 

2. Nio's Potential Mass Market Interest: It's possible that Nio will foray into the mass market, but the Nio brand will continue to focus on the premium market, William Li, Nio's founder, chairman and CEO, said in response to questions during the Q&A segment of the earnings call.

The reduction in investments in joint ventures with GAC and Changan has given Nio the flexibility and possibility to try different approaches to enter the mass market, Li said.

This, according to the Nio chief, is part of the company's long-term strategy.

Related Link: Nio To Begin Exporting EVs To Europe In Second Half Of 2021: Report

3. Nio's International Expansion: Li confirmed that Nio will enter European markets in 2021. The company has put in place a sales and service network in Europe, he said.

Nio is aiming to capture a significant slice of major overseas markets, although it will take time and effort to accomplish this, Li said.

The company has started nascent research on entering the U.S. market.

4. The Impact Of NEV Credit Sales On Nio's Margin: The 2.7-percentage point increase in gross margin in the fourth quarter was mainly due to a mix shift toward ES8s and EC6s, which have higher margins, the company said.

The average selling price, according to the company, increased 10,000 yuan ($1,545) per unit, while manufacturing costs and material costs fell slightly.

The company booked 120 million yuan in EV credit sales in the fourth quarter, which boosted gross margins by 1.8%.

5. Impact Of Chip Supply Shortage On Nio: Right now, Nio has sufficient chip supply to support production, the company said. The supply shortage could become a constraint in the second quarter, the company said. 

Nio said it has been proactive in firming up supply deals with its partners since last year to ensure a sufficient chipset supply.

"We believe for the second quarter, we should have the chip supply to meet our basic demand, but the risk is still quite high," according to the automaker.

6. Nio On Near-Term EV Demand, Model Y Competition: While stating that the first quarter has been seasonably weak, owing to subsidies and other policies, Nio's Li said the company doesn't prefer to emulate Tesla, Inc. TSLA in cutting prices and boosting order backlogs. Instead, he said the company prefers to have stable order performance.

"We would like to focus on the service and the experience improvement as well as building a positive word of mouth reputation in the market because we do not want to cut the price," Li said.

7. Nio's Production Capacity: From the current production capacity of 7,500 units per month, Nio expects an increase beginning in July. Annual production capacity will likely reach 150,000 units under one shift, and 300,000 units under two shifts, either by the end of 2021 or in the beginning of 2022, the company said.

8. Nio Plans To Double R&D Investment: While acknowledging that continuous R&D of products and technologies is the cornerstone of sustainable development, Nio said it seeks to double R&D investment to around 5 billion yuan in 2021.

NIO Price Action: At last check, Nio shares were down 11.82% to $43.92.