Hello, ladies and gentlemen. Thank you for standing by for NIO Incorporated's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I'll now turn the call over to your host, Miss Eve Tang from Capital Markets and Investor Relations. Please go ahead, Eve.
Good morning and good evening, everyone. Welcome to NIO's fourth quarter and full year 2021 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted at the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board, and the Chief Executive Officer, Mr. Steven Feng, Chief Financial Officer, and Mr. Stanley Qu, Senior VP of Finance. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor Provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today.
Further information regarding risks and uncertainties is included in certain filings of the company with the US Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial information. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead. Hello, everyone. Thank you for joining NIO's fourth quarter and full year 2021 earnings call.
In the fourth quarter of 2021, we delivered 25,034 ES8, ES6, and EC6, representing an increase of 44% year-over-year. 2021 was a year full of challenges for NIO and the global auto industry. By overcoming the pandemic, semiconductor shortages, supply chain volatilities, and many other difficulties, we have continued to lead the premium smart electric vehicle market in China with a total delivery of 91,429 NIO vehicles in 2021, representing a strong increase of 109.1%. In January 2022, NIO delivered 9,652 vehicles, increasing by 34% year-over-year. In light of the Chinese New Year holiday, NIO delivered 6,131 vehicles in February 2022, representing a growth of 10% year-over-year.
During the holiday, we adjusted the production lines to prepare for the delivery of ET7 in late March 2022. Although the user demand and order momentum remains strong, the production and the delivery have been affected by the COVID and the volatility of the supply chain production capacity. We expect the total delivery in the first quarter of 2022 to be between 25,000-26,000 vehicles.
试驾订单转换率超过我们的预期，让我们对第二代平台的竞争力充满信心。
We will start the delivery of ET7, the first product on NT2, on March 28th, 2022. In early March, we kicked off the test drive of ET7 nationwide. Users who test drove ET7 have spoken highly about the product. The test drive to order conversion rate exceeds expectations, which gives us great confidence toward the competitiveness of NT2.
2021年，中国纯电动汽车市场的增长速度超过市场预期。根据乘联会的数据，2021年纯电汽车的零售渗透率从1月份的5.9%增长至12月份的18.6%。在上海等一二线城市，纯电汽车的渗透率上升更为明显。2021年在上海的35万人民币以上，所有燃油和电动SUV中，蔚来的市场份额达到23%，整体销量排名第一。我们相信这样的趋势也会扩展到三四线城市。
In 2021, the battery electric vehicle market maintains a faster than expected uptrend. According to China Passenger Car Association, the retail penetration rate of a battery electric vehicles grow from 5.9% in January to 18.6% in December last year. In tier one and tier two cities in China, such as Shanghai, the penetration rate of battery electric vehicle witnessed a more prominent growth. In Shanghai, among the sales of all ICE and electric SUVs priced above CNY 350,000, NIO enjoyed a market share of 23%, with its sales ranked at the top in 2021. We believe that this EV growth trend will also gradually expand to tier three and tier four cities in the future.
在毛利方面，受益于单车销售收入的提升，以及75度三元铁锂电池包带来的成本优化，2021年四季度，蔚来整车毛利率达到20.9%。2021年全年，蔚来整车毛利率达到20.1%。目前，行业普遍面临着成本上涨的压力，我们会密切关注供应链的变化，和合作伙伴一起提高效率，尽可能减少成本上涨对毛利率的影响。
In terms of gross margin, benefited from the increase of revenue per vehicle and the cost optimization brought forward by the 75 kWh LFP and NCM hybrid battery. The vehicle gross margin reached a 20.9% in Q4 2021, and a 20.1% for the full year of 2021 respectively. Currently, the whole industry is confronted with the pressure of cost increase. We are paying close attention to the dynamics in the supply chain and working closely with other partners to enhance efficiency in order to reduce the impact to the vehicle gross margin.
2022年3月10日，蔚来通过介绍上市的方式，在香港交易所完成二次上市，正式开始挂牌交易，股票代码为9866。在香港上市让我们有机会服务更多的投资者，是蔚来的又一重要里程碑。
On a separate note, NIO started to be listed by way of introduction on the Stock Exchange of Hong Kong under the stock code 9866 from March 10, 2022. The listing in Hong Kong marks another milestone in the history of NIO and enables us to serve more investors in the future.
接下来我跟大家交流一下研发和运营方面的一些重点工作。
Next, I would like to share some recent key highlights of our R&D and operations.
2021年，我们开始加大研发投资的力度，全年研发总投入non-GAAP超过41亿人民币。我们加快了新产品研发的速度，在全栈自动驾驶及车机技术领域开始加大投入。
In 2021, we started to step up our investment in R&D with the overall non-GAAP R&D expenses exceeding CNY 4.1 billion in 2021. We have sped up the development of new products and increased our investment in full stack, autonomous driving and other core technologies.
研发投入对蔚来的长远竞争力至关重要。2022年我们就能看到去年加大研发投资的部分成果。2022年我们计划交付基于NT2的三款全新车型，ET7是第一款，目前量产进展顺利，在自动驾驶算力等多个方面引领了行业的发展趋势。
Investment in R&D is of critical importance for NIO's long-term competitiveness. Starting from this year, we will be able to see part of the fruitful results from last year's R&D investment and efforts. In 2022, we plan to deliver three new products based on NT2 with ET7 being the first. The mass production of ET7 is well on track. The product itself has led the industry in various aspects, including computing power for autonomous driving. At the NIO Day on December 18, 2021, we unveiled ET5, a mid-sized smart electric sedan. As a perfect combination of NIO's supercar DNA and the concept of design for AV, ET5 is equipped with NAD, NIO Autonomous Driving, and NIO Cinema, panoramic digital cockpit enabled by AR and VR technologies. It comes as standard with 100 configurations for comfort, safety, and smart technologies.
After its launch, ET5 has attracted a wider and more diversified user base, and received more orders than our expectations. The delivery of ET5 is expected to start in September this year. Soon we will also launch ES7, our first SUV model on NT2, which is positioned as a mid-large premium five-seater SUV and expected to start delivery from the third quarter of this year. In the coming years, we will continue to elevate our R&D investment and efforts in core technologies, especially in key capabilities such as the full stack autonomous driving and battery technologies. We believe the investment in core technologies will not only enhance our sustainable competitiveness in both our technologies and products, but also improve our gross margin and profitability in the long run, and ultimately create long-term value for our shareholders.
With regards to production capacity, the production line upgrades at the JAC-NIO Advanced Manufacturing Center is in progress phase by phase. By midyear, the production cadence across all workshops will reach 60 drops per hour. We have largely completed the building construction of our second manufacturing facility, F2, located in NIO Park, finished the equipment installation, and are now working on the calibration. F2 is planned to be put in operation in third quarter this year with a designed production cadence of 60 drops per hour. On March 16, the first validation build of ET5 rolled off of the production line from the F2 vehicle pilot production center. On the side of the supply chain, we are still faced with the challenges from chip supply volatility, raw material cost increase, COVID, and the changing international situation.
In the past two years and more, our teams and partners have accumulated a rich experience in securing supplies for production. We will continue to work closely and to try our best to safeguard the production and delivery going forward.
2021年是蔚来积极投入充换电基础设施建设和销售服务网络部署的一年。
2021 has been a year of decisive investments in charging and swapping infrastructure as well as the sales and service network.
销售和服务网络方面，我们现有46个蔚来中心和341个蔚来空间，覆盖全球155个城市。我们在中国146个城市拥有60家蔚来服务中心和179家授权服务中心。
In terms of the sales and service network, we now have 46 NIO Houses and 341 NIO Spaces in 155 cities worldwide. In China, we have 60 NIO Service Centers and 179 authorized service centers in 146 cities.
在销售和服务网络快速扩张的同时，我们不断优化网络布局，提升单点运营效率，始终保持了高品质的用户服务水准。2022年，我们将继续在中国扩展销售服务网络，计划全年新增不少于一百个销售网点，新增超过五十家蔚来服务中心和授权服务中心。
As the sales and service network expands quickly, we have been continuously optimizing the network deployment and the operational efficiency of each touch point while delivering high quality services to users. In 2022, we plan to open more than 100 new sales outlets and over 50 NIO Service Centers and authorized service centers.
在充换电网络方面，我们已经建成866座换电站，覆盖中国190个城市，完成了超过760万次换电。同时，我们也在全国累计部署超过711座超充站和3,786根目的地充电桩。
In terms of the charging and swapping network, we have deployed 866 battery swap stations in 190 cities and completed over 7.6 million swaps in China. So far, we have 711 supercharging stations and 3,786 destination chargers in China.
2022年，蔚来将新增部署三十条Power Up Plan目的地加电路线，中国市场将累计建成超过1,300座换电站、6,000根超充桩、10,000根目的地充电桩。我们将在充换电网络持续布局，进一步提升用户的加电体验。
In 2022, we will add 30 new destination charging routes to the Power Up Plan. With that, NIO will accumulatively operate over 1,300 battery swap stations, 6,000 power chargers and 10,000 destination chargers in China. We will further expand our power network to provide a better charging and swapping experience to users.
在全球市场方面，我们看到ES8赢得了挪威用户的喜爱，今年以来月交付量稳居挪威六座和七座乘用车市场的前两位。挪威市场成功的交付和高质量的用户服务，为我们提供全球服务积累的经验，坚定了我们后续进入更多市场的信心。
In the global market, ES8 has won the appreciation of users in Norway. This year, our monthly deliveries have ranked top two among the six-seater or seven-seater passenger cars. The successful delivery and high quality user service in Norway also help us accumulate valuable experience in providing services in other countries and regions, and gain confidence in entering more new markets.
2022年，蔚来的产品与全体系服务将在德国、荷兰、瑞典、丹麦正式落地。目前团队组建和相关市场进入的准备工作进展顺利。
In 2022, NIO will bring its products and comprehensive services to Germany, the Netherlands, Sweden and Denmark. The team building and market entry preparation are moving forward smoothly.
我们面向大众市场的新品牌的业务工作进展顺利，核心团队搭建完成，明确了战略方向和发展计划，首批产品已经进入到关键的研发阶段。
The mass market brand has been progressing according to plan. We have established the core team, specified the strategic direction and the brand positioning, and reached a critical research and development stage of the first batch of products.
蔚来的发展离不开用户一如既往的支持。2021年，共有3,756位用户志愿者投入到车展、NIO Day等活动中，更有超过12,000名蔚来用户参与了超过260场公益活动，积极为社会贡献力量。
The development of NIO won't be possible without the continued support of our users. In 2021, 3,756 user volunteers contributed their time and efforts in events like auto shows and the NIO Day. More than 20, more than 12,000 users participated in over 260 charity events to make active contributions to society. At NIO Day 2021, we announced that the user partner program with which NIO users can share benefits with each other and build an even deeper connection among users in the community. In addition, NIO launched the Clean Parks, an ecosystem co-construction initiative. So far, we have rolled out the initiative in six national parks and natural reserves in China.
We aim to contribute to ecosystem building, support the adoption of smart electrical vehicles and the clean energy infrastructure in the natural reserves, and establish a clean and low carbon energy circulation to protect the authenticity and integrity of ecosystems. 2021 was a year for NIO to develop fundamental powers and make comprehensive preparations for the next stage of development. 2022 is a year for NIO to press ahead at full speed. We will deliver three new products, continue to invest in R&D and infrastructure to improve our long term competitiveness, expand our production capacity to meet the faster growing user demand, and serve users in more countries and regions. We will always stay true to our original aspiration of putting users' interests first, make continuous improvements, and deliver products and services beyond the users' expectations. As always, thank you for your support.
With that, I will now turn the call over to Steven to provide the financial details for the quarter. Steven, please go ahead.
Thank you, William. I will now go over our key financial results for the fourth quarter and full year of 2021. To be mindful of the length of this call, I encourage listeners to refer to our earlier press release, which is posted online for additional details. Our total revenue in the fourth quarter were CNY 9.9 billion, or $1.6 billion, representing increase of 49.1% year-over-year, an increase of 1% quarter-over-quarter. Our total revenues are made up two parts, vehicle sales and other sales. Vehicle sales in the fourth quarter were CNY 9.2 billion, or $1.4 billion, accounting for 93% of total revenues in this quarter.
It represented an increase of 49.3% year-over-year, an increase of 6.7% quarter-over-quarter. The increase in vehicle sales year-over-year was mainly attributed to high deliveries. The increase in vehicle sales quarter-over-quarter was mainly attributed to higher average selling price, increase in subsidization in user vehicle financing arrangements, and higher deliveries. Other sales in the fourth quarter were CNY 0.7 billion or $107.5 million, representing an increase of 46.8% year-over-year and a decrease of 41.3% quarter-over-quarter.
The increase in other sales year-over-year was mainly attributed to the increased revenues derived from sales of service and energy packages and accessories in line with the incremental vehicle sales, as well as increased revenues from used car sales and auto financing services in the fourth quarter of 2021. Which was partially offset by the sales of automotive regulatory credits in the fourth quarter of 2020. The decrease in other sales quarter-over-quarter was mainly attributed to the sales of automotive regulatory credits in the third quarter. Cost of sales in the fourth quarter was CNY 8.2 billion or $842.8 million, representing an increase of 49.1% year-over-year, an increase of 5.0% quarter-over-quarter. The increase in cost of sales year-over-year was mainly driven by the increase of delivery volume in the fourth quarter of 2021.
Gross profit in the fourth quarter was CNY 1.70 billion or $266.7 million, representing increase of 48.8% year-over-year and a decrease of 14.7% quarter-over-quarter. The increase in gross profit year-over-year was mainly contributed by increased vehicle sales and increased vehicle margin. The decrease of gross profit quarter-over-quarter was mainly resulted from the sales of automotive regulatory credits in the third quarter of 2021, which contributes a higher profit. Gross margin in the fourth quarter of 2021 was 17.2%, compared with 17.2% in the fourth quarter of 2020 and 20.3% in the third quarter of 2021.
The decrease of gross margin quarter-over-quarter was mainly resulted from the sales of automotive regulatory credits in the third quarter of 2021, which contributed a higher gross margin. More specifically, vehicle margin in the fourth quarter was 30.9% compared with 17.2% in the fourth quarter of 2020 and 18.0% in the third quarter of 2021. The increase of vehicle margin year-over-year was mainly driven by the higher average selling price with higher degree of 100 kWh battery. The increase of vehicle margin quarter-over-quarter was mainly attributed to decrease in subsidization in user vehicle financing arrangements. R&D expenses in the fourth quarter were CNY 1.83 billion or $286.9 million, representing increase of 120.5% year-over-year, an increase of 53.3% quarter-over-quarter.
The increase of R&D expenses quarter-over-quarter and year-over-year was mainly attributed to the increased personal costs in research and development functions, as well as the incremental design and development costs for new products and technologies. SG&A expenses in the fourth quarter were CNY 2.36 billion or $370.1 million, representing an increase of 95.4% year-over-year and an increase of 29.2% quarter-over-quarter. The increase in SG&A expenses year-over-year and the quarter-over-quarter was primarily due to the increase in personal costs in sales and service functions and costs related to the sales and service network expansion, as well as incremental marketing and promotional expenses, including for the host of NIO Day in December 2021.
Loss for operations in the fourth quarter was CNY 2.45 billion or $383.7 million, representing increase of 162.5% year-over-year, an increase of 146.5% quarter-over-quarter. Share-based compensation expenses in the fourth quarter were CNY 396.7 million or $62.3 million, representing increase of 559% year-over-year, an increase of 49.4% quarter-over-quarter. The increase in share-based compensation expenses year-over-year and quarter-over-quarter was primarily attributed to additional options and restricted shares granted. Net loss in the fourth quarter was CNY 2.14 billion or $336.4 million, representing an increase of 54.4% year-over-year, an increase of 156.6% quarter-over-quarter.
Net loss attributable to NIO's owner shareholders in the fourth quarter was CNY 1.49 billion or $228.7 million, representing a decrease of 48.4% year-over-year, an increase of 25.6% quarter-over-quarter. Basic and diluted net loss per ADS in the fourth quarter were both CNY 1.36 or $0.21 per ADS. Excluding share-based compensation expenses and accretion of redeemable non-controlling interests to redemption value, non-GAAP adjusted basic and diluted net loss per ADS were both CNY 1.07 or $0.16 per ADS. Our balance of cash and cash equivalents, restricted cash and short-term investments was CNY 55.4 billion or $8.7 billion as of December 31, 2021. Additionally, we achieved positive cash flow from operating activities for the full year 2021.
Now for our business outlook. As William mentioned, for the first quarter of 2022, the company expects deliveries to be between 25,000-26,000 vehicles, representing increase of approximately 24.6%-29.6% from the same quarter of 2021. The company also expects the total revenues of the first quarter of 2022 to be between CNY 9.63 billion and CNY 9.99 billion, or between $1.51 billion and $1.57 billion. This would represent an increase of approximately 20.6%-25.1% from the same quarter of 2021. This business outlook reflects the company's current and preliminary view on the business and market conditions, which is subject to change. Now, this concludes our prepared remarks.
I will now turn the call over to the operator to facilitate our Q&A session.
Thank you. Once again, as a reminder, if you'd like to ask question, please press star one and wait for your name to be announced. For the benefit of all participants on today's call, please limit yourself to two questions, and if you have additional questions, you may re-enter the queue. First question comes from the line of Tim Hsiao of Morgan Stanley. Please go ahead.
Hi, William Li, Steven Feng, Stanley Qu. Congratulations on the solid result and thanks for taking my questions. Basically, I have two questions. The first question is about cost and margin, because we know that NIO is better positioned to cope with the battery cost inflation even without price hike. But may I know if the rising mix of the high margin 100 kWh, 75 kWh hybrid battery pack or other initiatives could have sufficiently offset a margin pressure this year? And separately, if and only if we need to raise the prices one day, can NIO increase the price to the consumers who bought the batteries and also the battery asset management companies simultaneously? Or it would take longer to renegotiate the terms and contract with the battery asset management company if it's more like a to-be business.
That's the first question. Second question is about the model. Currently, I think ES6 and ES8 have comprehensively covered the SUV market with pricing range from CNY 350,000- CNY 600,000. Since we will soon launch ES7, as William just mentioned, how could we effectively differentiate ES7 from incumbent SUV models without a volume dilution? Are we going to adjust the pricing strategy or reposition current SUV models along with the launch of ES7? Those are the two questions from my side. Thank you.
好的，谢谢Tim。第一个问题就是，确实去年四季度的话呢，因为我们开始使用这个75度的三元铁锂的电池，那么三元铁锂的电池的话呢，就是比原来我们用的那个70度的那个三元的电池的话呢，成本确实是要低一些，所以这个对我们四季度的毛利改善还是非常有帮助的。当然大家也知道，特别是从去年Q3、Q4开始到今年的话呢，这个电池的上游的原材料的成本，确实增长了非常的多啊。那我们当然这个整个产业链都要一起来分担这个上涨的压力。当然从目前来讲的话呢，我们还没有提价啊，目前我们还没有。当然我们今年会有一些年度的这样的一些，包括产品提升的一些计划，我们会根据这个时间会看一看，这个可能是我们到那个时候看根据这个市场的价格，原材料的价格，去看看我们的一个价格的政策，价格的策略。当前我们的产品，目前，当下我们还没有这个涨价的想法。当然这个大家也知道，我们的销量呢提升了以后，我们很多分摊的这个成本呢，也肯定是可以下降了不少。本来这个确实是可以对我们的毛利提升是一个比较大的正面的影响，但是原材料的价格也不光是电池啊，也包括大宗商品啊，这个包括铝啊，铜啊，所有这些涨价的话，对我们的毛利的增长肯定是有一些负面的作用的。这是第一个问题。
Thank you, Tim. Regarding the first question, actually, starting from the fourth quarter of last year, we started to deliver the 75 kWh LFP and NCM hybrid battery pack to the users, which has contributed to the cost optimization and benefited our vehicle gross margin growth in the fourth quarter. I believe everyone knows that starting from the third quarter and the fourth quarter of last year, we have been seeing some raw material cost increase in the industry. There has been lots of cost increase in the upstream of the whole industry chain, which means that we will need to share the pressure across the whole industry gradually. At this moment, we do not have any plan to increase our pricing yet.
Because during the year we're going to upgrade our product competitiveness and capabilities. At that time, probably based on the cost of the raw materials in the industry, we will reevaluate our pricing strategy as well. At this moment, we're not going to increase our price for the products. On another point, because of the sales growth, we believe this has also contributed to the amortization of the cost and benefited of a vehicle gross margin increase. Regarding the raw material cost increase, it's not just about the battery but also other commodities like the copper and aluminum. Those raw material cost increase have also affected our vehicle gross margin as well.
In light of the cost increase of those raw materials I've just mentioned and the other BOM cost over a full year, vehicle gross margin for 2022 will still target to reach around 18%-20%. The second question is about the ES7. This is going to be the first SUV product based on the NT2, and it's positioned as a mid-large five-seater SUV. In this specific segment we have witnessed some user demand increase recently. For example, the BMW X5 we believe is going to start the local production very soon. For the ES7 it's going to have the industry leading battery electric powertrain and also the smart technologies as well.
We believe it's going to showcase the high performance capabilities of the product and also satisfy users demanding in terms of the premiumness and the luxury feeling. We also believe this is going to attract the users who will have a very high requirements regarding the product quality and the premiumness. All in all, we believe the ES7 is going to contribute and going to be complementary to our current ES8, ES6, and EC6 instead of affecting the sales of the current products. We are going to launch the ES7 in the second quarter of this year, and we'll share the pricing information as well at that time.
At this moment we can see that, regarding the market segment of the mid-large SUV priced above CNY 400,000, it actually has an addressable market size of over 320,000 units. This market size is also growing. That's why we're very confident with the performance of the ES7 after the launch.
谢谢。
Thank you for the questions. Next question comes from the line of Bin Wang of Credit Suisse. Please go ahead.
各位领导好，我有两个问题。第一个就是最近有个媒体报道，第一季度是说我们的ET7拿到了15,000的订单，那每个月的销量可以达到5,000台，能不能请William Li讲到这个预期，就是ET7到底能卖多少台，那同样的ES7，大概我们每个月的销量目标会达到什么程度？你刚刚提到这个X5嘛，之前我们ET7提到是那个5系，那想问问看是不是能用同样的类比，我们比如说一个月4,000、5,000是不是一个合理的解释？这是第一个问题。第二个问题呢，我想问问看，我们的这个服务，好像在第四季度大幅的亏损了30%几的毛利，想问问看这个毛利的一个趋势是怎么样呢？是不是在2022年、2023年还会是这样一个毛利，以及我们刚刚讲的18%到20%的一个毛利指引，是包括了这个服务的负毛利，还是说只是说这个汽车的毛利指引。好，我英语翻译一下。 Actually I have two questions. The first one is about ET7 sales, because recently there was a media report saying that the ET7 received very good order flow of about 15,000 order backlog, which indicates monthly volume could be around 5,000. So what's your comment about this? The second question is about the margin, because in Q4 last year the service actually had a very big negative gross margin of more than 30%. What's the reason behind it?
What's the outlook of this service margin going forward? Meanwhile you just provide 18%-20% margin guidance. Is this just the vehicle gross margin or actually including the service margin already? Thank you .
谢谢王斌，那个我回答第一个问题，Stanley回答第二个问题。ET7大家也知道，我们这个很早就不公布这个预订单的量了，但是我能说的是，我们的这个订单量肯定比现在媒体，这个你刚才说的媒体传闻的肯定是要多的。那当然如果我们就看ET7，它直接和油车的里边的这个同样价位的话，比如说宝马五，奔驰的E-Class，奥迪的A6，那事实上来讲，他们从价位的角度来讲的话呢，是直接竞争的。那么目标用户群体也是非常的像，特别是BMW的5系。那么如果我们去看这个这三款车的话，那么它们基本上在中国市场每个月都是一万二到一万五的销量。当然我们知道电动车的这个还需要一个过程让用户去接受，我们如果比照我们在SUV在上海市场的份额23%的份额的话，我们还是能看到有很好的一个想象的空间的。在大型高端轿车的市场，那么我们不管是从产品还是从各方面的竞争力都是非常的强的。所以我们很难去说一个月是多少，但是从目前来看的话，我们对于我们在这个市场里面去获得一个显著的份额还是非常有信心的。从目前用户的反馈的角度来看。好，Eve，你翻译一下。
Regarding the first question of the ET7. Of course we cannot disclose the specific order number at this moment, but what I can say is that it's actually much more than the media report. For the ET7 market segment, we can see some other benchmarks, for example, the BMW 5 Series, Audi A6 and Mercedes-Benz E-Class. ET7 has the similar pricing and the target group with those product as well, especially regarding the BMW 5 Series.
For BMW 5 Series, we can see that the monthly delivery number is around 12,000-15,000. Of course, for the EV product, it will need some time for the users to adopt and accept. If we look at the examples of the Shanghai market right now in the premium SUV segment in Shanghai, our market share is around 23%. If we also mirror this to the sedan market, we believe that there is a lot of room for growth and also potential for our ET7. At this moment we cannot see how much we are going to deliver every month. According to the user feedback we receive right now, we are very confident with the ET7 performance in the future.
Okay, this is Stanley .
Ah.
Okay。
William，还有一个ES7的问题。
那，Stanley 回答第二个问题吧。
William 第一个问题里面也提到说 ES7 我们有没有对市场的一个估计。
ES7 的估计，怎么说呢，这个前面其实也讲了一下，ES7 的定位在大五座的这么一个高端 SUV 的市场，当然它和现在主要的对标的话呢，还是 BMW 的 X5，那如果我们去看的话呢，X5 的话呢，这个在市场上它国产了以后，那大家对它的期许还是比较高的。那么这个市场现在差不多前面讲的是二十万辆，那么我觉得我们这个还是有非常大的信心能够去和像 X5 去做这样的竞争的。所以从销量参考的角度来讲，大家可以看一看这个领域像 X5 它的一些量。
Regarding the ES7, previously I have also mentioned that the ES7 is positioned in the mid-large premium SUV segment. If we talk about the specific benchmark we can refer to BMW X5. After the local production of the BMW X5, we can see that the market actually has a very high expectations for BMW X5 the performance. The current market size of this segment is over 200,000 units. If we look at the comparable, we can use the BMW X5 as a reference. Based on data, we are very confident with our ES7 because we believe they can actually out compete the BMW X5.
Okay. For the second question of service loss, we accelerated the construction of power swap stations in 2021 and more power swap stations started to provide service to end users, which led to the cost increase of other revenue, other business compared with Q3. In 2022, we will continue to deploy the battery charging and swapping facilities. The anticipated depreciation and operating expenses will keep rising, but we believe the upfront deployment of battery swap stations can contribute to our branding, user experience and also sales, and the long-term value to the company. Bearing a short-term loss of power swap stations constitutes a strategic decision of the company.
In the long run, the cumulative vehicle deliveries going up and the improvement of service efficiency, we expect that the negative margins resulting from power maintenance and repair service and other services will gradually improve. Other revenues and margins contributed by innovative business models like BaaS, NIO Life, and also AD as a Service will keep growing. Okay. The gross profit margin targets 18%-20% for 2022 is for vehicle, not the overall gross margin. Yeah. Thank you.
Thank you for the questions. Next question comes from the line of Ming-Hsun Lee of Bank of America. Please go ahead.
谢谢管理层。那我这边就两个简单的问题。第一个问题还是关于这个产能，因为刚才William也有提到两个工厂JPH的这个水平，但是想了解一下，因为我们今年的新车都有这个光达，然后还有另外就是也想了解一下我们这个电池产能，尤其是hybrid这个产能现在的一个expansion的progress。然后最后一个部分是还有芯片，因为昨天也看到NXP半导体有宣布对芯片有做一些涨价，然后不晓得管理层对这边，对这个芯片的供应，然后包括像NVIDIA这个Orin芯片的供应，今年的这个紧张程度，那会不会也多少制约了我们这个可以交付的水平。那这个就是我的唯一的问题。So my question is regarding the capacity, in lidar, hybrid battery, and also the chip, especially NXP yesterday also announced the chip shortage will cause the price hike. So I also want to know whether the NVIDIA Orin chip will constraint your vehicle delivery this year. 谢谢管理层。
好的，谢谢明。产能的问题，我们前面也讲到了，我们第一个工厂就是在年终的时候，那个能够达到60 JPH，然后第二个工厂我们是按照60 JPH规划的，你看它有一个爬升的过程，那也就是说如果60 JPH的话，如果是双班的话，这个四千个小时，那么是24万辆，一个月两万辆，如果是这个加班多一些的话，五千个小时的话，那么当然是30万辆。那么这个确实是从产能的角度来讲，整车的产能的角度来讲，在今年的下半年往后一些，今年的差不多Q4吧，那我们应该就会有根本性的一个好转，那对给下一阶段的这个生产的话，肯定是真有一个很好的保障。那么电池的话，确实这个产能的这种瓶颈也是有的。那我们从去年开始和CATL就根据我们的要求，各增加这个产线。那么今年从目前从电池的角度来讲的话，我觉得应该是能够match我们的整个的这个需求的，电池应该还好，今年，但这个价格上涨是另外一回事，但是需求应该还是能满足的。芯片是比较非常大的挑战，因为我们每辆车我们都要用这个一千多颗芯片，有其中的10%它会不时面临这种供应紧张的问题，那么这个确实很大程度上是会有一些影响的。当然这个芯片的价格的上涨，我们事实上去年，因为我们在现货市场要买一些芯片，我们去年就已经有一些毛利的损失，是因为芯片的价格的上涨。那么今年的话，我们在毛利的这个考虑方面，已经把芯片的这个价格的上涨已经考虑进去了。所以芯片的价格的问题还OK，主要的问题还是这个供应的这个不确定性的问题。高端的芯片，比如说Orin，英伟达的Orin的芯片，因为我们是全球第一个量产的，那包括高通的这个座舱的8155，这些芯片的话，我们因为和这些合作伙伴都是直接的、长期的战略的合作，我们总体上还好。现在主要的问题还是一些基础芯片，比如说TI，或者英飞凌，或者有一些很便宜的芯片，现在这些芯片因为它缺一些的话，我们也没法去生产这个车。所以这些芯片，我们当然会用一些替代料的方式去做，包括现货市场，我们也会去买一些。毫无疑问，这个肯定会把局面搞得复杂一点。所以今年总体上来讲，到四季度，到下半年吧，下半年往后一些，产能应该就，整车的产能和电池的产能是OK的，但主要是供应链别的波动性，特别是一些基础芯片的这样的一些波动性，给我们的影响比较大，这是目前的一个overall的一个情况。 谢谢。
Regarding the production capacity, previously I have also mentioned that by the middle of this year of our first factory, that is the JAC new manufacturing center is going to reach a production cadence across the different workshops. That is around 60 drops per hour. The designed production capacity of the factory two is also going to be around 60 drops per hour. Of course for the factory two, because this is a new factory, then we will need some time to ramp up the production gradually. If we think about the 60 drops per hour, it means that if we work with 4,000 hours every year, then the annual production capacity is going to be 240,000 units, and for every month is around 20,000 units.
If we work overtime a little bit to 5,000 hours per year, then it means that the annual production capacity is going to reach around 300,000 units. This is about the vehicle production capacity. We believe in the fourth quarter of this year, we will see some fundamental improvements regarding the vehicle production capacity, which is going to support of a next step of production. For the battery production capacity bottleneck. Yes, previously we have also mentioned about this, and starting from last year, we have been working together with our partners CATL to add additional production lines for the battery cells. We believe according to the current plan in 2022, the battery production capacity should be able to meet our demand. Of course, the cost increase of the battery is another matter.
Actually, I believe that the chip shortage is a bigger challenge for us because in our vehicle we have over 1,000 chips. Among those 1,000 chips, we have probably around 10% of the chips may face the supply shortages or challenges from time to time. For us, starting from 2021, we started to see some chip cost increase and this has affected our vehicle gross margin in 2021. Based on this experience in 2021, we have already taken into consideration of the chip cost increase in terms of setting of a target for the vehicle gross margin. We believe the main challenge regarding the chip is more about the supply.
Regarding those high-end chips like the NVIDIA Orin chips and the Qualcomm 8155, we have a long term and direct strategic cooperation with NVIDIA and Qualcomm. We believe we should be able to have sufficient supplies for our production. For those common chips or the cheaper chips like from TI and Infineon, we may face some challenges from time to time, and this is going to affect our production. Of course, we have some other ways to mitigate those challenges. For example, we can find some other chips to replace those chips, or we can probably scan the market to build up our strategic inventory to avoid those risks.
We believe, overall speaking, in the second half of this year or around the fourth quarter of this year, we should be able to see some fundamental improvement in terms of our vehicle production capacity and the battery production capacity. We may still face some challenges in terms of the supply chain volatility, especially the semiconductors.
Thank you. Thank you for the questions. Our next question comes from the line of Jeff Chung of Citi. Please go ahead.
李总好，我是花旗的Jeff啊，这有两个问题，第一就是，我们会不会考虑，我们的这个零售产品，MSRP这边加价，去抵消一些电池啊或者铝价成本的上升。如果是的话，怎么加？如果不是的话，为什么不加？这是第一个问题。第二个问题呢是，现有的这个866产品，您认为四五六月份，可以维持大概一万台一个月吗？还有就是说这个ET7的这个爬坡，就是说三月底开始交付，这个爬坡四五六月份，您感觉会是一个怎么样的一个节奏？然后最后也想附带一个问题，就是碳酸锂中国的这个spot price，您认为是不是应该现在就到顶了？因为好像中国政府已经开始干预了，会释放更多的这个供应，有些整车厂跟我们说了，就想听听您的这个意见。I've got three questions. So number one is should we consider any MSRP hike in the near term to offset potential battery and aluminum cost hike?
If yes, how? If no, why not? The second question is about the existing ES8, ES6, and EC6 products sales volume visibility over the next few months. Any confidence we can maintain 10,000 units a month, as well as, could you give us more color on the ET7 ramp-up pace in the second quarter? Last but not least is the lithium spot price in China. Do you think it has already peaked due to the recent government intervention? Thank you.
好的，谢谢Jeff。第一个问题就是，当我们在我们现在的ES8、ES6、EC6的这个做汤的这些芯片的话呢，确实还是这个，18年那个我们那一代NT1的这个芯片啊，那到今天来讲，确实这个运行一些这个复杂的软件，它的效率会确实有一些挑战。所以我们今年呢，是有计划对我们现在的这个866进行一些智能硬件的这样的一些升级，同时呢也会给现有的用户提供这种后装升级服务啊，那么这个已经在我们的计划中，那么我们会做这个，会在合适的时候做这个销售工作。那么所以考虑到这样的一些情况的话呢，我们现有的产品呢，我们认为这个，没有必要在一个，没有必要去进行一个价格的调整，当然我们会结合我们这个智能硬件的升级，也就是我们一个现有的866产品的一个年型款啊，那我们会做一个合适的价格的调整，那我们还有一些时间去看这个材料，还有这种电池的成本的变化，我们会做一个合适的定价。所以这是我们的一个总体的一个思考啊。那么这是第一个问题。当然你还说到这个是不是可以维持一个月这个一万的这样的一个需求。从我们来讲，我们现在这个，三月份的订单的情况还是达到我们的预期的。我们认为，需求端呢没什么问题，即使是我们现有的866的产品和同样价位的，别的，油车相比，或者电车相比，我们仍然是有非常大的这个竞争优势的。所以对需求来讲的话，我们认为是能够，能够保持在一个，保持在一个合理的这样的一个水平的，这个是没有问题的。第一个问题Eve你先翻译一下。
For the current ES8, ES6 and EC6. Of course if we look at the digital cockpit chip set, this is actually based on the new technology platform 1.0 which was developed in 2018. For this chip, the efficiency may be impaired if we run some complicated software. That's why starting from this year or within this year, we're going to upgrade to the smart hardware of our existing products. We are also going to provide the after-sales upgrade services for the users regarding the smart hardware upgrades. We are going to launch this program and in an appropriate time for the existing ES8, ES6 and EC6, we believe we do not need to adjust the pricing at this moment.
Of course, based on the smart hardware upgrade of the existing products and also we are going to launch some model year products, then at that time we believe probably we can re-evaluate our pricing strategy based on the cost increase in the supply chain. You have also asked about the performance of our current product, whether it should be able to still maintain the 10,000 units per month. According to our order momentum in March, we believe this can meet our expectation, and we believe that the user demand is not a problem for us, because if we compare our current ES8, ES6 and EC6 with other EV products and ICE products in the market, we believe we still have a lot of competitive advantages. The overall demand momentum stays quite strong.
第二个问题的话呢，就是ET7的这个爬坡的速度。ET7因为是在我们第一个工厂产，它和ES8、ES6、EC6都是共线生产的，它也引进了一些新的工艺，那我们去年其实就进行，在不断地进行这个产线的这个改造，能够让它能够支持ET7的这个量产。当然我们在第一个工厂的前面，其实我们也说了，我们会生产这个ES7。那么这个ES7的话呢，我们目前的计划是三季度交付，所以大家应该知道，这个在我们第一工厂现在是一个稍微有一点复杂的局面，有这个有三辆现有的车型，我们要保证它的产能，然后我们又还有ET7的新车的生产，我们还要为ES7的这个量产做准备。所以，是要复杂一些。那么，我们所以从这个角度讲，ET7的爬产它的过程，会比大家，会比一般的像我们ET5这样的，肯定将来的ET5这样肯定要慢一点。那我们希望的话能够这个ET7差不多在，差不多三季度吧，三季度的话能够达到我们认为的一个常规产能，所以它前进的爬坡会稍微慢一点，主要是这个生产的，这个工厂的这个管理，这个爬坡的阶段，情况复杂一些。
For the ET7 production ramp up. Because the ET7 is going to be manufactured in the first factory we called F1, and it's going to share the production line with the current product, ES8, ES6 and EC6. At the same time, we will also introduce some new manufacturing technologies and the techniques in the production of the ET7. That's why starting from last year, we started to adjust the production lines in the F1 to support the new product production. In the meantime, I have also mentioned about the ES7, which is going to start the delivery in the third quarter of this year. This product is also going to be manufactured in the F1.
The situation in F1 is quite complicated, as you can see, because we need to make sure we have sufficient production capacities to support the current ES8, ES6 and EC6. At the same time, we also need to produce the ET7 and also prepare for the production of the ES7. That's why we believe the ramp up progress of the ET7 is probably going to be a little bit slower, compared with that of the ET5. Since ET5 is going to be manufactured in a separate new plant called F2. We believe that probably around the third quarter of this year, we should be able to reach a normal production cadence for the ET7.
第三个问题就是我们对碳酸锂这个市场的看法。确实今年以来这个碳酸锂的涨价是非常夸张的。我们总体上认为，我们对上游的材料，对上游的从矿产开始到各个环节，我们也进行了非常细致的这个research。我们总体上认为，这个碳酸锂的涨价还是比较投机性的这种因素更多一点。其实从一个需求和供应的角度来讲的话，其实没有那么大的这个差距。我们也看到了中国的一些主管部门，比如说工信部也在协调这样的一些价格的机制。那我们认为，我们也是呼吁上游的这样的一些，从这个锂矿的厂商，包括一些碳酸锂的这样的一些厂商，那么能够从整个行业的这个长期利益出发，还是希望他们能够不要做投机性的这种涨价，去人为制造这个价格的上涨，这对整个行业肯定不是一件好事。所以总体上来讲，我们不认为是一个真正的产能和供应的问题，我们认为这里面投机性的因素是更大一些。
Regarding the lithium carbonate cost increase. We have done very in-depth research regarding the overall industry chain, especially the upstream. We believe the cost increase or the price hikes is mainly due to the opportunistic price hikes. There's no specific big gaps in terms of the demand and the supply of the lithium carbonate materials. Of course, right now we can see some Chinese authorities like MIIT have already started to set up some mechanisms to manage the situation. At the same time, we also like to urge the companies in the upstream of the industry chain that they should think more from the long term benefit of the overall development of the whole industry, instead of manipulate or take the opportunity of the cost increase to increase their price.
好，谢谢您。
Thank you for the questions. Next question comes from the line of Nick Lai of JP Morgan. Please go ahead.
Yes, thank you for taking my question. Two simple question. First on margin, and second on export business. I mean, William and then Nelson talk about the GP margin already. Let me switch focus to the OP margin. I mean, last year we understand the R&D spend and SG&A increased a lot, I mean, largely due to the top-line increase. As we move into 2022, how should we think about SG&A and R&D expense in terms of either dollar term or percentage to revenue? Is it fair to say R&D percentage to revenue should drop meaningfully while SG&A should move more or less in tandem with the top-line sales? The second question is regarding export.
I understand it's probably not a big portion of our total sales, but considering the latest dynamic in Europe and advancing stronger RMB against either dollar or euro, any update on export front? Thanks.
Nick.
Regarding the OP margin, last year in terms of the company's strategy, we would like to make sure that the growth profit can cover the SG&A cost. We believe that through the efficiency improvement and execution, we have followed through this strategy in 2021. In the coming years, we will continue to make a decisive investment in terms of the R&D and the infrastructure. Of course, our strategy will stay the same. That is, we would like it to make sure we can use the growth profit to cover the SG&A costs. If we look at the EU market, of course the last year, because that was the first year for us to enter the global market, then it means that last year we need to make some advanced investment.
We believe that this year the efficiency is much higher than last year. In terms of the R&D front, we are going to step up our R&D investment. This year we believe the R&D investment is going to be more than doubling than that of 2021, because we are going to invest in some long-term core technologies and some fundamental technologies, as well as new products for 2023, as well as some product adaptation for the global market. By the year-end of 2022, our R&D headcount is going to reach around 9,000, and we believe that this is going to be a big increase compared with our current R&D team size. This is the overall plan for 2022.
In terms of the overall strategic direction for the company, our target is that we can achieve a break even for a single quarter in the fourth quarter of 2023. We can achieve break even or reach a profitability in 2024 for the full year.
Okay. Next, the second question is about our global business, right? You know, actually right now, every month we deliver about 100 ES8 in Norway. That boosts our confidence a lot, improves our product competitiveness and also our business model. However, since we will kick off our SUV in Europe in the second half of this year, the contribution of the European market to sales volume won't be very significant in this year.
In the long run, we will continue to develop and improve its product portfolio and service network, establish local user communities and pursue a high user satisfaction. With that, we believe that market share and sales volume in Europe will come along naturally.
Thank you for the questions. I'll now take the next question. Please continue. Allow me to take the next question from Fei Fang of Goldman Sachs. Please go ahead.
Let me just quickly translate for myself. Can management talk a little bit about the utilization metrics of your infrastructure, you know, battery swap stations, supercharging stations, how often people use it, what's the unit economics or what's the difference between top cities versus lower tier cities? Thank you.
Previously, we have also mentioned that cumulatively we have completed over 7.6 million swaps. It means that the current status for the swap station is that every day we can complete around 30,000 swaps. For some areas with more users, of course, we will be able to accommodate over 1,000 swaps for one power swap station in one day. On highways, probably, in one day, the power swap station is going to accommodate around 10-20 swaps per power swap station. We have deployed the power swap station network in advance, probably one or two years in advance.
Because the design target of the power swap station network is that the ratio between the power swap to the user should be around 1 to 1,000. If we look at our current power network, especially for the power swap network, we have over deployed some power swap stations at this moment to make sure we have a much better experience for the users. 100 swap.
Okay. Good.
Certainly. Next question comes from the line of Edison Yu of Deutsche Bank. Please go ahead.
Thank you for taking our questions. First one, can you give us some sense of the future rollout cadence of NIO Autonomous Driving? What kind of features do you think the LIDAR will enable, and when can we expect those to arrive on the car? Then the second question is about the NIO ecosystem, more broadly speaking. There are reports that you're working on a smartphone. How do we think about, you know, what's going on beyond the car? I know there's VR could be a big part. Any thoughts there would be appreciated. Thank you.
好的，ET7交付的时候，我们这种先当然是开通这些辅助驾驶的功能，那么这个全栈的技术，从感知到整个的全部的技术，都是我们自己的团队研发的，那么这是第一阶段。当然我们希望在今年内能开通这个NAD的订阅服务，那么在今年的Q4吧，我们能在某些区域，针对一部分用户开通这个订阅服务，这是目前我们的一个计划。第一个问题，Eve Tang翻译一下。
Thank you for your question. Of course, at the time of the delivery of the ET7, we are going to start to provide the enhanced ADAS features first to the users. But on top of that, we have already cued up the full stack autonomous driving capabilities from the perception to the controlling strategy. We targeted to start provide the AD as a Service, probably in the fourth quarter of this year with our NAD technology.
第二个问题就是，我们当然会积极地探索在他们这个车和移动终端进行互联的这样一个可能性。因为大家也清楚，从一个底层的技术的角度来讲的话，那么在智能化方面，那么包括这个供应链啊，包括很多软件方面，其实和这个smartphone是有很多共通的部分，我们会积极地进行这方面一个这个研究啊。那像我们在ET5发布的时候，我们宣布了这个在车上去做原生的VR和AR这样的一个设计，那么我们认为这方面还是有很多可以去创新的地方。
Of course, we have always been actively explore the possible connections and synergies between the vehicle and smartphones and other mobile terminals, because we believe there are lots of synergies between these two products in terms of the fundamental technologies, the supply chain and the software. At the launch of the ET5 at the NIO Day, we have also introduced some AR and VR technologies as well, and we believe that there should be lots of room for innovation. We can also think about some innovative applications in the vehicles.
好，谢谢 Eve Tang。
Thank you for the questions. Next question from the line Xue Deng from CICC. Please go ahead.
感谢提问机会。早上好，我是邓雪，来自中金公司研究组。大部分我的问题可能也都被前面的解决了，那我就大概问一下，今年的CapEx，就是固定资产开支的预算是怎么样的？能否详细地介绍一下投资的具体金额和计划吧。My next question is, what's the CapEx budget in 2022? Will you please introduce the detail about the main directions and the exact amount of money? Thank you.
好，谢谢邓雪。William 回答一下吧。
Thank you, Deng Xue.
Yes, as mentioned by William, our gross profit margin already can cover our SG&A expense, and this is also our target for 2022. Our cash on hand will mainly be used for our R&D activities and also capital expenditures for our new product developments and production facilities, sales service network and expansion, and also the charging and swapping infrastructures. Overall, also as mentioned in our previous explanations, we will increase our power swap stations to 1,300 stations by the end of 2022. We will further open 100 NIO House and NIO Space and 60 NIO Service Centers, 50 NIO Service Centers in 2022. We will further construct our NIO Park located in Hefei in 2022. The total expenditure I think overall could be a big increase compared with 2021. Yeah. Thank you.
好，谢谢。
Thank you for the question. The next question comes from the line of Paul Gong from UBS. Please go ahead.
Yeah, hi, thanks for taking my question. I'm so glad I still have a chance to ask even at this late moment. Let me just limit my question to one. I want to know more about your thought about the mass market brand. Obviously you have to compromise some of the features such that NIO has for more attractive pricing points or some cost competitiveness.
Among all the features that NIO are offering, including say the exterior, the interior, the autonomous driving features, the acceleration, the driving range, the battery swap station, as well as the, let's say, the digital experience and also the service. What do you think is the things that you are willing to compromise on your mass market brands that would be reserved exclusive for the NIO brands and you are not expecting from the mass market brands? Just this question. Thank you.
Thank you, Paul.
Thank you for your question. Of course, if we want to increase our volume and expand our user base, different companies will have very different strategies. For example, some peers like Tesla, they have adopted very different strategies compared with ours. For Tesla, they basically differentiated the Model 3 and Model Y from the Model X and the Model S with a very big price gap. By doing this, they entered the mass market with the Model 3 and Model Y. So far, this has been quite successful. At the same time, we have also seen some downsides. For example, the sales of the Model X and the Model Y have decreased significantly despite the product cycle.
We believe there are some underlying fundamental rules of the auto industry. That is, there is a limited bandwidth of a specific brand. It's very difficult to imagine a single brand can actually support the pricing range from CNY 100,000- CNY 1 million. It's not feasible, and I believe that this is against the common sense. For NIO right now, we target the market segment that is around $50,000-$100,000. If we want to reach down to the mainstream market that is priced around $30,000-$50,000.
We believe this is a much bigger market and there is reasonable market size for us to grow, and we can also achieve reasonable growth margin. We also need to take some lessons learned from the Model 3 and the Model Y. We understand, of course, for this mass market, we will also need to rethink the fundamental architecture of other products, and also need to think about using different kind of materials and also different manufacturing technologies for our products. Because in terms of the mass market brand, of course, this will need to be efficiency driven. For this specific market segment priced from $30,000-$50,000, we believe a more sensible approach for us is to use a new brand to enter this new market segment.
We believe that this is a better strategy for us. We can also see some successful examples in the market with this strategy. For example, Audi and Volkswagen and Lexus and Toyota. We believe this can also be a strategy for us to disrupt the market as well. Of course, for the mass market brand, the prerequisite for us is to make sure we can achieve high efficiency and also achieve reasonable vehicle gross margin.
Thank you.
Thank you.
There's no further questions. Now I would like to turn the call back over to the company for closing remarks.
Thank you once again for joining us today. If you have further questions, please feel free to contact NIO's Investor Relations team through the contact information provided on our website. This concludes the conference call. You may now disconnect your line. Thank you.