Hello, ladies and gentlemen. Thank you for standing by for NIO Inc's second quarter 2020 earnings conference call. At this time, all participants are in listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Director of Investor Relations of the company. Please go ahead, Rui. Thank you.
Thank you, operator. Good evening and good morning, everyone. Welcome to NIO's second quarter 2020 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 CEO; Mr. Steven Feng , CFO; Mr. Stanley Qu , VP of Finance; and Ms. Jade Wei, AVP of Investor Relations. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. 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 U.S. Securities and Exchange Commission.
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 discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP financial measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, go ahead, please.
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Hello, everyone. Thank you for joining NIO's 2020 Q2 earnings call. In the second quarter of 2020, NIO achieved the record quarterly deliveries of over 10,000 units, and delivered an aggregate of 10,331 ES8 and ES6, representing a strong growth of 119.8% year-over-year and 169.2% quarter-over-quarter. In July 2020, NIO delivered 3,533 units, marking the second highest monthly delivery results. The cumulative deliveries in the first seven months of 2020 increased by 111.3% over the same period of 2019. Starting from October 2019, ES6 has ranked as the top-selling SUV across all EV sectors in China. For the first half of this year, ES8 has also achieved the number one in sales among mid to large size luxury electric SUVs priced above RMB 400,000 in China. In the third quarter, we are confident to achieve a new quarterly record of 11,000-11,500 deliveries.
As for the gross margin, with the strong momentum of quarterly deliveries, rise of average selling price, reduction of battery pack and other BOM costs, and improvement of manufacturing efficiency, our gross margin has substantially increased in the second quarter. The vehicle margin and the gross margin reached 9.7% and 8.4% respectively, far above our previous guidance of 5% and 3%. We will continue to improve our gross margin and expect our vehicle margin and the gross margin to both exceed 10% in the second half of this year.
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With the gross margin turning positive and operational efficiency improving comprehensively across the company. The operating loss of the second quarter has further narrowed to RMB 1.16 billion, representing a decrease of 64% year-over-year and a decrease of 26.1% quarter-over-quarter. The significant increase in deliveries and the direct sales model and the great support from supply chain partners have enabled us to achieve positive operating cash flow for the first time in our history.
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The second quarter of 2020 is a milestone quarter for us. NIO has made significant breakthroughs in sales, gross margin, operational efficiency and cash flow. After enduring efforts in the past year, we have found our pace to implement efficient management and solid execution on near-term operational objectives, and meanwhile, to make decisive investments in R&D and services for our long-term competitive edges.
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Next, I would like to share with you our recent key priorities.
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With respect to R&D, as the company overall situation improves, we have accelerated the new product development and will increase our investment in the autonomous driving technology so we can develop industry leading technologies to maintain the long term competitiveness of our products.
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In terms of product, the EC6, our smart electric coupe SUV, was officially launched on July 24 with a pre-subsidy price starting from RMB 368,000. It has been very well received by the users and the market, and presented a stronger order performance above our expectations. The mass production of the EC6 is proceeding well according to plan, and we will commence deliveries in late September.
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As for production capacity, the manufacturing team is going to increase the production rate of the Hefei plant from 15 jobs per hour to 20 jobs per hour while working together with supply chain partners to improve their capacity at the same time. By late August or early September, the overall supply chain capacity on a single shift is expected to reach 4,500-5,000 units per month.
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Regarding sales and service network, we have opened 22 NIO House and 119 NIO Space in 89 cities, and 142 battery swap stations in 63 cities in China. Moving forward, we will further expand the coverage of the battery swap stations and NIO Space to better serve our users.
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In the meantime, we have also made profound progress with the innovative business model of Battery as a Service, namely decoupling the battery from the vehicle. We have completed the necessary product homologations and certifications required to be qualified to sell vehicles and batteries separately. The process of the first vehicle under the BaaS model has been validated, including insurance purchase, loan application, and the license plate registration. This is a breakthrough moment in our technology and business innovations. Currently, we are still working on the final preparation for the official offering of our BaaS solution, which will be released publicly in the third quarter. Along with the increasing recognition from the users, government and the industries, we believe the advantages of our chargeable, swappable, and upgradable products, and the service systems will become more self-evident.
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As we deliver more and more vehicles, our user base is growing while the user community is maturing. On August 8th, 2020, the NIO Day 2020 host city bidding campaign came to a conclusion. Over 40,000 new users actively participated in the voting. After fierce but friendly competition, Chengdu stood out among 10 cities and won the bid to host the NIO Day 2020.
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Every little bit of our progress will not be achieved without the trust and the support of our users. The bidding campaign of NIO Day 2020 has once again demonstrated the vibrancy and the enthusiasm of the NIO community.
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I would like to thank our users and everyone for their support. With that, I will now turn the call over to Steven to provide the financial details for the quarter. Steven, please go ahead.
Okay. Thank you, William. I will now go over our key financial results for the second quarter of 2020. To be mindful of the length of this call, I encourage listeners to refer to our earnings press release, which is posted online, for additional details. Our total revenues in the second quarter were RMB 3.72 billion, or $526.4 million, representing an increase of 146.5% year-over-year, an increase of 171.1% quarter-over-quarter. Our total revenues are made of two parts: vehicle sales and other sales. Vehicle sales in the second quarter were RMB 3.49 billion, or $493.4 million, accounting for 94% of total revenues in this quarter. It represented an increase of 146.5% year-over-year, an increase of 177.6% quarter-over-quarter. The increase in vehicle sales year-over-year was primarily due to the increase of vehicle deliveries of the ES6, which began its first deliveries in late June 2019.
Other sales in the second quarter were RMB 232.8 million, or $33 million, representing an increase of 147.7% year-over-year, an increase of 100% quarter-over-quarter. The increase in other sales year-over-year was mainly attributed to increased revenues derived from the service package and energy packages subscribed, home chargers installed, and accessories sold, which were in line with increased volume in the second quarter of 2020. Cost of sales in the second quarter was RMB 3.41 billion, or $482.1 million, representing an increase of 69.2% year-over-year, an increase of 121.2% quarter-over-quarter. The increase in cost sales year-over-year was mainly driven by increase of delivered volume in the second quarter of 2020.
Gross profit in the second quarter of 2020 was RMB 313.1 million, or $44.3 million, representing an increase of 162.1% year-over-year and an increase of 286.9% quarter-over-quarter. The increase in gross profit year-over-year was mainly contributed by increased vehicle sales and higher gross margin in the second quarter of 2020. Gross margin in second quarter of 2020 was 8.4%, compared with negative 33.4% in the same quarter of 2019, and negative 12.2% in the first quarter of 2020. The increase of gross margin year-over-year was mainly driven by the increase of vehicle margin in the second quarter of 2020. More specifically, vehicle margin in second quarter of 2020 was 9.7%, compared with negative 24.1% in same quarter of 2019, and negative 7.4% in the first quarter of 2020.
The increase of vehicle margin was mainly driven by the decrease in purchase price of certain materials and lower unit manufacturing cost attributed from increased production volume in the second quarter of 2020. Besides above, the increase of vehicle margin year-over-year was also attributable to impact of one-off cost in relation to the company's voluntary battery calls in the second quarter of 2019. R&D expenses in the second quarter were RMB 545.2 million, or $77.2 million, representing a decrease of 58.1% year-over-year, and increase of 4.4% quarter-over-quarter. The decrease in R&D expenses year-over-year was primarily attributable to incurrence of expenses relating to rigorous testing activities of ES6 in the second quarter of 2019 before its mass production. SG&A expenses in the second quarter were RMB 936.8 million or $132.6 million, representing a decrease of 34.1% year-over-year and increase of 10.4% quarter-over-quarter.
The decrease in SG&A expenses year-over-year was primarily driven by the company's overall cost-saving efforts and the improved operating efficiency in marketing and other supporting functions. Loss from operations in the second quarter was RMB 1.16 billion or $164.2 million, representing a decrease of 64% year-over-year and a decrease of 26.1% quarter-over-quarter. Share-based compensation expenses in the second quarter were RMB 45.3 million or $6.4 million, representing a decrease of 50.9% year-over-year and increase of 39.8% quarter-over-quarter. The decrease in share-based compensation expenses year-over-year was primarily due to less options granted, driven by the decline in the number of employees and impact of part of the share-based compensation expenses being recognized by using the accelerated method, under which the expenses decrease gradually over the vesting period.
Net loss attributable to NIO's ordinary shareholders in the second quarter was 1.21 billion RMB or $171 million, representing a decrease of 63.6% year-over-year, a decrease of 29.9% quarter-over-quarter. Basic and diluted net loss per ADS in the second quarter were both 1.15 RMB or $0.16 per ADS, excluding share-based compensation expenses and accretion of redeemable non-controlling interest to redemption value. Non-GAAP adjusted basic and diluted net loss per ADS were both 1.08 RMB or $0.15 per ADS in second quarter. Our balance of cash and cash equivalents, restricted cash, and short-term investment was RMB 11.17 billion or $1.58 billion as of June 30th, 2020. Now for our business outlook.
As William mentioned, for the third quarter of 2020, the company expects deliveries to be between 11,000-11,500 vehicles, representing increase of approximately 129.2%-116.6% from the same quarter of 2019. An increase of approximately 6.5%-11.3% from the second quarter of 2020. The company also expects the total revenue of the third quarter 2020 to be between RMB 4.05 billion-RMB 4.21 billion, or between $572.9 million-$596.2 million. This would represent an increase of approximately 120.4%-129.3% from the same quarter of 2019, an increase of approximately 8.8%-13.3% from the second quarter of 2020. This outlook reflects the company's current and preliminary view on the business situation and market condition, which is subject to change. This concludes our prepared remarks. I will now turn the call over to operator to facilitate our Q&A session.
Certainly, ladies and gentlemen, we will now begin the question- and- answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press pound or hash key. For the benefit of all participants on today's call, please limit yourself to two questions. If you have additional questions, you can re-enter the queue. Thank you. We have the first question from the line of Tim Hsiao from Morgan Stanley. Please go ahead.
Hi, William, Steven, Jade, and Rui. Congratulations on the strong results, and thanks for taking my questions. Two quick questions. The first one, regarding second quarter's gross margin, because it came in as a strong beat versus previous guidance. I think, in addition to the strong scale, because you just mentioned also attributable to the high average revenue per vehicle. Could we have a rough idea what's the gross margin difference between ES8 and ES6 at the moment? Could we expect ES6 margin to reach similar level as ES8, with additional contribution from EC6 later this year? My second question is about R&D expenses. If you look at the state in the first half, I think that R&D expenses are under great control, with around RMB 500 million-RMB 600 million per quarter despite the model launch. Would this be the normalized level?
As William mentioned about investment in new vehicle development and also the autonomous driving technology. Could we also have the rough breakdowns about how many percentage of the R&D is now for the vehicle development and the rest, like autonomous driving and other technology? Thank you.
This is Stanley. For the first question about the gross margin of ES8 and ES6. Generally, the gross margin of ES8 is higher than ES6. We are trying to improve both the two models in the future. We won't break down details of margins of each models. Okay?
I would like to answer the second question regarding the R&D investment. Right now, we would like to control our R&D investment within RMB 3 billion every year, including the labor cost of suppliers' R&D cost. In terms of the breakdown, of course, the percentage we invested for the vehicle-related R&D is higher. Just like I mentioned, we will increase our investment on the autonomous driving technology. Right now, we have already got a team around 200 people focusing on the autonomous driving technology development, which accounts a fixed part of the R&D cost. For the next generation autonomous driving technology, we are going to increase our investment.
At a normal pace, just like you mentioned, it should be around RMB 500 million-RMB 600 million for one quarter. For some quarters, because of our product development cadence, we may need to increase this investment.
Thank you. Got it. Thank you very much.
Thank you. We have our next question from the line of Bin Wang from Credit Suisse. Please go ahead.
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Actually I got three questions about autonomous. Question number one about launch timing of their two features. One is the NGP, Navigate on Pilot. Second about their summon feature when will be launched. They have been showed in their new app, will maybe come up this year. I just want to know the exact timing. The second thing is about penetration, because you want to get such a feature, you will pay additional RMB 39,000 as a package. What's the penetration right now, and what's the ratio has been moving in the past few months or quarter? The third one is that for the next generation autonomous, which is level 4, according to media, you partner with Mobileye on the EyeQ5 on the chips. What's the timing for launch the level 4? Thank you.
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Thanks for your question. Regarding the Navigate on Pilot feature, we are now doing rigorous tests on this feature. We plan to release this within 2020. Regarding the nearby summoning feature, because of the hardware constraints, our feature is not as competitive as Tesla's nearby summoning. Our feature can only support getting out and in the parking space. I don't want to mislead the users. Together with the HD map we give our Navigate on Pilot can achieve a very good performance.
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Regarding the second question for the take rate of the Navigate on Pilot. We have the Founders Edition which account for around 10,000 units. This Founders Edition has the NOP as a standard feature, so this is quite helpful with the take rate of our speaking. Normally speaking, the take rate for the NOP right now is around.
Not NOP, NIO Pilot.
Right now, for the take rate of the NIO Pilot is around 25%. This year we have released a selected NIO Pilot, which priced around RMB 10,000, which has enjoyed a much better take rate.
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For the next generation autonomous driving technology or our NIO Technology Platform 2.0. We are speeding up our development pace for this NIO Technology Platform, but it's still too early to share any specific information regarding the technology roadmap. All I can say right now is we set very high bars for ourselves for this next generation platform, and we have been working on the autonomous driving technology development. In 2018 when we released the ES8, we are the first car to be equipped with the Mobileye EyeQ4 chipsets. Other competitors, they launched the car with the EyeQ4 chipsets around one year later. It shows we have much more experience in terms of the mass production and autonomous driving. Our experience in this regard has been tested and verified.
For the next generation platform, we would like to set a much higher standard for ourselves and we will keep you guys updated at a timely manner.
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Here I would like to emphasize that we don't actually use the Level 3 or Level 4 to define our AD technologies. We use two different criteria from the user's interest perspective. The first one is we focus on how much time we can free up for our users. The second criteria is how many accidents we can reduce compared with the human driver. We believe that these two criteria are more important than the definition of Level 3 and Level 4.
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Thank you for question.
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Can I have another follow-up?
Please.
Yeah.
Please.
Okay, thank you. Actually, I from the website said that NIO may go to Germany later this year. Just want to know your global team plan or limited to China, what's your future plan for the overseas expansion? Thank you.
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From day one, NIO is different from other companies. We are a global startup. We have kept our normal operation in the San Jose and German office, even despite the most difficult times in last year. Even with the COVID-19, we still operate normally in the overseas office. We are now doing the preliminary research regarding the international market entry, including the product preparation, team building, and also the market entry planning. This year, I believe everyone understand is not a very good year for us to enter the international market. We understand many overseas media pay great attention to our product. After the renowned European and U.S. media tested our vehicle, they also speak very highly of our vehicle. We would like to do this step by step and build up our capabilities to enter the global market.
I would like to ask for your patience.
Thank you so much and congratulations for the great result. Thank you.
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Thank you. We have our next question from the line of Lei Wang from CICC. Please go ahead.
Thank you. Good evening, William and Steven. This is Wang Lei speaking from CICC. Congratulations on the positive cash flow and better-than-expected gross margin. That's for sure a great move. I have three questions on the financials. The first question goes with the gross margin. I know William just guided the GPM above 10% by end of this year. Considering we just have hit a 9.7% vehicle gross margins by second quarter already, can we have an updated gross margin target? If you have any, that's the first question.
Okay. Hi, Lei. I would like to answer the first question. Generally, in the Q3 and Q4, we expect the vehicle average selling price remains relatively stable. For the battery pack cost, we foresee there will still some room for us to further reduce its cost. Together with other cost savings for the firm, I think generally the over 10% target for vehicle margin and the overall margin can be achieved. As you mentioned, whether we want to further increase our targets for the gross margin, I don't think we want to do this at this moment. I think we still keep the guidance of over double digits in the second half.
Of course, we understand that there are still room for improvement in terms of the gross margin and many other aspects. We would like to move forward according to our own pace. Just like the last quarter, we would like to keep a more conservative attitude regarding those targets.
All right. Thanks, William. Thanks, Steven. The second question goes with the operating cash flow. I think that's primarily driven by optimized working capital. I wanted to see if you or Steven could kindly provide a breakdown.
Hi, Wang Lei. This is Stanley.
Hi, Stanley.
Regarding the positive cash flow, yeah. Generally, there are the following reasons which drive the positive cash flow. The first is operating loss. We control at relatively lower level. Second, as you mentioned, we negotiate the credit term and also the payment methods with our suppliers. For example, we ask the supplier to extend the credit term from 60 days to 90 days, and also ask them to accept the back notes instead of cash for the payment of the purchase. The third one, as William mentioned, the direct sales model, and also make us to receive cash collections earlier than the payment to the suppliers. Generally, all these reasons drive us to achieve the positive cash flow in Q2. Yeah.
All right. Thanks, Stanley. I think the payment terms is a very positive signal as the supplier already has some confidence on NIO.
Yeah
The third question and the last question. William mentioned the monthly production capacity of between 4.5K units-5K units. As Steven just guided, roughly 11,000 unit car deliveries in next quarter. Why do we see a gap between the production capacity and the sales outlook?
David, this is Steven. We increase our production capacity at end of August. You know, for any plant which tries to increase its production capacity, there is a ramp-up period. Okay, our production capacity in July and August, it's still below 4,000 units. That is a constraint for our delivery in Q3. Why do we increase our production capacity to 4,500 to 5,000? That's because that's the preparation for our Q4 delivery.
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We want to improve the production capacity is because of the strong demand in the market. Many of my friends have asked me to check whether it's possible to have their ES8 delivered early. There is a very big ES8 order backlogged right now. As I mentioned, the ES6 delivery will commence at late September this year. We also need some time to ramp up the production of the EC6 in the plant. Before we start the delivery of the EC6, we will start to accumulate orders for the EC6. It means that in the fourth quarter of this year, we are going to witness a significant pressure on our delivery and production. That's why we would like to increase our production capacity at the end of August. We can be fully prepared for the EC6 ramp up and the Q4 delivery.
All right. Thanks, William. Thanks, Steven. That is all my questions with financial results. Thank you.
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Thank you.
Thank you. We have our next question from line of Ming Hsun Lee from BofA. Please go ahead.
Thank you, William, Steven and the management. Congrats for the good result. Two questions. The first question is that I think the market seems to not understand too much on the Battery as a Service. Probably I think you can take this opportunity to give a more explanation on the business. First of all, I want to know that right now how much of a battery assets on your book, and once you set up a new battery management company, around how much assets you can reduce down from your balance sheet. This can ease your pressure on balance sheets going forward. The second question is that once the BaaS business model is confirmed, I believe you can start to open auto finance program for both the vehicle as well as the battery.
I think that the down payment of consumers will be much lower compared to the current status. How much more new demand do you think you can create through the Battery as a Service? That's my first question. Thank you, William, and the management team.
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Thanks for your questions. Battery as a Service is a very innovative business model, and it's quite difficult to validate this process. Just like I mentioned in my previous prepared remarks, we have now got the government approval, and the first vehicle without the battery has already finished the validation process regarding the insurance purchase, loan application, and the license plate registration. Basically, it means that you buy the car without the battery, and it means that when you pay for the car, you do not need to pay the cost of the battery. Previously, we tried to launch similar plans, but because of the restrictions with the government policy, we didn't fully implement the real Battery as a Service business model. Now, since we have already got the support from the government and the related policies, we believe it's the right time for us to do this.
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I would like to explain a little bit about the difference. Right now, if the user wants to do the financing for the battery, it means that at the beginning of the vehicle purchase they can pay less money, that is around RMB 100,000 less. They will have the monthly payment. For that monthly payment, they cannot get the loan. It means that we can use the ES6 as example. The price is around RMB 358,000. It means that the users can pay RMB 258,000 at the beginning, but for this, they cannot get the loan from the bank because of the government policy restrictions.
If we can go with the BaaS solution, then it means that with the new product homologation policy and the certification policy, the users can have less payments at the beginning, but they can still enjoy the loan for their monthly payments, which, just like you mentioned, should be able to lower the down payment as well as the monthly payment for the users. We believe that this is not going to affect our gross margin, or probably is even going to help us with the gross margin. With this solution, we should be able to help the users to lower their down payments and the monthly payments, and we believe that this is going to be a very good boost to our vehicle sales.
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Just like I mentioned before, we will release the detail in the third quarter. We are now at the final commercial preparation stage. A very important task for us is to prepare the setup of the battery asset management company. We are one party out of this endeavor, but we are not the main stakeholder. It means it's not going to affect our balance sheet. We would like to set up this company around August. This asset company is going to own the battery assets and then lease it to the users. We believe that this is going to be a very innovative move for the whole industry, and attract more parties to join this asset management company and build a virtuous cycle.
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Thank you, William. That's my question. Thank you.
Thank you.
Thank you. We have our next question from the line of Paul Gong from UBS. Please go ahead.
Hi, thanks for taking my question. I have two questions. I remember at the early stage of NIO, it has planned the ET7 as a sedan as well as the new plants, they get either delayed or canceled last year. Nowadays, since you have received a lot of refinancing and has a much stronger balance sheet than last year, will you consider to build the second plant by yourself? Will you consider launch the ET7 at the same time or with the fourth model be a different model? Can you give us a little bit color on the next model coming in the NIO Day later this year?
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Thanks for your question. We have kept our cadence of launching one new product every year. After we released the ET7 in the Shanghai Auto Show, we have attracted great attention from the market and the users. People are looking forward to our sedan product development. What we can say now is the next product will be a sedan, but I would like to ask for your patience.
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We have a very comprehensive and detailed planning for our product development for the coming years. In the future, we see there is a need for the second plant. Right now we have a very successful cooperation with the JAC. The product we manufactured together with the JAC has ranked at the top in many quality assessments conducted by third parties. I'm very confident with our cooperation with JAC, and we do have room for improvement for the production capacity of our current plant. We do not have an immediate need to kick off the second factory. We are now working on the planning of the second factory because of our product development cadence. We don't need to say that we will build this plant by itself.
What we need from the company's perspective is to make sure we have sufficient capacity to support our product development and deliveries. We are now preparing sufficient capacity for the product that we are going to launch in 2022.
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Another point is about the current NIO-JAC plant. Without significant investment, we should be able to increase the production capacity of our current plant to 150,000 units under two shifts.
Thank you. That's very helpful.
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Thank you. We have our next question from the line of Alex Potter from Piper Sandler. Please go ahead.
Hi, thank you very much. I have one question on selling regulatory credits. You probably have seen that Tesla gets a fair amount of revenue, several hundred million dollars a quarter, from selling regulatory credits to non-compliant auto brands, primarily in Europe. I know that China is considering a similar credit trading system. I'm wondering if you are having discussions with any foreign auto brands or other auto brands to prepare to sell those automotive credits in the future in China. That's my first question.
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Thanks for your question. This year, the Chinese government launched the NEV.
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Okay. Thanks for your question. This year, the government has updated their policy of the NEV and the CAFC credits, which they have launched in the past, which has helped us to increase the value of the credit we are now on our hands.
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We have accumulated around 100,000 dual credits last year. According to the current pricing in the market, we should be able to generate RMB 120 million for the revenue of the credits. We're now talking to some OEMs. We plan to sell those credits in the third quarter or the fourth quarter. We believe this is going to help us with the gross margin improvement. Different from Tesla, we're not going to account this as a part of the vehicle margin. We are going to consider this as part of the gross margin. This year, we believe we're going to accumulate around 200,000 credits, which will be sold next year with increased pricing. The pricing will depend on the demand and the supply in the market.
We believe that this is the future direction because the Chinese government would like to make sure they can use the credit to replace the subsidy and encourage OEMs to produce EVs. We believe that there will be a very big market for the credit trading between different OEMs. Last year, with 20,000 units, we have achieved RMB 120 million revenue, which means that for each vehicle, it can generate RMB 60,000 revenue. With increased pricing, we believe this is going to benefit our gross margin in the long term.
Thank you.
Thanks very much. That's very interesting. I'll pass it on.
Thank you. As there are no further questions, I would like to hand the call back to our presenters for any closing remarks. Thank you.
Thank you again for joining us today. If you have any further questions, just contact NIO's IR team through the contact information provided on our website. This concludes the conference call. You may now disconnect the line. Thank you, and stay safe.
Thank you.
Thank you.
See you next quarter.
Thank you. Bye-bye.
Bye.
Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect now. Thank you.