Hello, ladies and gentlemen, thank you for standing by for NIO Inc.'s First Quarter 2022 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, Ms. Eve Tang from Capital Markets. Please go ahead, Eve.
Good morning and good evening, everyone. Welcome to NIO's First Quarter 2022 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, Mr. Stanley Qu, Senior Vice President of Finance, and Ms. Jade Wei, Vice President of Capital Markets.
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 measures.
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 first quarter 2022 earnings conference call. In the first quarter of 2022, we delivered 25,768 premium smart electric vehicles, another record quarter with a growth of 37.6% year-over-year. Despite the outbreak, our products have continued to witness the robust demand.
Our order intake stays strong, especially for ET7, and reached a new high in May. We believe the launch of new products will drive continuous order growth. In the meantime, governments at all levels in China have also introduced positive policies to encourage vehicle consumption and purchase of electric vehicles. This will further promote the up-trading and new purchase of premium smart electric vehicles. Going forward, we will further increase the overall supply chain production capacity, and we're confident of ramping up our deliveries at a much faster pace in the second half of this year.
毛利率方面，行业面临电池、原材料以及芯片价格的上涨，我们的整车毛利率也受到影响。一季度，蔚来整车毛利率为18.1%。二季度电池成本继续显著上涨，在四月份达到高点，为二季度整车毛利率带来很大挑战。为了缓解成本上涨压力，我们进行了产品价格调整等一系列措施。随着新产品交付，单车收入提升以及产量爬坡，我们预计毛利率从第三季度开始反弹。
In terms of the vehicle gross margin, the whole industry is faced with the rising cost of batteries from materials and chips, which has also affected our vehicle margin. In the first quarter, our vehicle margin stood at 18.1%. As the battery cost continued to surge and peaked in April, the vehicle margin in the second quarter will be under even higher pressure.
To mitigate the impact of the rising material costs, we have taken a series of countermeasures, such as adjusting product prices. With the deliveries of new products, higher revenue per vehicle, and increasing production output, we expect the vehicle margin to start bouncing back from the third quarter.
2022年5月20日，蔚来在新加坡交易所主板上市。新加坡上市是蔚来又一重要里程碑。我们进一步完善了全球资本市场布局，能更好地连接与服务全球投资者，对我们全球的业务发展也意义重大。
On 20 May 2022, NIO was listed on the main board of the Singapore Exchange, which marks another important milestone of NIO. With that, we have further enhanced our footing in the global capital market, which lets us better connect with the investors and serve the investors from around the world. It is also of a great significance for our global business development.
此外，根据恒生指数有限公司的公告，蔚来将于6月13日被纳入恒生科技指数及恒生综合指数。
In addition, according to the announcement made by the Hang Seng Indexes Company Limited, NIO will be included in the Hang Seng TECH Index and the Hang Seng Composite Index starting from 13 June 2022 .
接下来我跟大家交流一下公司研发和运营方面的一些重点工作。
Next, I would like to share with you some updates on our recent operations and R&D.
新产品与核心技术的研发始终是蔚来长期发展战略的重点。目前各项工作正在按计划有序地推进。
Research and development of new products and core technologies has been one of NIO's long-term strategic focuses. We have been making positive progress on various related fronts.
3月28日，ET7正式开启交付，卓越的驾乘体验受到首批用户和媒体的好评。自交付ET7以来，我们持续通过FOTA升级，快速提升，并推出了更多的智能体验。NT 2.0技术平台推出了超过两百项的全新功能，基于全新一代语音交互情感智能引擎，NOMI实现了交互体验的全面进化。基于全栈自研算法的辅助驾驶系统，在外部评测和实测数据中表现优异。三季度，我们将基于与合作伙伴共同开发的自研高精地图，推出NOP+增强领航辅助功能，通过强大的软硬件平台，全栈自研的算法，端到端的数据闭环和运营能力，NT 2.0实现了快速迭代升级的能力，为后续开通覆盖更多场景的NAD服务，实现超越期待的自动驾驶体验打下了坚实的基础。
On 28 March 2022, we started to deliver ET7, whose extraordinary handling and riding experience has been well recognized by the users and the media. Since the delivery of ET7, we have made fast iterations and released more smart features via FOTA updates on a continuous basis. We have introduced over 200 new features on the NT 2.0 platform with the next generation voice interaction and emotion engine technolo gies.
NOMI's interactive experience is comprehensively upgraded. The driver assistance system, powered by NIO's full stack in-house algorithm, has achieved outstanding performance in external reviews and field tests. In the third quarter, we will release NOP+ based on the HD Map co-developed with our partner.
Enabled by the powerful software and hardware platform, full stack in-house algorithm, and end-to-end closed-loop data collection and operations capabilities, NT 2.0 is capable of fast iteration and upgrade, laying a solid foundation for releasing NAD services in more scenarios, and providing the autonomous driving experience beyond expectations.
4月29日，ET5的首批全工艺生产线试制车在NeoPark新桥智能电动汽车产业园区内的F2工厂正式下线。团队正在积极推进最后的量产工作，将按计划于九月份开启交付。
On 29 April 2022, the first ET5 tooling trial built rolled off the production line in F2 at NeoPark. The team is working towards the final stage of mass production of ET5, and the delivery is expected to start this September.
本月我们将发布基于NT 2.0平台的全新大五座SUV车型ES7，并将于八月下旬开启量产交付。
This month, we will unveil ES7, a brand new mid-large five-seater SUV based on the NT 2.0, and will start the delivery in late August.
我们也在持续加大动力电池相关领域的投入。目前，蔚来拥有超过400人组成的电池相关团队，深入参与电池的材料、电芯与整包设计、电池管理系统、制造工艺等研发工作，全面建立与增强电池体系化研发和工业化能力。我们相信这些投入将提升未来产品的长期竞争力和盈利能力。
We will continue to step up our investment in battery related fields. As of now, we have over 400 employees working on battery related technologies, including battery materials, cell and pack design, battery management system, and manufacturing processes. We aim to build and enhance our comprehensive battery R&D and industrialization capabilities to improve the competitiveness and the profitability of our products in the long run.
产能方面，江淮蔚来F1工厂目前已经恢复到疫情之前的产能水平，并将配合新产品的量产和爬坡，逐步提高实际产出。NeoPark的F2工厂已经实现生产线的全面贯通，进入了造车验证阶段，将按计划于今年第三季度正式投产。F2工厂用时仅十二个月便完成了从破土动工到首批全工艺生产线试制车下线，创造了行业领先的建设速度。
With regards to production, F1 has fully resumed its capacity to the level before the recent outbreak. In addition, we will further ramp up the production output on a gradual basis to support the mass production of the new product. NeoF2 at NeoPark has completed the production line installation and tooling, and has entered into the production validation phase. It will be put into operation from the third quarter this year. It only took us 12 months from kicking off construction to rolling out the first tooling trial built in F2, which is a record construction speed in the industry.
销售和服务网络方面，我们现有381个蔚来中心和蔚来空间，覆盖全球152个城市，已经拥有247家服务中心和交付中心，覆盖全球149个城市。
In terms of the sales and service network, we now have 381 NIO Houses and NIO Spaces in 152 cities, as well as 247 NIO Service Centers and NIO Delivery Centers in 149 cities worldwide.
在充换电网络方面，我们已经建成超过960座换电站，覆盖全球197个城市。同时，我们已经累计部署829座超充站和超过4,140根目的地充电桩。
With regards to charging and swapping networks, we've installed over 960 battery swapping stations in 197 cities. So far, we have 829 supercharging stations and 1,140 destination chargers.
销售服务和充换电网络的持续布局，将为未来的品牌知名度、用户满意度、销售增长带来长期贡献。
The continued deployment of our sales service and power network will bring long-term benefits to our brand awareness, user satisfaction rate, and the sales growth.
在全球市场方面，在进一步完善挪威市场布局及提高用户满意度的同时，相关团队正在加速推进产品和服务体系在德国、荷兰、瑞典、丹麦的落地准备工作。
With respect to the global market, while further expanding our sales and service network and improving the user satisfaction in Norway, our teams have been accelerating preparations to launch of our products and services in Germany, the Netherlands, Sweden and Denmark.
大众市场新品牌的产品研发及投产正在稳步推进中。五月十日，蔚来与合肥市就NeoPark整车二期和关键核心零部件配套项目签署战略合作协议。根据协议，蔚来开始规划和准备新品牌产品的产能建设工作。
In terms of our mass market brand, our product development and the production preparation are in steady progress. On 10 May 2022, NIO signed a strategic cooperation agreement with Hefei on the second phase of a vehicle production plant and the facilities for key components at Neo Park. The agreement marks the start of the planning and preparation of the production capacity of the new brand. NIO originates from a vision filled with the blue skies.
We are fully committed to making continuous investments in environmental protection and social welfare, and contributing to global sustainable development. Since we announced the Clean Parks, a global ecosystem co-construction initiative last December, NIO has been actively cooperating with several organizations to roll out various projects to support national parks and natural reserves.
On 22 April 2022, NIO reached a strategic cooperation with the World Wide Fund for Nature, who has joined hands with us in establishing a clean and a low carbon energy circulation system in national parks and natural reserves in China and beyond. Although we went through many challenges in the first half of 2022 is still a critical year for NIO to make committed investment and efforts in new product, core technologies, global market entry, and the mass market brand. In the second half of this year, we will accelerate our new product delivery and the capacity expansion.
We are confident of and look forward to realizing satisfying results in 2022. 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 first quarter of 2022. To be mindful of the length of this call, I will refer to RMB only in my discussion today. I encourage listeners to refer to our earlier press release, which is posted online for additional details. Our total revenues in the first quarter were RMB 9.9 billion, representing an increase of 24.2% year-over-year, and remained stable quarter-over-quarter. Our total revenues are made of two parts, vehicle sales and other sales.
Vehicle sales in the first quarter were RMB 9.2 billion, representing an increase of 24.8% year-over-year, and remained relatively stable quarter-over-quarter. Increase in vehicle sales year-over-year was mainly attributed to higher deliveries.
Other sales in the first quarter were CNY 0.7 billion, representing increase of 15.6% year-over-year, and remained relatively stable quarter-over-quarter. The increase in other sales year-over-year was mainly attributed to the increased sales of service and energy packages and others in line with the incremental vehicle sales in the first quarter of 2022, which was partially offset by the decrease of revenue from battery upgrade services.
Gross margin in the first quarter was 14.6%, compared with 19.5% in the first quarter of 2021, and 17.2% in the fourth quarter of 2021. The decrease of gross margin year-over-year was mainly attributed to the decrease of vehicle margin and reduction in other sales margin, resulting from expanded investment in power and service networks.
The decrease of gross margin quarter-over-quarter was mainly attributed to the decrease of vehicle margin. More specifically, vehicle margin in the first quarter was 18.1%, compared with 21.2% in the first quarter of 2021, and 20.9% in the fourth quarter of 2021. The decrease of vehicle margin year-over-year was mainly driven by the lower average selling price due to changes in our product mix.
The decrease of vehicle margin quarter-over-quarter was mainly attributed to the increased battery cost per unit. R&D expenses in the first quarter were CNY 1.76 billion, representing an increase of 156.6% year-over-year and remain stable quarter-over-quarter.
The increase of R&D expenses 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. The SG&A expenses in the first quarter was CNY 2.01 billion, an increase of 68.3% year-over-year, and a decrease of 14.6% quarter-over-quarter. The increase in SG&A expenses year-over-year, primarily due to the increase in personal costs in sales and service functions, and the costs related to the sales and service network expansion.
The decrease in SG&A expenses quarter-over-quarter are mainly attributed to the decrease of marketing and promotion expenses. The marketing and promotion expenses incurred from the hosting of NIO Day in December 2021, as well as decrease of professional services expenses. Loss from operations in the first quarter was RMB 2.19 billion, representing a 639.7% increase year-over-year, and a 10.5% decrease quarter-over-quarter. Net loss in the first quarter of RMB 1.78 billion, representing a 295.3% increase year-over-year, a 16.8% decrease quarter-over-quarter.
Net loss attributable to NIO's ordinary shareholders in the first quarter was RMB 1.83 billion, representing a 62.6% decrease year-over-year, and a 16.3% decrease quarter-over-quarter. Our cash and cash equivalents, restricted cash and short-term investments, was RMB 53.3 billion as of 31 March 2022. Now, this concludes our prepared remarks. I will now turn the call over to the operator to facilitate our Q&A session.
Thank you. 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 withdraw your request, please press the pound or hash key. Please limit to two questions at a time. If you have follow-up questions, please request to rejoin. Once again, it's star one for questions. Our first question comes from the line of Jeff Chung from Citi. Please ask your question.
I have two questions. One is the second quarter GP margin outlook. Looks like the high margin products as a percentage of sales in second quarter could reach about 37%. Versus 17% in the first quarter. I think this is one of the positive that may potentially lift up the GP margin trend. Secondly, that there has been some MSRP hike recently, and we would like to know how much of the sales volume from the second quarter has been price hiked versus the first quarter. Also, this is the first question.
The second question is that our new model cycle suggests that our current aging products, three products, is going to turn into six new products into the next six to 12 months. My question is whether the third quarter production capacity can reach above 48,000 units, since by referring to Tesla, we saw a strong week-on-week and month-on-month recovery from the past weeks. My understanding is that a lot of our supply auto parts suppliers are overlapped with the Tesla. If Tesla recover fast, would that mean that we are going to enjoy the similar pace into June and the third quarter? Thank you.
Thank you for your question, Jeff. Starting from April, we actually updated our agreement with our battery supplier, CATL. Right now, our battery cost is connected with the raw material indexes. Basically, it means that if in the second quarter, we can see the battery cost is going to significantly increase compared with that of the first quarter. This is going to affect our vehicle gross margin performance, but there is going to be some latencies.
The battery prices increase in the prior month is going to be reflected in the battery cost of the later month. This is going to incorporate it into our vehicle gross margin performance. According to the current forecast and the market trend, we can see the battery cost is going down a little bit starting from May.
We have also taken some measures, for example, increasing of our product prices. This is going to help us improve our performance in the third quarter. Right now, we are still delivering vehicles without the price adjustment, and we expect to start to deliver the vehicles with the price adjustment, starting from the third quarter because our business model is make to order or order to delivery. Just now, you have also mentioned that our product with a higher gross margin is also going to kick in terms of the performance of the vehicle gross margin, just as the ET7 that is launched in the second quarter.
We expect the production of ET7 is going to gradually ramp up starting from June and then starting from the third quarter is going to maintain at a normal level. Overall speaking, we believe our vehicle gross margin is going to face higher pressure in the second quarter. This is mainly due to the battery cost impact. The vehicle gross margin of the second quarter is going to be lower compared with that of the first quarter. With the price adjustment, we expect we are going to start to deliver the vehicles with the higher prices starting from the third quarter, which is going to contribute to our vehicle gross margin.
第二个问题，我们在三季度，我们其实现在的话呢，我们第一工厂的扩产工作已经开始，给我们六月份的产能已经在贡献了。当然它扩产的那个产线也需要一个时间去爬坡。所以从一个整车生产的角度来讲，您刚才说的这个数对我们已经不是瓶颈了，需求的角度来讲的话，我们认为也不是问题，现在的主要还是在供应链端。因为供应链就像您刚才讲的，供应链这个确实包括芯片，包括有一些供应链的产能提升还是有一些瓶颈的。我们当然还是对三季度的交付量非常有信心的，如果照现在的这样一个趋势的话。
With the production capacity expansion in the F1, we expect that this is going to start improve the overall production output starting from June. Of course it will need some time to gradually ramp up the production, but we believe the vehicle production is not going to be a bottleneck, and the demand is not a issue for us. The main challenges that we are facing right now is the supply chain, especially in terms of the chipsets and also the production capacity of our suppliers. We are very confident of our delivery performance starting from the third quarter.
Xie xie, Jeff. Thank you.
Thank you. Next question comes from Tim Hsiao from Morgan Stanley. Please ask your question.
好，感谢接受我的问题，那也恭喜我看到这个整体的交付在六月份会有一个比较明显的恢复。那我这边两个很快的问题，第一个是关于订单，好，因为刚才可能在 presentation 里面 William 提到我们五月份的这个新增订单恢复得非常强劲了，所以是不是可以针对这个细节再稍微分享一下，就首先，是不是大多的这些新增订单都是以 ET7 为主，那这个是不是也代表了我们原先 ES8、ES6、EC6 的车型的需求这边是一个比较明显的放缓，那我们是不是会有一些中期改款在二季度或者三季度推出。那另外的话就是想问一下，我们这个所谓的这个订单目前是不是有包含 ET5 这一款，是不是也有很大的贡献？这是第一个有关于订单的问题。那第二个问题是有关于电池，好，因为刚才简报中也提到了，就是说现在蔚来已经有超过四百项的一些电池的技术，那还包括了电池芯、电池包、BMS，还有更多这个最新的技术。所以中长期来讲，我们在电池这一块的涉入，会不会考虑到会有一些电池的生产？或者是说我们也会寻求专业代工厂的协助，依照这个蔚来的这个专利，以及这个技术去做一个电池生产，那基本上都是基于我们自己本身的研发。好，这就是两个问题。
So let me translate my questions. The first question is about orders, so could you please provide further details? Do orders of ET7 dominate the current order intake, while the demand for incumbent SUV models are falling more meaningfully? Are we going to have a refresh for our current SUV models anytime soon? And you mentioned the record order book, does that include the orders of ET5?
My second question is about the batteries, because during the presentation I think William mentioned NIO now has more than 400 battery-related technologies covering cell, pack, BMS and more. Will NIO consider involving more in battery production over time, or seek professional battery OEM vendors' help to produce the battery based on NIO's patents and technology? So those are my two questions. Thank you.
好，谢谢Tim。第一个问题关于订单，那么我们在五月份的话呢，我们的订单的增长，也是包括了那个现款的866，也有这个订单的增长。我们866，现款的866的话，总体的订单还是稳定的，稳定中还是有一些增长的。当然你刚才讲到了，我们会不会有一些年中的改款，我们会有一些新的智能的，像硬件的应用，软件的应用，到现在的这个866上，我们近期会发布这方面的一些计划。第一个问题，你先那个衣服翻译一下。
Thank you Tim for your question. Regarding your first question for order, basically in May, our order growth is quite significant, and this actually includes the order intake for the existing ES8, ES6 and EC6. The overall order intake performance of the existing ES8, ES6 and EC6 is quite steady, and we have witnessed certain growth. You have also mentioned whether we are planning for some upgrades of our existing models. We are planning for incorporating some smart hardware and some new software features for the upgraded version of the existing models.
我们ET5在去年NIO Day发布以后，我们在目前来讲的话，我们订单仍然是持续在增加，那总体上来说的话呢，因为近期有一些车展，所以我们也看到ET5还是非常受欢迎，ET5的订单的情况是还是非常好的。
After we launched the ET5 in last year's NIO Day, we have witnessed the steady growth of the order intake recently because of the auto shows and exhibitions. We have witnessed very positive order performance of ET5.
第二个问题就是我们说的是有超过四百人的研发团队，这个团队的size，在过去的这段时间，我们在电池研发方面的投入是显著增加了，增加的比较多。那我们现在总体的方向呢，是在24年的我们在下一代的车上面，我们会有全新的这个800V，这个高压平台的快充的，这个当然也是换电的这样一个电池包，我们会launch这样的一个电池包，我们相信会有很多革命性的这样的技术会应用。那么在这个方面的话，我们的unified pack的这样的一个思考，我们相信对于这个电池的定义会有我们新的这样的一些定义，包括成本的优势、性能的优势、安全方面的优势，我们相信都是很大的。那么这方面的话呢，如果今天去说的话，我们的计划当然是在24年的这个下半年，我们要投产我们新的这样的一个电池包，但具体的制造策略，我们从长期的方向上来讲呢，我们肯定是一个自制加上外采的这样一个战略，在这一点上我们是非常坚定的，我们认为对于增加公司的竞争力，产品的竞争力和毛利的利润的盈利的能力都是很重要的，这也是我们在投资和研发方面的一个重点。
Just now for the 400. This is actually about the R&D teams focusing on the battery technology. We have over 400 employees. For this we plan to leverage our R&D capabilities in terms of the battery to launch an 800V high voltage battery pack, which will also support the battery swapping technologies in 2024. We understand that this is going to bring many innovations, innovative technologies and revolutionary solutions. We believe this unified pack concept is going to redefine the battery technologies in terms of the battery cost and the battery safety.
Our plan right now is to start the production of this new next generation battery pack in the second half of 2024. Our long-term battery strategy is going to be a combination of in-house production and also outsourcing. We believe that this long-term strategy is going to benefit the overall competitiveness and the vehicle gross margin, as well as the profitability of the new products. This is also going to be our first.
Thank you team.
Thank you. Our next question comes from Bin Wang from Credit Suisse. Please ask your question.
谢谢，那我就两个关于速度的问题。我想问一下，就是我们二季度跟一季度的毛利率大概会掉多少，因为我们之前有涨价一万块嘛，这一万块应该就是来抵消这个电池成本上升的，能不能说我们的毛利就会只会下降一万块，在二季度对比一季度。那同时我们也讲到这个三季度会回到正常水平，那这个正常水平是指18%的这个一季度呢，还是指之前的高点21。最后就是关于这个毛利率，我们在换这个智能芯片之后呢，应该有可能会进一步涨价，那么是不是说四季的毛利率会进一步改善，是因为有换了芯片之后的一个涨价。好，这就是我的问题。我翻译一下。
I actually want to quantify the margin because you actually say that second quarter will be a low margin. Can you say what's the level of the decline in margin? Because you actually raised the price for current products by around CNY 10,000. Can I notice the decline in the gross profit margin? Gross profit just CNY 10,000. You also mentioned that the third quarter went back to normal. What's the back to normal you're referring to? You refer to the 8% to 18% gross margin of first quarter or the last peak level around 21%?
Meanwhile, I suppose you will further increase the price for the upcoming better semiconductor intelligent cockpit version of the current product. Is that going to be another increase in the gross margin? Thank you.
好，谢谢王彬。我们这个涨价的这一部分呢，基本上需要到三季度才能去体现。我前面也讲了，因为我们涨价的这一部分的话呢，这个前边涨价之前的一些订单，我们现在还在交付那些订单，所以涨价还是需要在三季度才能去体现。那么二季度电池成本确实增加的是比较多一些，但具体的受的影响的话呢，我们现在还有一些不确定性吧，那我们如果从现在来看的话，是比一万要多一些的，这个我们从目前来看的话，但具体是多少的话，我们可能还需要看看这个近期的材料的价格的变化，因为我们已经是一个联动的这样的一个方式。所以这是二季度的一个情况。三季度的话呢，会恢复，也其实这里面也确实有一点不确定性，就是三季度我们虽然涨了价，但是我们需要看这个电池的上游材料的这样的一个趋势。当我们三季度这个第二代平台的车，它能增加一些毛利，所以总体上来讲，当然我们是能看到三季度肯定会反弹，但是反弹到底哪个水平，我们今天确实还有一些不确定性，因为这个和以前不一样的地方在于，我们现在这个电池的成本跟这个原材料是关联的，不像我们以前是一个fixed的价格比较好预测，这个主要不确定性来自于这个地方。
Thank you, Bin, for your question. Regarding the price increase for our products. Previously have also explained that this is going to be reflected in our vehicle gross margin in the third quarter. Because right now we are still delivering vehicles without the adjusted price. For the second quarter, the battery cost is higher than that of the first quarter, but the impact of this is still uncertain. Specifically, we believe it's going to be higher than the CNY 10,000 you have just mentioned.
But we believe that there's still many uncertainties that we need to weigh out a little bit, because just like I mentioned, right now the battery cost of our products is actually based on the raw material trends and the index.
It means that for the third quarter, we will probably see some trends of the raw material cost going down a little bit. With our vehicle gross margin improvement based on the NT 2.0, the vehicle gross margin in the third quarter, we believe is going to bounce back. There are still many uncertainties, because the battery cost is very difficult to forecast and determine at this moment.
好，谢谢王敏。
Thank you. The next question comes from the line of Ming-Hsun Lee from Bank of America. Please go ahead.
William，还有各位领导，晚上好。那我这边就是两个问题，那第一个问题呢，是关于，就是因为今年的话就是有三款新车跟三款中改，那所以下半年这个volume growth应该是蛮强的。那想了解一下，说我们管理层现在有没有对明年的可以的这个新车型，还有包括ES8、ES6、ES6是不是今年改款，然后明年是一个换代的节奏？可不可以就是就这个product cycle，可以给多给我们一些提示？这是第一个问题。然后，第二个问题呢，是关于这个，我们的这个other revenue的部分，因为，其实过去几个季度的话，我可以看到这个other revenue通常都是逐季增加的，那我想这个跟我们的这个client base一直往上走应该有关系，那有注意到这个，一季度的话，other revenue稍微掉下一点，不晓得是不是跟这个疫情封控有一点关系。然后另外就是other revenue它的毛利率，也是一季度跟去年四季度也一样，就是负超过30%。那想了解一下，是不是因为这个也是battery swapping stations之前开的比较多，所以这个一下子产能利用率还没拉上来之前，它的这个毛利率会比较低。那管理层这边有没有预期说这个other revenue的这个毛利率，大概会用什么样的一个，这个节奏来改善？谢谢！那我翻译一下。
My first question, could you also give us some guidance regarding your potential product pipeline for 2023, especially for the ES8, ES6, will you consider to launch the new generation in next year? Second question is regarding your services and others business. First, the revenue slightly decline quarter-over-quarter. Is it because of COVID impact? Secondly, of course, margin of this business is also not very good for the quarter. Is this because of the lower utilization when you build a new battery swapping station? What do you expect the margin improvement for this business? Xie xie.
好，谢谢Ming。第一个问题，我们现在的这个在产的车型，明年当然都会切换到NT2的平台上去，这个当然是我们的计划，这是肯定的。那么第二个问题的话呢，我们请Stanley回答一下。
Thank you, Ming, for your question. Of course, for the existing models, including the ES8, ES6 and EC6, our plan is to upgrade all those models to the NT2 platform in the next year.
Hi Mingxi, this is Stanley . The other operating loss mainly because the increase in depreciation and also operating expenses relate to our battery swap stations. In this year, we will continue to build the battery charging and swapping network, which can bring the unique experience to our users.
Can benefit the further improvement of our user satisfaction and also brand image. From the short term, I think the other losses will increase along with the expansion of the network. From the long run, the number of deliveries and also users grow, we will make our charging and swapping services more efficient. The losses arising from the charging and swapping service will gradually narrow down. Our innovative business models, including NIO Life and also ADAS, can also bring extra gross profit and booked in this account. That's me.
Thank you. Next question comes from Nick Lai from JP Morgan. Please ask your question.
你好，李彦跟宽城大家好，我是Nick。有两个就简单的问题，刚刚有些已经回答过了，我就想追问一下，第一个是有关这个供应链的问题，刚刚有没有提到说在二季度还是三季度芯片的预约，那算一下六月份的这个预计的销量大概是算大数，在一万到一万三千台，跟我们现在预计的可能在一万五千台，有一点差距，这个芯片的预约在六月份到今年下半年的这个能见度是什么状况，可以跟咱们update一下是什么样的芯片，还是什么样供应商，这个业务的状况，大概下半年的能见度可以跟我们展望一下。那同样有关这个供应链的问题，刚提到跟那个电池好像是联动的关系，我们前面这个涨价一万多块是反应，就是到上半年的这个电池的涨价价格是full，全部的pass through吗？那假设下半年的这个联动关系的成本还有再往上涨的话，我们对这个下半年对产品的pricing，这个价格的strategy可以跟我们分享一下。这个是有关供应链的问题。那第二个问题就比较简单，就是刚提到说我们这个next market的plan，那个因为可能我比较可能能够透露的还不是特别多，比较更，就分享一下这个next market plan，就时间点跟平台跟价格大概是什么样，我们可以预期到比较多的一些说明。
Let me explain very quickly my two questions. First is related to supply chain. Can you give us an update on chip supply condition in June as well as second half, as well as the pricing with battery supplier? Has the recent price hike reflected the cost increase in the first half and with battery cost continued to rise in the second half? Are we going to raise our price again in second half as well? Second is a quick update on next market brand strategy. Thank you.
谢谢 Nick。第一个问题是，供应芯片的话呢，确实它是经常有一些不确定性的这样的一些短缺出现，我们车上大概有一千，每辆车有一千多颗芯片，那有那么很少数的，大概比如说它可能每一段时间出现的这种短缺可能有点不太一样，这个完全是根据 tier I 它的上游的这个情况去定的，都是一些基础性的芯片，比如说 TI 的，或者 NXP，或者这个 Infineon Technologies 这样的一些，他们有一些，因为他们的芯片的型号很多，所以它有一些不确定性，很难说是某一种。如果我们就知道某一种的话，这个事情就好办了很多，它确实是有一些不确定性的，有那么一二十颗，基本上来讲在我们的 risk 的单子里面，一般来说都有那么一二十种的芯片，可能这个月和下个月的是不太一样的。所以要不停地去解决，不停地去解决。总体上来说的话呢，我们也找到了这样的一些方法吧，就通过各种方法去解决这个问题。从订单的角度来讲，我们原来的计划里面也是下半年开始爬升产量，所以我们提前在去年就在 book 这样的一些供应。所以总体上来说，我们相信这个有 risk，但还算可以管理，基本上是这么一个情况。六月份的话的产量倒跟芯片没有太大的关系，主要还是一个正常的爬坡的过程。Eve。
Thank you for your question. There are many uncertainties in terms of the chip supply, because in our vehicle we probably have over 1,000 chips and the chip shortage situation for those 1,000 chips may vary from time to time. This totally depends on the upstream suppliers of the tier I suppliers of NIO.
Many of the chip shortages are actually caused by the basic chipsets used by those tier I suppliers or the upstream suppliers of those tier I suppliers. For example, like TI and Infineon, they provide various kind of chips to the OEMs and it's very difficult to actually identify specific risky chips that we are going to face the shortage. That is why we do have a risky chip list. Normally it includes probably around one to 20 different kind of chips, and this list may change month to month. Of course, we will try to mitigate all those risks with different kind of measures.
Previously our plan is to expand our production capacity starting from the second half of this year. That's why starting from last year, we have already started to work closely with our suppliers to make sure we can secure sufficient supplies for our products. We have some risks in terms of the chip supply, but we believe this is actually manageable and is under control. For the production capacity in the month of June, this is actually not specifically related to the chip shortage or other supply chain risks. This is just a part of the normal ramp up process for the production capacity expansion.
Yeah. Regarding the second question of the battery, starting from April of battery cost is linked together with the raw materials of the batteries in the market. We can see the raw material cost actually peaked in April. We started to see some trend of going down, specifically for the lithium carbonate. In China, we have already started to see there are more resources in for the lithium and there are some companies trying to mine the lithium to make sure they can supply to the market and meet the demand.
I believe the general consensus of the industry is, it already peaked in April, so it's going to gradually go down. Of course, people have different forecasts in terms of what is going to be the final cost of those raw materials.
Some people may think that the lithium carbonate is going to go down to around probably CNY 30,000 per ton. This means that we are going to reduce the cost of the lithium carbonate by 20% to 30%. We also have a similar forecast for the nickel material as well. We believe the general trend is the cost of those battery materials is going down. It's not going to go up again. The next question is about the mass market brand. Our plan is to start the delivery of the product of the mass market brand starting from the second half of 2024.
This product is going to be based on the new technological platform 3.0, and we believe the mainstream products of the mass market brand is going to be at the price range from CNY 200,000 to 300,000. Of course, the mass market brand products will also support battery swapping, and we are going to use our in-house developed and manufactured batteries for the mass market brand product.
Of course, this platform is also going to support high voltage technologies. We believe with all those advanced technologies and competitive pricing, those products under the mass market brand are going to be very competitive.
Thank you.
Thank you. Our next question comes from Paul Gong from UBS. Please ask your question.
好，谢谢。让我提问题啊，就两个问题。第一个问题来说是关于ES7的，因为像以前ET7和ET5的话，从发布到交付间隔的时间都比较长，为什么这一次从ES7来说，它的交付还在那个ET5的之前，然后相应的就说ES7，相对于ES8、ES6、EC6来说，我们会预计多少的那个蚕食和挤压？这是第一个问题。第二个问题来说的话是对于这个NT 2.0平台的一个供应链的准备，因为像现在就说ET7的交付周期都还相对比较长，在是在量比较小的时候，那等我们ET5交付了之后，那事实上整个NT 2.0平台所需要的一个零部件是大大地增加了，我们现在有些什么样的措施来保证这个供给，我们和那个供应商是否都已经谈好了相对比较大的一个量的一个ramp-up。
Let me translate my question. The first question is related to ES7. Why from unveiling or launch until delivery, it seems to be a lot faster than the previous ET7 or ET5. How do you think about the cannibalization versus ES8, ES6 and EC6, given they are all kind of SUVs of similar size? My second question is regarding the supply chain preparation for the NT2 platform. Currently it seems that the ET7 production remains to be relatively low in terms of ramp up and with pretty long waiting periods.
In view we are going to have ET5 with some larger volume and ES7 in the pipeline. Have we done enough work to secure the key components supply to enable the ramp up of the overall NT2 platform models? Thank you.
好，谢谢Paul。第一个问题，事实上来讲的话，我们ES7的研发工作是一直都在开展的，我们这个发布时间本身就是按照我们这样的发布节奏，这个是正常的一个发布节奏。当然原来我们是预期会比现在早一点，因为疫情的原因也往后推了一些，所以看起来就感觉离交付特别近，原定的时间比这个肯定是要早一些。但总体上来说，我们是按照计划在往前走的。但ES7因为搭载的是我们NT 2.0的技术，比现有的ES8、ES6、EC6的话，肯定是智能化的这个技术平台，包括成本都会高一些，所以它的价格也肯定和现在是在ES8和ES6之间。那我们会不会有一些替代关系呢？我相信会有一些，但是他们还是有显著的产品的定位的差距，价格上也有差距。比如说它和ES8有定位的差距，因为ES8是一个六座、七座这样的一个定位。那么ES7的话，还是一个大五座，那比ES6的话，相对来说它的价格上肯定是要高一些的。我们觉得定价上也有一些的差距。我们认为ES8、ES6、EC6还是有竞争力的。总体上来讲，我们觉得这个替代关系应该不会特别大，不会有特别大的挤压的这样的一个效应。这是第一个问题。
Thank you, Paul, for your question. Regarding the first question, we have always been working on the development of new products and we have been working on the development of the ES7 for some time, and the launch time of the ES7 is actually already planned when we were developing the product. It may seem that right now it's very close to the delivery of the ES7, but previously our plan is to launch the ES7 earlier. Due to the impact of the COVID-19, we delayed a little bit. That is why it seems that it is much closer to the actual delivery of the ES7. Everything is actually going forward according to our plan.
ES7 is going to be based on the new technology platform 2.0, which is going to be offering higher and smarter technologies compared with the current NT2, NT1 technology platform. The current ES8, ES6 and EC6 are actually based on the NT1 technology platforms. There will also be some price differences. The price positioning of the ES7 is going to be between that of the ES8 and ES6.
We believe that there's not going to be cannibalizations between the ES7 and the existing models, because we have a different positioning and pricing strategies for those products. For example, the ES8 is mainly focusing on the six-seater and seven-seater markets and the ES7 is positioned as a mid-large five-seater SUV, which has the higher pricing compared with that of the ES6.
第二个问题，我们当然这个很早就在为NT2的这些产品的爬坡，这个产量的，这个交付量在做准备啊。虽然有挑战，但是我们在供应链方面是很早就在做这样的准备了。
For the second question, of course, we have already and actually started at a very early stage to plan for the production ramp up of the products based on the NT2 platforms. We have already done this for some time. Of course, there are going to be some risks, but because we have a plan ahead, we believe it's still manageable.
Thank you, Paul.
Thank you. Next question comes from Yuqian Ding from HSBC. Please go ahead.
谢谢管理层。两个问题。第一个是想跟进一下刚才的讨论，刚刚 William 也有提到，就是在涨价覆盖成本上涨的这个方面可能也有一些溢出。我们看到公司的这个定价策略看起来是很克制的，那大概我们看到我们的这个电池，然后包括全铝车身，包括这个对于芯片的一些供应的保供，那可能都会带来额外的这个成本增加，那大概多溢出的这些成本就是侵蚀到什么程度，我们可能会再次 pass 给消费者一次，就是在这个里面，具体可不可以请管理层讲一下这个，具体的量化的或者是方向上的思考。 然后第二个问题想请教 ET5 的这个车型，对于今年的这个量以及利润率的这个方向上的细节。第一就是说，这个车型前期的订单很好，但是下半年的时候可能会面临一个就是入门级的豪华车首次受益这个购置税减免，就是那可能我们正好处在入门级豪华车竞争区间，其他竞争对手也会，有车的这个竞争对手，突然首次也有了这样的这个优势，所以对于这个我们大概是怎么评估的，对我们量的影响。然后第二个就是说此前我们发布的时候设计的这个利润率是20%以上，但那个时候其实没有大宗商品的这个影响，那我们订单前期也拿了很多，就是锁定了之前的这个价格，那我们在交付的时候，这个会不会出现一些，就是那个时候成本，电池价格联动它已经比较高了，然后会对，那实际交付会对设计的这个 margin 产生一定的稀释。
So, I've got two questions. The first is to ask about whether our price hike in May is enough to cover the cost headwind from the battery side, aluminum body and also the chip shortage in China. What's the management thoughts about the extra cost and also the pricing strategy going forward. Second question is to ask about ET5 volume and the margin conviction.
We know there's a bit of a substitutability splash on the entry luxury, which is currently ET7 has been launched within the segment, and also previously we have a design 20% gross margin. Back at the time we haven't considered the cost headwind coming from the commodity side might persist longer.
好，谢谢Yuqian。Stanley你回答第一个问题吧。
Hi Yuqian, this is Stanley. For the cost increase of battery, I think William has give us a lot of guidance. Regarding the price increase of other material and also chip cost, I think we have absorbed through close cooperation with our partners and also internal efficiency improvements. As William introduced the whole market for the key raw materials are quite dynamic. At this moment, we cannot give the precise, like, estimation of the following months or quarters the trend. For second question, William.
ET5 的话，确实我们今年涨价也好，怎么样也好，因为我们今年肯定这个预订单，今年肯定是交付，不，交付产不出来的，所以我们会再看一看情况吧，再看一看这个材料的情况吧。这个现在我们还是专注在赶紧把它产出来，所以不管 ET5 涨不涨价，其实对今年都没什么影响。
For the ET5, because we have already accumulated a significant amount of reservation orders. If we consider the production of the ET5, we believe for this year, the production of ET5 will only be sufficient to meet the backlog for the ET5 orders. This price increase for of the ET5 is not going to have any impact of vehicle gross margin performance this year.
Great, thank you. Our next question comes from Vijay Rakesh from Mizuho. Please ask your question.
Yeah, hi. I have a quick two questions. On your in-house capacity with Hefei, you have talked about 240,000 annual capacity. Do you think you get to that 20,000 a month run rate by end of third quarter of this year, third quarter 2022? The second question is on the Neo Park, you know, that obviously has an incremental additional 300,000 per year capacity. You talked about ramp starting that in third quarter. Can you walk through how that ramp should look? Will it be like 10,000 a month exiting this year and then gradually increase next year? That's it. Thank you very much.
谢谢，Vijay。Steven，要不你回答一下这个问题。
Okay, Vijay, thanks your question. For the product capacity of our first plant with JAC NIO, as we have mentioned, we will continue to ramp up its production capacity in third quarter. I think probably at least in the second half of the year, and our overall capacity should reach 20,000 units per month. It can be, it's not probably too early for us to say when.
For the NT2 ramp up pace, actually first we will kick off the delivery of ET5 from this plant in third quarter, so it will give production in third quarter, and then we try to reach 10,000 units within quite a short period, probably three four months, I think that's our plan. Of course, next year, as we introduce more models into this factory, then the overall production volume of ET will continue to rise.
All right, thank you. Our next question comes from Jing Chang from CICC. Please ask your question.
好的，谢谢。管理层，我这边的话可能稍微跟进两个问题。第一个问题是关于，我们之前在五月份那也有一定的消息，提及到说，可能这个在美国有相关的一些招聘信息，那不知道这边是否有更多的信息、细节可以分享。然后以及就是针对海外市场突破这边的话，那目前我们也在挪威这边，这个北欧这边有一些这个布局和销售，但往前看的话，哪些是我们觉得非常具有潜力、布局和突破的一些市场，那同时在海外拓展方面的话有什么难点？第二个问题的话呢，可能就请，想请这个管理层介绍一下目前我们NAD可能测试的一些进展，是不是有更多的细节可以去分享。我这边看一下英文，那么。
My first question is about it was reported that in May that we have relevant recruitment information in the United States. So, can you share more details about it? How do you see the breakthroughs in overseas market? Reaching potential market, we think have more potential for us to deployment and what are the difficulties? My second question is about NAD. Can you share more details about its current testing progress? Thank you.
好，谢谢唐静。Steven，你回答第一个问题吧。
Jing Chang, thank you for your question. First with regard to the US market, the short answer is we are definitely entering the US market. Actually we've studied a comprehensive study of the US market and have a dedicated team in charge of delivering this plan for the market. We'll tap into the US market with innovative manner. Now it's still in the study phase, so we'll share more information when it's appropriate. For the difficulties or difference in the Norwegian market.
First, actually, there are a lot of commonalities between China and the European market, from the business model to the aspiration for green smart EV products. The Norwegian users also enjoy the concept of smart EV and even the price. If we do need to learn some difference, of course, first the culture and also the cost structure. In Europe, surely the labor cost would be higher. We need to accumulate enough understanding of the local culture and get integrated into the local community. William, back to you.
第二个问题就是NAD。因为NIO Pilot的话，我们现在的NT2上面的NIO Pilot就是我们的辅助驾驶的所有的功能，那么应该说是基于我们自己的全栈技术去做的，从感知到我们整个的算法，到整个的归控，所有的事情都是我们自己的技术在做的。那我们看到了从三月二十八号ET7交付以后，我们看到了自己掌握这种全栈技术的，基于数据闭环快速迭代辅助驾驶能力的这样一个巨大的优势。那在过去的这两个多月的时间里边，我们看到我们辅助驾驶各方面的性能指标都有非常大的一个跃升，因为我们会根据数据会持续地去迭代和改进，去training，去训练和改进我们的辅助驾驶各方面的性能。那如果根据我们自己的测试的话，和我们第一代的辅助驾驶相比的话，那我们应该说是有几倍的这么一个性能的提升。那我们也讲到了我们在三季度我们会发布NOP+，就是辅助驾驶的这样一个增强版，那我们从目前的测试的角度来讲的话，我们还是非常有信心的。那么这个高精地图也是我们和腾讯合作，从自研的角度去跟他有这样的一个合作，那我们是集成到我们整个的自动驾驶和辅助驾驶的整个的数据闭环的框架里边。
For the second question regarding NAD, the current ADAS functions and the features based on the new technology platform 2.0 is actually derived from the full stack of technologies developed in-house by our own AD teams. We have a comprehensive full stack capabilities starting from sensing algorithm and control strategy.
Starting from the delivery of the ET7, 28 March 2022, we have witnessed the data closed loop management and collection, which has helped us to achieve a very fast iteration and upgrade of the vehicle autonomous driving or ADAS experiences based on the NT2. For us, we have witnessed many improvements in the last two months, because we can collect our data and we can actually see all those data.
We can see that the performance of the NT2 is actually several times better than that of the NT1 because after we collect all those data, we can use the data to train our algorithm and our ADAS and AD technologies. I have also just mentioned that we're going to release the NOP Plus. We are very confident with the performance of the NOP Plus. This NOP Plus is going to be based on the high-definition map developed together by ourselves together with Tencent. This is going to be an in-house high-definition map.
We are going to integrate all those different technologies, including the high-definition map with our AD and ADAS closed loop data management. We are going to use the same kind of technology stack to improve our autonomous driving and ADAS features. That is why we're very confident with the NAD performance in the long run, based on our sensing capabilities, the closed loop data management, and also the fast iterations and the systematic capabilities.
Thank you.
Right. Thank you very much for all your questions. We have reached the end of the question-and-answer session. I'll now turn the call back to the management team 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.
Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you for participating. You may all disconnect.