Hello, ladies and gentlemen. Thank you for standing by for NIO Inc.'s first quarter 2021 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, Ms. Eve Tang from Capital Markets and Investor Relations. Please go ahead, Eve.
Good morning, good evening, everyone. Welcome to NIO's first quarter 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, Mr. Danny Xu, VP of Finance, and Ms. Jade Wei, AVP of Capital Markets and 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 the applicable law. Please also note that NIO's earnings press release and today's 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 2021 Q1 earnings call.
In the first quarter of 2021, NIO delivered 20,060 ES8, ES6, and EC6, representing a strong year-over-year growth of 422.7% and a solid quarter-over-quarter growth of 15.6%.
All three models have achieved outstanding results in their respective segments, especially EC6. With its comprehensive performance, streamlined silhouette, and superior digital experience, EC6 has outperformed other peers in the coupe SUV segment and has been well-received among users, especially among the younger audience. On April 7th, 2021, our 100,000th production vehicle was rolled off the line. It took NIO 26 months to roll out the first 50,000 vehicles, but only nine months for the second 50,000. Together with our users, NIO has set a new speed record from delivering the first vehicle to the 100,000th vehicle among the premium auto brands. Driven by the growing brand awareness, competitive product portfolio, industry-leading technology, outstanding services, and innovative business models, NIO has gained increasing recognition and support from our users. Our order momentum remains solid, while the risk of a global chip shortage still looms large in the second quarter.
Despite the challenges, we expect to deliver 20,000- 22,000 vehicles in the second quarter. In terms of gross margin, benefited from higher deliveries and solid average selling price, our vehicle gross margin reached 21.2%, while the overall gross margin increased to 19.5% in the first quarter. On top of the positive operating cash flow for the full year of 2020, we have continued to realize positive cash flow from operating activities. In the first quarter of 2021, while steadily improving operating efficiency and overall system efficiency, we remain committed to doubling down on our investments in research and development, and stay determined to accelerate the deployment of our swapping and charging network and offline service channels. Next, I would like to share with you some recent key operational highlights of the company.
After the launch of ET7, our first flagship smart electric sedan at the NIO Day, it has attracted great attention from the market and the industry. Our teams are fully focused on and devoted to the production and testing of ET7. On April 2nd, the first body in white of ET7 rolled off the production line in Hefei manufacturing center. On April 19th, the interior of ET7 was unveiled at the Shanghai Auto Show, showcasing its second living room design concept, which has been well received by the media and the public. On April 15th, we kicked off the deployment of the Power Swap Station 2.0. The second-generation Power Swap Station can significantly boost its service capacity to up to 312 swaps per day by shortening the battery swapping time and carrying up to 13 battery packs.
To further improve the swapping experience, we upgraded and optimized our NIO Palace based on the Power Swap Station 2.0 in NIO OS 2.10, which was released to users in April to achieve an automatic one-click park and swap experience without getting off the car throughout the whole swapping process. All NIO users can enjoy this feature once they have updated their vehicle operating system. As an organic part of NIO's holistic charging and swapping network, the Power Swap Station 2.0 will be gradually deployed nationwide in China. NIO has created innovative battery subscription models based on vehicle battery separation and chargeable, swappable, and upgradable batteries. As more users get to know better about the benefits of Battery as a Service, or BaaS, and more battery pack options become available, BaaS has gained increasing popularity.
We believe BaaS and NIO's growing charging and swapping network will further elevate the user experience of owning an electric vehicle and attract more users to choose electric vehicles. In addition, since its launch, the 100 kWh battery pack has been widely welcomed by our users. With a much higher take rate than we expected. As of April 16th, more than 10,000 users have been using the 100 kWh battery pack. On April 18th, we have also officially made the flexible upgrade to 100 kWh battery pack available for reservation, and will offer this upgrade service to users starting from June.
产能方面，3月底4月初，受芯片短缺影响，江淮蔚来工厂暂停了五个工作日的生产，这对我们四月份的生产和交付产生了一定负面影响。二季度全供应链的整体产能仍将持续面临巨大的挑战。我们与合作伙伴一起在全力以赴保证供应。在停工和假日期间，我们和合作伙伴一起对工厂产线进行了改造，为ET7的量产做好准备。
In terms of production capacity, late March and early April, due to the semiconductor supply shortfall, JAC NIO Factory halted the production for five working days, which has posed a certain negative impact on our production and delivery in April. In the second quarter, we expect the challenges to the overall supply chain production capacity will continue to linger. In spite of the volatile microenvironment, we are working closely and diligently with our partners to secure supply chain resources. During the production suspension period and holidays, our partners and us have modified our production lines to prepare for the mass production of ET7.
此前，蔚来与合肥市签署了深化合作协议，并宣布共同在新桥建设智能电动汽车产业园区。2021年的4月29日，也就是昨天，我们参加了新桥产业园区的开工仪式，并召开了合作伙伴大会。蔚来致力于与合作伙伴一起，从人才、研发、产业链和制造等方面助力合肥智能电动汽车产业的发展。
Not long ago, NIO signed further collaboration framework agreement with the Hefei government and announced to jointly build the NeoPark, a smart electric vehicle industrial park in Xinqiao. On April 29th, 2021, NIO participated in the kickoff ceremony of the NeoPark and organized the NIO Partner Conference 2021 in Hefei. NIO strives to collaborate with partners in talent attraction and cultivation, research and development, supply chain and manufacturing to facilitate the development of the smart electric vehicle in Hefei.
为了支持后续产品的生产，我们将与合作伙伴一起在新桥智能产业园区筹建第二工厂，正在与合作伙伴就实施细节和最终的合作模式进行商讨，会适时和大家分享最新的进展。
To further support the production of NIO's future models, together with other partners, we will plan and build a new factory in NeoPark. We are in discussion with other partners about the detailed execution plan and the cooperation model. We'll share more information at an appropriate time.
销售和服务网络方面，我们现有23个蔚来中心和211个蔚来空间，覆盖中国123个城市。我们会继续加强蔚来中心和蔚来空间的建设，扩大销售网络覆盖，提高运营效率，提升品牌影响力。
With regards to the sales and service network, we now have 23 NIO Houses and 211 NIO Spaces covering 123 cities in China. We'll continue to strengthen the building of NIO Houses and NIO Spaces to further expand the sales network coverage, improve operational efficiency, and enhance brand influence.
蔚来换电站已经建成206座，覆盖77个城市。我们已经开始逐步部署二代换电站，目标是今年将换电站总量增加到至少500个。与此同时，我们将加大超充网络和目的地充电桩的建设。截至目前，我们已经在全国累计部署超过了146座超充站和1,826根目的地充电桩，计划2021年底分别达到600座和15,000根。
NIO has built 206 swap stations in 77 cities. We have gradually started the deployment of Power Swap Station 2.0. We aim to have at least 500 battery swap stations in operation by the end of this year. At the same time, we will ramp up the availability of Power Chargers, our supercharging piles, and the destination charging. Up until now, we have deployed over 146 Power Charger stations and 1,826 destination charging, and plan to increase it to 615,000 respectively by the end of 2021.
4月15日，蔚来与中国石化正式签署了战略合作协议，双方将携手共建充换电基础设施。这一战略合作将有效保障蔚来充换电基础设施的选址资源，提升电动汽车用户的体验，有利于进一步转换原油车的用户。
On April 15th, NIO signed a strategic cooperation agreement with the Sinopec to work together on building battery charging and swapping infrastructure. This strategic collaboration will enhance efficiency of site selection for NIO's charging and swapping facilities, better users experience of owning an EV, and help convert more gasoline car users to EV.
为了让中国北方的电动汽车用户享受到更加便捷的充换电服务，在今年的上海车展上，我们发布了Power North计划。在未来三年内，我们计划在中国北方八个省区部署100座换电站、120辆移动充电车、500座超充站、超过2000根超充桩，以及1万根目的地充电桩。我们相信Power North将极大地改善北方地区的电动汽车的使用体验，促进北方地区智能电动汽车的普及。
In the meantime, to provide users in the northern China regions better and more convenient charging and swapping services, we announced the Power North Plan at this year's Shanghai Auto Show. In the next three years, in the eight northern provinces and autonomous regions, we plan to deploy 100 power swap stations, 120 Power Mobile, 500 Power Charger stations with over 2,000 Power Chargers and 10,000 destination charging. We believe the Power North Plan will significantly improve the electric vehicle usage experiences for users in the North, and further catalyze the adoption of smart electric vehicles in those areas.
目前我们有33家蔚来服务中心，162家授权服务中心。基于不断提升的运营效率，2021年我们会继续扩大售后服务网点的布局，进一步改善售后服务体系。
Up to now, we have 33 NIO Service Centers and 162 authorized service centers in operation. Coupled with continuously improving operational efficiency, we will keep expanding our after sales service network and further improve the service operation system.
作为一家用户企业，用户的信任和支持是最宝贵的资源，也是我们不断进步的动力所在。在刚刚结束的上海车展，来自不同城市的180位车主志愿者，在蔚来展台向观众介绍蔚来的理念、产品、技术和服务。15位蔚来用户和行业专家共同发起了14场座谈的演讲，探讨科技智能创造的愉悦生活方式。还有更多的用户将自己创作的艺术作品陈列在了上海车展的蔚来用户博物馆，让更多人感受蔚来创作的生活方式。
As a user enterprise, the trust and the support of our users has always been our most treasured resources and the driving force of our growth. At the just concluded Shanghai Auto Show, 180 user volunteers from different cities came to our booth to introduce the concept, product, technology, and service of NIO to others. 15 NIO users collaborated with experts from various industries to jointly host 14 sessions of sit talk to discuss how to shape a joyful lifestyle with smart technologies. Many users displayed their original artworks at the NIO user museum at our Auto Show booth, through which they shared the joyful lifestyle NIO advocates and shapes.
2020年在用户的支持和团队的努力下，蔚来总体经营步入正轨，并进入了加速发展阶段。2021年是蔚来发展里程至关重要的一年，我们会进一步提升充换电与销售服务网络的建设，扩大蔚来品牌影响力，为蔚来用户提供最好的全程体验。更为重要的是，我们会坚定地加强新产品和新技术的研发投入，为长远稳固的发展打下坚实的基础。
With the support from our users and the efforts of our teams in 2020, NIO has stepped onto the right track for the overall operation, and has embarked onto the stage of accelerated development. The year of 2021 is of key importance for NIO's development. We will further improve the establishment of power, sales, and service networks to enhance NIO's brand reputation and provide the best holistic experience to NIO users. More importantly, we'll continue our decisive and efficient investment in NIO product and technology research and development to solidify the foundation for NIO's long-term growth.
感谢大家的支持。现在 Steven 将为大家介绍第一季度的财务业绩。有请 Steven。
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 Li. I will now go over our key financial results for the first quarter of 2021. 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 first quarter were CNY 7.98 billion, or $1.22 billion, representing an increase of 481.8% year-over-year, an increase of 22.2% quarter-over-quarter. Our total revenues are made of two parts: vehicle sales and other sales. Vehicle sales in the first quarter was CNY 7.41 billion, or $1.13 billion, accounting for 93% of total revenues in this quarter. It represented an increase of 489.8% year-over-year, an increase of 20% quarter-over-quarter.
The increase in vehicle sales year-over-year was mainly attributed to high deliveries achieved from more product mix offered to our users, the expansion of our sales network since 2020, and the slowdown of vehicle sales in the first quarter of 2020 due to COVID-19 pandemic in China. The increase in vehicle sales quarter-over-quarter was mainly due to high deliveries and higher average sales price.
Other sales in the first quarter were CNY 576.5 million, or $88 million, representing an increase of 395.3% year-over-year, an increase of 23.4% quarter-over-quarter. The increase in other sales year-over-year was in line with the incremental vehicle sales in the first quarter of 2021.
The increase in other sales quarter-over-quarter was mainly due to the increased revenues derived from 100 kilowatt-hour battery permanent upgrade service provided since December 2020, partially offset by sales at our automotive regulatory credits in the fourth quarter of 2020. Cost of sales in the first quarter was CNY 6.43 billion, or $0.98 billion, representing increase of 370.5% year-over-year, an increase of 16.9% quarter-over-quarter. The increase in cost of sales was in line with revenue growth, which was mainly driven by the increase of vehicle delivered volume in the first quarter of 2021. Gross profit in the first quarter was CNY 1.55 billion, or $0.24 billion, representing increase of CNY 1.72 billion from a gross loss of CNY 0.17 billion in the same quarter of 2020, an increase of 36.2% from the fourth quarter of 2020.
The increase in gross profit was mainly contributed by increased vehicle sales and increased vehicle margin. Gross margin in the first quarter was 19.5%, compared with negative 12.2% in the same quarter of 2020, and 17.2% in the fourth quarter of 2020. The increase of gross margin was mainly driven by the increase of vehicle margin in the first quarter of 2021. More specifically, vehicle margin in the first quarter was 21.2%, compared with negative 7.4% in the same quarter of 2020, and 17.2% in the fourth quarter of 2020. The increase of vehicle margin year-over-year was mainly driven by the increase of vehicle delivered volume, higher average selling price, as well as lower material cost. The increase of vehicle margin quarter-over-quarter was mainly attributed to higher take rate of NIO Pilot and 100 kilowatt-hour battery package.
R&D expenses in the first quarter were CNY 686.5 million, or $104.8 million, represent an increase of 31.4% year-over-year, and a decrease of 17.2% quarter-over-quarter. The increase of R&D expenses year-over-year was mainly attributed to less R&D research and development activities in the first quarter of 2020 due to COVID-19 pandemic in China. The decrease in R&D expenses quarter-over-quarter reflected fluctuations due to different design and development stages of new products and core technologies. SG&A expenses in the first quarter were CNY 1.2 billion, or $0.18 billion, represent an increase of 41.1% year-over-year, and a decrease of 0.8% quarter-over-quarter. The increase in SG&A expenses over year-over-year was primarily due to the increased marketing activities, as we have increased number of employees in sales and service functions in the first quarter of 2021.
SG&A expenses remained relatively stable compared to the fourth quarter of 2020. Loss for operations in the first quarter was CNY 295.9 million, or $45.2 million, representing a decrease of 81.2% year-over-year and a decrease of 68.2% quarter-over-quarter. Share-based compensation expenses in the first quarter were CNY 96.1 million or $14.7 million, representing an increase of 198.1% year-over-year, an increase of 60.3% quarter-over-quarter. The increase in share-based compensation expenses was primarily attributed to incremental options granted to relatively higher grant date fair values during the period. Net loss in the first quarter was CNY 451 million or $68.8 million, representing a decrease of 73.3% year-over-year and a decrease of 67.5% quarter-over-quarter. Net loss attributable to NIO's ordinary shareholders in the first quarter was CNY 4.88 billion or $0.74 billion USD, representing increase of 183% year-over-year, an increase of 226.7% quarter-over-quarter.
In the first quarter of 2021, NIO purchased 3.305% equity interest in NIO China from the minority strategic investors and recorded an amount of RMB 4.4 billion or $0.67 billion in accretion of redeemable non-controlling interests to redemption value. Excluding share-based compensation expenses and accretion of redeemable non-controlling interests to redemption value, non-GAAP adjusted net loss attributable to NIO ordinary shareholders was RMB 354.5 million or $54.1 million in the first quarter of 2021. Basic and diluted net loss per ADS in the first quarter were both RMB 3.14 or $0.48 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 RMB 0.23 or $0.4 per ADS. Our balance of cash and cash equivalents, restricted cash and short-term investment was RMB 47.5 billion or $7.3 billion as of March 31st, 2021.
Additionally, we achieved positive cash flow from operating activities for the first quarter of 2021. Now, for our business outlook. As William mentioned, for the second quarter of 2021, the company expects the deliveries to be between 21,000 and 22,000 vehicles, representing increase of approximately 103% to 113% from the same quarter of 2020, an increase of approximately 5% to 10% from the first quarter of 2021. The company also expects the total revenues of the second quarter 2021 to be between CNY 8.15 billion and CNY 8.50 billion, or between $1.24 billion and $1.30 billion USD. This will represent increase of approximately 119% to 128.7% from the same quarter of 2020, an increase of approximately 2.1% to 6.5% from the first quarter of 2021. This business outlook reflects the company's current and the preliminary view on the business situation and the market condition, 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.
Our first question comes from the line of Nick Lai. Please ask your question.
Yes. Good morning, William, Steven, and management team. Congratulations for the great result. My simple two questions. First one is on gross margin, and second one is really on chip shortage, common question raised by many investor. On gross margin, indeed, a very good improvement from 4Q last year to 1Q this year. The vehicle margin increased from roughly 17%- 21%. Of that four percentage point improvement, I wonder if you could help us quantify a little bit the underlying driver, how much percentage is driven by ASP volume, and on the flip side, raw material price, battery, and so on. That's my first question. Second question on the chip shortage. It's a common issue, and I know visibility is very low, two to three months.
At the same time, we did revise down slightly our 2Q sales volume guidance from previously William mentioned 7,500 per month in 2Q, and right now it's roughly about 21,000 - 22,000 in 2Q. On the chip shortage, do we have any visibility on the potential easing of supply?
Would that happen hopefully in 3Q？
我第二个问题就是有关这个芯片短缺，这是行业比较普遍的现象。这个芯片问题全部解决可能要到2022年的事情了。那我想说的是，我们在看到从这个短缺到紧张，这个拐点大概会什么时候出现？谢谢，就这两简单问题。
好，谢谢 Nick。Danny 会回答第一个问题，我回答第二个问题。
Hi Nick, this is Danny. Overall our vehicle cost including BOM and also manufacture cost remains stable in Q1 2021. The increase of vehicle margin are mainly driven by the increase of take rate of 100 kW battery pack and also the NIO Pilot, of which CNY 5,000 is for the 100 kW battery pack and CNY 8,000 is for the NIO Pilot take rate. The overall 100 battery pack take rate in Q1 is 25%, and we think this trend will keep in the following quarters. That's the general reason of why we achieved a higher gross profit margin in Q1. OK, William.
所以总体上来讲，毛利率我们认为Q1确实比我们自己预期的也要高一些。那当然，刚才Danny讲了，主要是一些高配车型的比例的增加，当然成本的话也有一些下降，这个就是常规的一些下降。那我们觉得20%以上的一个毛利率的话，已经到了我们认为还比较健康的一个状态。因为我们也不降价，总体上我们认为现在还比较comfortable。但是确实我们也不要预期我们会像去年这样每个季度都提升好几个百分点。当然我们认为还有一定的提升空间，但是总体来说，我们也希望大家对这个提升的预期不要太乐观。我们认为毛利率现在我们还是觉得不错的，20多%的毛利率，我们认为其实比我们预期到的要早一些。当然我们还是会把产品和服务做好，这对我们来说还是最重要的。
Overall speaking, the gross margin in the first quarter of 2021 is higher than our expectation. Just like Danny mentioned, this is mainly driven by the higher take rate of some options like the 100 kWh battery pack and the NIO Pilot. At the same time, the cost has also reduced to some extent. We believe that the current gross margin around 20% is a very healthy situation for the company's operations, because we don't actually cut the price and we believe this is quite comfortable for us. At the same time, I would like to urge everyone to manage your expectations, because this kind of rapid improvement of the gross margin will be quite challenging for us. I believe there will still be room for improvement for the gross margin, but not at this big margin.
We should not be too optimistic about the gross margin improvement. Right now is quite good for us to reach 20% of the gross margin and it is earlier than we expected. Our focus for the company is the product and the service.
Nick的第二个问题就是芯片短缺的问题。实事求是地讲，我们现在这个市场波动得还是非常厉害，我们每一天都要去跟踪这个chip shortage对于供应链的影响，因为汽车的产业链非常的长。大家知道这个Renesas Electronics的这个工厂，日本的工厂前一段时间有一个失火，大概是有几个星期的一个停产。那么因为他对整个供应链有一个延迟，这件事情差不多在5月的中旬会影响到全球的汽车的产业链。当然从我们来讲的话，类似于这样的事情吧，其实现在在整个这个行业时有发生，这个确实挑战是非常大的。从目前来讲的话，我们看到3月底4月初我们已经停产了5天，这个对于4月份的交付肯定会有一点影响。那么从这个整个季度来讲的话，我们现在是全供应链的产能，我们是认为如果我们能够在7,000到7,500之间的话，对我们来说已经是很大的一个挑战了。我们当然在全力以赴地去做，我们还是有信心的，但是这个难度还是非常大的。当然这个拐点的话，现在行业总体上来说，大致上认为三季度会好一些，到四季度应该是会比较全面的好转。当然也有一些更悲观的，觉得明年都没戏，明年都会有很大的压力。总体上来讲的话，我们供应链的合作伙伴对我们还是非常支持的。像昨天我们召开了NIO Partner Conference 2021，来了几百家的合作伙伴，大家都还是非常希望能够支持未来的生产。所以总体上这是全行业的挑战，我们总体上so far做得还OK，跟别人相比的话。
好的，谢谢William。
The second question is about the chip shortage.
The current situation in the market is quite volatile. We have been tracking the chip supply every day. This has been a very severe issue for the whole industry supply chain. For example, the fire incident of one factory has caused several days delays for the chip shortage. We believe this negative impact is going to kick in around the middle of May. This is going to affect the whole industry supply chain.
We believe this kind of incident will happen from time to time. That is why we believe the challenge for the whole industry will still be quite big for the following quarters or months. At the beginning of April and at the end of March, we suspended the production of a factory for five working days, which is going to impact our delivery and production in April. For the full quarter, we believe it will be possible, still quite challenging for us to achieve 7,000-7,500 production units.
We are trying our best to secure the supply and to maintain the production speed. Of course, we are quite confident, the challenge is still quite daunting. This is a common situation for the whole industry. The common understanding in the industry is that the turning point will happen around the third quarter. The overall situation is going to improve around the fourth quarter. Some also believe that probably this situation is going to continue to next year. Our supply chain partners have shown very strong support to the production of the NIO. Yesterday we had a partner conference in Hefei, which was attended by hundreds of partners to show their support of the new production. We believe the situation is quite challenging, overall speaking, our operation is relatively OK.
Thank you, Nick Lai.
Our next question comes from the line of-
Maybe the second question.
Thank you. Our next question comes from the line of Bin Wang from Credit Suisse. Please ask your question.
Thank you so much. Actually, I got two questions. Number one is that I found that you have another announcement about ESG. Can you elaborate what's the detail and why you host another ESG maybe for the first time? That's number one question. EGM, sorry. The second question about the margin outlook. Actually, I found that a few factors may impact the second quarter. One is the new product attach rate. Second is what's the penetration about the 100 kilowatt-hour pack. Number three is that I found that you offer free installed NIO Pilot. Number four, maybe in the semiconductor pricing hike, because not just the supply, but also the pricing also increased. Notably, lastly, is about the battery price. Can you provide guidance about the direction, about the margin and the output key parts movements? Thank you.
好，谢谢王彬。对，我们在昨天的话，我们有一个公告，我们要召开一个EGM，在今天的早上。我们这里面比较重要的一个是对我们董事会的结构，主要是人数上我们会有所增加。大家知道NIO现在的董事会人数是几个，我们希望增加一些多样化，增加一些灵活性。那么在中间比较重要的是我们给予了NIO User Trust一个提名一个董事的权利。当然整个董事的approve还是会follow董事会的决策。并不是说一个任命的权利，是一个提名的权利。因为大家知道我们在上市的时候，我将自己1/3的股票，5,000万股的股票，成立了一个蔚来的用户信托。我们已经进行了两届的用户信托的理事的选举，用户参与度也是非常高的。我们用户信托整个的重点，是包括用户关怀、行业的社群、社会的公义和环境的保护。我们认为是合适的时候，给到用户在公司更长远的战略决策方面一定的参与的权利。所以我们董事会是提请股东会进行这样的一个批准。这一次我相信对公司的长远的发展和股东的回报来讲的话，都是有非常重要的意义的。这个也是未来作为一家用户企业，进一步深化我们用户企业的运营，更深入地去理解这个用户企业很好的一个方向。
Thanks for your question. This morning, we announced that we are going to organize a EGM. There are some important points in this EGM that we are going to discuss. The first one is we are going to increase the number of the directors in the board. Right now, our board member is five people, and we would like to increase this number because we want to improve the diversity and flexibility of the board. At the same time, another important matter is we would like to give the NIO User Trust the right to nominate directors to the board, but this nomination right is not an appointment right, so the board will still have the power to appoint the directors. At the IPO of the company, I have transferred one third of my shares to establish this NIO User Trust.
The User Trust focus is on environmental protection, the industry subcommittees, the social welfare and the user care. We believe it's quite important for us to allow the User Trust to participate in making process of the company, which is a very important strategy for the company. That is why we would like to propose this in the EGM. From this proposal, we believe it's going to be quite beneficial for the long-term development of the company, and is going to serve the best interest of our shareholders. This also showcases our mission and vision of building a user enterprise, which will also help us to deepen our relationship with the users for the long run.
OK, Hi, Bin Wang. As explained by William in the prior questions, 20% gross profit margin is quite healthy at current stage for us. We don't expect the margin will dramatically improve in this year, like quarter-over-quarter in 2020. The 100 kWh battery pack and also the new power features are both well accepted by our users. We expect these two options will further bring the high profit margin for us. Yeah. That's the general trends we want to explain to you. Yeah.
Thank you. Next question.
Our next question comes from the line of Tim Hsiao from Morgan Stanley. Please ask your question.
Thanks for taking my questions and congratulations on the result. Two questions from my side. The first question is about competition, because as you may notice that a lot of traditional players launched their models during Auto Show this year. If you look at their product pricing, channel strategy, I think they are quick learners and catching up rapidly. Meanwhile, some of our tech names or smartphone makers also announced their EV plan. I think William shared a lot of initiatives during the call just now. What will really make NIO to be stay differentiated in the following years? Are we going to change our pricing or product strategy in the mid to long term?
That's my first question. Second question is about the launch of ET7, because as William just mentioned, I think the supply dynamics stay tight and might stay challenged throughout the whole year. Considering the more backloaded second half, do we see any risk that the launch of ET7 might be delayed or face any production bottleneck? Especially I think ET7 carry quite a lot of new hardware and software features. Where could be the potential bottleneck in your view? Thank you.
谢谢Tim。对，这次的上海车展确实我们看到了中国的智能电动汽车产业的一个活力。如果你去看了上海车展的话，你就知道中国的创新，特别是在智能电动汽车这个领域的创新，是非常的有活力的。
In this year's Shanghai Auto Show, we have witnessed the vitality of the China smart EV industry. If you have ever visited the Shanghai Auto Show this year, you should have seen this by yourself. That is we have a lot of innovations in the smart electric vehicle industry in China.
对，但从一个总体的竞争力的角度来讲的话，我们对于NIO在我们所在的这个汽车市场的竞争还是非常有信心的。那如果我们去看，在我们这个高端市场的领域，我们still还是并没有看到一个能够和NIO有全面的竞争能力的品牌。我说的全面竞争力的说法包括产品，包括服务体系，包括技术，包括整个的用户体验，还有community整个用户的社区，我们并没有看到一个真正有竞争力的竞争对手。
In terms of the overall competitiveness, NIO is still quite confident in our specific market segment. In the premium market, we haven't seen any brand with this kind of competitiveness yet in terms of the product, service, technology, user experience, and user community.
如果我们去看传统的这些汽车公司推出的高端的品牌，推出的那些产品，当然他们有他们某方面的一些亮点，但是从整个智能化的程度，自动驾驶的能力，从这些角度来讲的话，我觉得他们要变革的决心可能还需要更大一些。
For the traditional brands, yes, there have been some highlights for their premium brands and premium products, but I believe they're still lagging behind in terms of the digital experience and autonomous driving capabilities. It will be quite important for them to be more decisive and determined to transform themselves into this new era of smart electric vehicle.
那中国的企业，它们在一些技术的应用方面，包括follow未来在用户的社区、用户的企业的搭建方面，包括直接服务用户的模式方面，有一些follow它们，它们确实行动也是非常快。但是honest讲，我认为做一个高端的品牌，其实还是有比较高的门槛的。它们在定价方面的话，我认为这是它们的一个压力吧，就是说它们的在一个20多万人民币的一个定价，在这个市场的话，品牌的定位方面的话，是有一定的挑战的。那我们当然认为这个汽车行业不是一个winner takes all的行业，我们现在最关注的地方还是我们对高端市场的市场占有率。那从一个电车和油车的比例的角度来讲的话，电车仍然是一个很小的比例。虽然中国在3月份第一次电动车过了10%，但是整个行业更多的还是汽油车。那我觉得从这一点上来讲的话，我们还有非常大的一个空间。
There have been many domestic players following NIO in terms of the technology adoption, user community concept, and direct service to users. They have been moving very fast as followers. I believe it will be quite challenging and difficult for them to build a premium brand. They will face a significant pressure in terms of their pricing. The auto market is not a winner takes all market. Our focus at this moment is still in the premium market. In this market, we can see that the EV still accounts a small share compared with that of the gasoline cars. Although in March the EV penetration has reached 10%, the majority of the vehicles in the market are still gasoline cars. It means that we still have a lot of room and opportunities for growth.
对，所以从长期差异化的角度来讲的话，我们仍然认为汽车行业的特点是你不能有短板。我们认为NIO的产品、技术、品牌服务、用户、企业、用户的运营，community是一个整体。我们认为我们整体的这样的一个优势，能够让我们在一个长期的竞争中竞争力会越来越强，其实并不是说越来越弱。
When it comes to the long term differentiation, we believe in the auto industry, it's quite important that you should not have any very significant and obvious weaknesses. With our comprehensive competitiveness in product technology, service, user operations, and user community, we believe we can solidify our position in the market with all those strengths and stood out in the competition. This differentiator and competitiveness is going to continue to grow and stay strong in the long run.
对，这是个长跑，并不是一个短跑，我们还是越来越有信心的。
This is a marathon, this is not a sprint, so we're quite confident in our long-term competition.
第二个问题就是ET7的量产。那确实ET7我们认为它对未来来说，是我们第二代平台的第一款车，那并不是仅仅是这车的生产，事实上也意味着我们整个第二代平台的开始量产。我们在传感器，在芯片算力方面，在很多新的技术应用方面，我们在整个行业都是第一个。当然，也有一些公司推出了一些一代半的产品，我们不觉得那件事情值得做，我们其实直接是一个breakthrough，直接到了next generation。这个量产的challenge肯定是非常大的。比如说LiDAR，也包括我们的自动驾驶芯片的合作伙伴，NVIDIA的Orin的量产，我们事实上都是比他们原来预期的计划，要求他们我们一起把它们提前了很长的时间。这个压力还是非常大的，但so far，我们还是认为在明年的Q1去交付ET7是可能的，也是目前我们各方面都是往这个方面去推动的。所以主要是在这些方面，我们怎么样达到我们的质量的目标，然后突破这些产能的瓶颈，怎么样去ramp up。我们大家也知道，未来推出产品的速度，在过去几年证明我们每年推出一款新的产品，这个能力还是非常强的。我们产品的质量也一直在行业里面都是排在第一名的位置。所以我们对量产的爬升还是非常有信心。
The second question is about the mass production of ET7. ET7 will be the first product on offer second generation platform, New Technology Platform 2.0. It means that this is not just about the production of ET7, it's actually about the mass production of the second generation platform. We are the first in many aspects. For example, the advanced sensors, the computing power, SoC and other advanced technology applications. Some companies have launched their product with some kind of 1.5 generation technology or transitional technology, which is not going to be our strategy because we would like to just leap forward to the next generation technology and achieve significant technology breakthroughs. Of course, this kind of determination is going to raise a lot of challenges for us. For example, we have pulled ahead the production schedule of many advanced technologies like the LiDAR and the NVIDIA Orin SoC.
This has posed a lot of pressure on our teams and the partners. We are still quite confident that we believe it's possible for us to launch ET7 according to schedule in the first quarter of next year. Our teams and our partners are fully focused on achieving this goal and pushing ahead despite all those challenges. Our objective is to make sure we can deliver the product according to our quality requirement and solve the production bottlenecks, so we can gradually ramp up the production and the delivery of our vehicles to the users. As the history tells us, NIO has a very strong capability to deliver one new product every year, and our quality has already been proven that we are at the top. That's why we are quite confident that we should be able to deliver ET7 according to the schedule with high quality.
Thank you, team.
Thank you very much, William and team.
Next question.
Our next question comes from the line of Ming-Hsun Lee from BofA Securities. Please ask your question.
Thank you. Thank you, William and the management team, and congrats for the good result. My first question is regarding the details of the NeoPark. From the announcement we saw that NeoPark, ultimately, it will reach 1 million unit capacity. I want to understand your near-term plan for this NeoPark. Is 1 million capacity all for NIO or probably will have other EV companies? Also, for this NeoPark cooperation, will the current cooperation method continue? JAC build the plant and hire labors, NIO will purchase the equipment and the mold, etc. That's my question. The second question is regarding the battery form factor. We are seeing more and more auto companies start to apply LFP battery to further control the cost, lower the selling price, and to increase the penetration rate.
From the recent media, we also saw that NIO will probably consider to use the LFP battery by the end of the year. Could you give us more update regarding the potential plan? Thank you, William and the management.
谢谢Ming。对，昨天我想这个是非常重要的一件事情，就是合肥市启动了NeoPark的建设。我想提醒大家注意一下，是N-E-O Park，不是N-I-O Park。这个它的中文名字叫新桥，如果用英语去说的话，大概是New Bridge，因为它和合肥的机场是一个名字。那么这个是非常大的一个park，这个park将近有17,000亩，11.3平方公里，是非常大的一个park。
Thank you for your question Ming. Yesterday is quite important because Hefei government has kicked off the building of the NeoPark. Over here, I would like to emphasize the spelling of this park is N-E-O, is not N-I-O. The Chinese name of this industrial park is Xinqiao, or the literal translation is New Bridge. This bears the same name with the Hefei Airport. This is a very big park, occupies a huge area.
17,000亩，11.3平方公里。
It is
就11.3平方公里。
It is around 11.3 sq m.
对，这个园区里面有研发，有智能制造，甚至也包括一些生活和文化的区域。那毫无疑问，NIO会是其中最重要的一家企业，但是按照他们的规划，也还有其他的几百家产业链上相关的企业会入驻。
This industrial park will be a massive project, including manufacturing facilities, R&D, and residential areas, as well as culture areas. NIO is going to be a very important company in this park. According to the planning of the Hefei government, they will also have probably hundreds of other companies joining this new park.
对，我们是和合肥市一起来规划的这个NeoPark。我们参与了很多它的规划，那我们并不会出资去参与这个园区的一些基础设施的建设。整个园区它有很多的基础设施需要建，那这个当然是会由合肥去投资建设。当然我们会是非常重要的使用方。你刚才问的这个问题，如果说这100万辆整车的产能，一百几瓦时的电池的这样的一个产能，那会不会都给到NIO？我只能说，如果我们发展得够快，那suppose如果我们发展得我们用得了这么多的话，那我觉得他们应该不会把事情复杂化，应该就会是我们来去使用这些工厂的基础设施。当然规划和实际的使用还是有区别的，这个肯定是一步一步地去建设的。那就像我前面讲的，我们毫无疑问会是在中间最重要的企业。那么对我们的意义是什么呢？如果汽车产业链的人才聚集的话，对于增加我们的竞争力肯定是非常有帮助。就像我们在上海，我们在安亭的汽车的创新港，我们是第一家企业，当然现在也是里面最大的一家企业，现在就汇聚了非常多的人，现在所有的创业的公司都往那边去，这当然是一件好事。另外还有一个非常大的好处，就是提升我们的运营效率，包括内部的运营效率。如果我们的研发、我们的制造，我们的甚至于员工的居住都能够在一个更小的一个区域去做的话，对于整个内部运营效率的提升是非常大的。还有一个就是供应链的物流的效率。我们举一个例子，按照我们现在的规划，要不你先翻译一下。
For the planning of the Hefei government regarding the NeoPark, NIO is not going to invest on the infrastructure building of the park. Hefei government is going to make this investment, NIO is going to be a very important company using this park. Just now you asked about the capacity of the 1 million units and the 100 gigawatt hour, whether this is only for NIO or whether this is going to be available for other companies. Of course, if NIO is going to develop in a very faster speed, I believe the Hefei government is not going to make this matter very complicated for NIO and themselves.
It means that NIO should be able to use all the resources and the capacities and all the infrastructure built by the Hefei government in the NeoPark. This is the planning of the NeoPark, which may be different from the actual execution in the future. We need to look at this step by step. NIO is going to be a very important player in this NeoPark. This NeoPark is also going to contribute to the long-term development of NIO, because we believe if we can attract all the talents and consolidate all the resources in this NeoPark, it will be beneficial for NIO's development, just like what happened in Anting, in our Shanghai headquarter.
NIO was the first innovative company to build offices in the Shanghai headquarters in Anting. Many other companies followed suit to join in this offices area in Anting. We believe if we can consolidate all the resources together with our partners in this NIO Park, this is also going to help us to improve the operational efficiency, including our internal efficiency. Because if you imagine that we have all the people working in the same place, including our manufacturing teams, R&D teams, and they are also living in the same place, this is going to help us to significantly improve the operational efficiency of the company.
另外讲外部效率，我举一个例子，比如说我们现在规划中电池的工厂和整车的工厂是在一起的，那么电池生产完了以后，直接就可以通过传输带直接到整车的工厂，座椅的工厂也都是按照这样一个方式去规划的。那光电池的工厂建设在一起，这件事情从一个物流的费用上来讲的话，这一件事每块电池就差不多能减少$100左右的一个物流费用，那其实这是非常大的一笔钱。如果我们考虑，假设它是100万辆的规模的话，这就是非常大的一笔钱。所以类似于这样的一些效率提升，我们觉得都是非常有意义的。
The next important factor which we consider is the external operational efficiency. If according to the current planning of the NeoPark, we will have the battery factory together with the vehicle factory, then it means that after we finish the production of the battery packs, we can ship directly to the vehicle factory in a very short distance. That's the same with the seat factory in the future. It means that we can save significant logistic cost. For example, the battery logistic cost is around $100 per battery pack. Imagine in the future, the volume is going to be 1 million units, then this is going to be a huge saving in terms of the logistic cost. This is also going to help us to improve the overall operational efficiency.
对，这个合作的方式，我们在规划中的第二个工厂的合作的方式，还是会是制造合作的一个方式。我们会focus在制造的工艺、供应链，还有包括质量的控制。那么我们也会进行一部分的设备的投资，但是我们并不会去购买土地，并不会去建设厂房，这个工人我们会通过和JAC合作的这个公司，JAC的NIO的一个合作的公司，仍然会和JAC有这样的一个合作，在工厂的日常运营和工人管理方面，还是会通过这个去进行合作。
When it comes to the cooperation model of the second factory, we will continue to focus on the manufacturing cooperation. It means that we will still focus on the manufacturing processes, technologies, the quality, and the operations of all plants. We will invest in some dedicated equipment for NIO, but we are not going to invest on building the actual factories. In terms of the operators in the second factory, this will be managed by the joint venture between JAC and NIO. The name is [Foreign language], this joint venture is going to be responsible for the overall operation and management of the operators in the plant.
第二个问题，LFP。当然，Tesla还有别的一些公司，他们现在主要的产品都在用这个LFP。LFP有它的优势，这个是毫无疑问的，特别是成本方面。但是如果它在低温情况下的续航不去解决的话，低温下的性能不去解决的话，那我觉得这对冬天的用户体验影响是非常大的。我们认为在低温下的LFP的这种性能表现，如果能够解决的话，这是一个前提，这是用LFP的一个前提。
The next question is about the LFP battery pack. Yes, many companies, including Tesla, are using the LFP battery pack. Of course, there are some inherent advantages of the LFP battery pack. A very important one is the cost. There are also some weaknesses and shortcomings with this technology or form factor. For example, the performance of the battery pack in low temperature. This is going to significantly affect the user experience, especially during the winter. If we can solve the performance bottleneck under low temperature, I believe it should be the right timing and the right choice for us to use LFP battery pack and form factor. Thank you, Ming. Next question.
Our next question comes from the line of Lei Wang from CICC. Please ask your question.
Good morning. This is Wang Lei speaking. I would say it is beyond our expectation to see the vehicle margin above 20%, so definitely congratulations to the team. I think most of my question has been probably answered. I only have one follow-up question regarding the collaborations with Sinopec Group on swap stations. Will Sinopec burden some of the CapEx investments in the 2nd generation of stations, or will Sinopec share some of the revenues as well? I'll translate my question.
Thank you, Wang Lei. Thank you for your question. Of course, in the future, we're going to deepen our cooperation with Sinopec. For now, our cooperation is quite simple. Basically, we utilize their site and the location resources. In the gas stations, of course, they will need to have service personnel. We believe this is also an opportunity for us to work together to share the service resources. At this moment, we do not have any revenue-sharing mechanisms between NIO and Sinopec. Thank you.
Thanks.
Next question.
Next question. Our next question comes from the line of Edison from Deutsche Bank. Please ask your question.
Thank you, and congratulations on the quarter. Two questions from the competitive angle, sort of. Coming out of the Shanghai Auto Show, obviously we saw a lot of product, a lot of developments. Has this influenced or sped up your target about bringing in a mass-market brand into the market, so a non-NIO brand? Has that effort been accelerated, or any sort of change to those plans for going forward? Second question, it seems like a lot of automakers now are also potentially considering doing chips themselves. I think it's reported that NIO has considered doing that as well. What's your latest thinking on moving away from NVIDIA and doing the chips yourself as well, or designing the chips yourself? Thank you.
Thank you, Edison.
Thank you for your question, Edison. From the competition perspective, I checked out all the possible competitors and their new models. To be honest, the most impressive one is from Wuling Hongguang, their sub-brand Baojun. They have a model called KiWi EV. For the mass market, we believe there are many new companies launching their new products. Just like I mentioned, in the China smart EV industry, the innovation capability has been quite strong, we are quite confident about the popularization and the adoption of the smart EVs in the future. In the premium sector right now, we don't actually see any strong competitors
第二个问题就是整个关于研发。应该这么说，从智能电动汽车产业链的角度来讲，肯定是往软件、往芯片、往智能硬件方面去转移的。从一个长远的角度来讲，我相信如果是头部的公司，应该会在智能硬件方面的投入都会持续地深入。当然我们目前还没有可以对外说的计划，但大家应该知道，我们在研发方面的投入决心还是非常的坚决的。我们会围绕着自动驾驶，围绕着整个智能电动汽车的全栈的技术，去进行一个持续的、长期的投入。
The second question is about the research and development of the chipset. In the smart electric vehicle industry, we believe the industry chain is going to move towards chipset software and other smart technologies. For the long term, the top leaders are going to deepen their investments in research and development of the smart hardwares. I believe this is the common understanding of the industry at this moment. We do not have any specific plans that we can disclose to the public or share with the public, but I believe it is quite obvious to everyone that NIO has always been very decisive in investing in the research and development of new technologies. We are determined to build our full stack capabilities surrounding the smart electric vehicle technologies, including autonomous driving, and we believe that this is going to build the long term competitiveness of the company.
Thank you.
Thank you. Next question.
Our next question comes from the line of Paul Gong from UBS. Please ask your question.
Yeah, thanks, Wei, and thanks everyone. Two questions. The first one is on the R&D, and the second one is a little bit follow up on the gross margin. On the R&D I see in this quarter, it's actually pretty moderate, even sequential declined from the 4Q at less than CNY 700 million. I recall last time you said you are going to double down on the R&D activity in 2021 and significantly increase the R&D budget. Can you give us a little bit of an update on this strategy? More importantly, which key areas is going to be the focus for the R&D, and a rough breakdown, how much percentage goes to the vehicle development, what percentage goes to maybe autonomous driving, etc.? This is my first question. My second question is a little bit follow up on the gross margin.
Obviously, this is a pretty decent gross margin for a relatively young company like NIO. In between this margin versus market share, is it a little bit overly focused on the margin and a little bit under focused on the market share, do you think? Will you strategically choose to either add in higher specs or kind of making the vehicle more competitive in the market to balance in between this margin versus market share? Also, how do you think about the rising material cost impacts in the next few quarters? Because some battery makers have indeed mentioned that it's possible for the battery price to go up. I think I caught your comment just now that the 100 kilowatt hours of the battery take about 25% in Q1. What was the NIO final take rate in Q1, please? Thank you.
谢谢Paul。R&D方面的话是这样，确实，如果只是从一个数字的角度来讲的话，我们确实Q1的研发的投入感觉不是特别的高，但是大家知道，车的研发它还是跟着产品走的。我们ET7的量产的工作在过程中，所以我们从Q2开始的话，跟ET7量产相关的，包括测试，包括一些外部的合作伙伴的EBD的费用，这些都会上来。所以光ET7的话，它本身的开发费用的支出从一个财务角度来看的话，也是越到量产就会支出得越高。但事实上来讲，我们现在在并行开发的产品的数量还是非常多的，因为我们要把我们NT2的技术尽快地应用到新的系统市场的车型上，所以从Q2开始，大家能看到研发费用的显著增加，很大一部分是跟我们的后续的量产车型增加有关系的。另外一方面的话，我们围绕着自动驾驶，围绕着软件，围绕着Smart OTA的全面的这种基础技术的投入，我们NT2的技术，包括我们再下一代的NT3的技术的投入，我们都会加速，我们的人员也会增加。在过去的一季度，我们其实在研发方面的人员增加了很多，我们还会持续地增加研发人员。所以在这些基础的技术方面，平台性的技术方面，也包括ETS，这些方面我们其实增加得也是非常快的。所以今年确实就像这个50亿的研发费用要花出去的话，高效地花出去也是有挑战的。但是简单来讲，从这个数字大家能看到，我们的研发肯定是在提速的。
Thank you for your question, Paul. Regarding the R&D expenses, yes, the R&D expenses in the first quarter is not that high, but this follows the normal stages of a vehicle. For example, now our ET7 fall under research and development. It means that starting from the second quarter, we're going to see increase in R&D expenses related with the testing cost and the ETD cost together with our suppliers.
The ET7 R&D expenses will increase gradually as they get closer to the mass production. At the same time, we're also developing multiple products in our pipeline, because we would like to make sure we can apply the NT 2.0 technology to more products in different segments in a faster speed. Starting from the second quarter, we are going to see some ramp up of the R&D expenses. This will be main driven by the research and development of other products in the pipeline. Just like I mentioned, we are determined to develop the autonomous driving full stack capabilities, the software capabilities, and the smart electric vehicle technologies. We will accelerate the development of the new technology platform 2.0 and the new technology platform 3.0.
At the same time, we're also ramping up of R&D personnel. In the past first quarter, the R&D personnel in the company has significantly increased, and we believe that it will continue to increase in the following quarters. We have also increased our investment in terms of the R&D resources in the platform technologies, including ETS or the electric power train. In this year, it will be quite challenging for us to efficiently and effectively spend the CNY 5 billion for the R&D expenses. We're quite confident that we can achieve our objective and improve our R&D capabilities at a very efficient manner.
第二个问题，关于到底是GM还是market share，这个之间到底怎么取舍。那当然从一个企业运营的角度来讲的话，合理的GM，合理的gross margin是需要的。我们认为现在的毛利水平，其实honestly讲是比我们预期的要好一些。那当然，因为我们说过我们确实是不降价的，我们愿意把这样的一些margin更好地用到服务的领域里面去，包括我们的换电的设施，包括我们的一些community相关的一些用户权益。那我们在这方面肯定有更多的资金可以进行这样的投入。我对market share，还是希望大家把它一定要放在不同的level的里边去看。比如说，就像我们说法拉利的market share，保时捷的market share，去和五菱宏光去比market share，我觉得是不一样的。这是汽车行业的特点。那NIO肯定care的是我们在premium这个market里边的这样一个market share，那这个是非常重要的。我想有的brand会不断降价，其实它混淆了一个brand，在汽车领域是有区间的。这就是为什么Porsche虽然卖不到30万辆车，但是它的整个的利润可能占整个Volkswagen的比例是非常高的，40%多，可能差不多是来自于这个。所以我觉得对这件事情，我们还有一个更长远的思考，一个很long term的一个思考。Brand、community，这些需要很好地去维护它们。所以我不觉得通过降价去增加所谓的market share是一个好的方法，事实上可能也达不到这个目标。那所以我们认为到了一定的margin以后，更好的方式是把产品做得更好。如果你有margin的空间，你当然可以把产品做得更好，可以把基础设施和服务做得更好，这个是我们一个长期的战略。从全球的premium market来讲，差不太多是接近1,000万辆的这样一个市场，那我们今天还只有千分之几的份额，所以我们还有非常大的成长空间。所以这个是我们关于长期的market share的一个理解。当然大众市场
怎么进入，这是一个战略问题，mass market怎么进入，但是我们肯定不会用NIO这个brand进入大众市场。这是100%可以确定的事情。
The second question is about the balance between gross margin and market share. Of course, for any company, if we want to have a sustainable operation and development, we need to maintain a reasonable gross margin. For the current gross margin, yes, it's better than our expectation, but we have emphasized again and again that we are not going to cut the price, and we would like to leverage our margin to invest more on user service, including the power infrastructures and also the user community. For the market share, I believe we need to look at the market share in different market segments.
For example, it's not possible for us to compare the market share of a Ferrari and Porsche in their market segment with the market share of a Wuling Hongguang in the mass market segment. For NIO, our focus is the market share of the premium market. We don't want to have the same strategy like other brands that just cut their price from time to time, because we believe this is going to hurt our image and the users. For example, Porsche probably only sells around 300,000 units, but they contribute 40% of the gross margin of the Volkswagen-
Net.
Net margin.
Net profit.
Net profits of the Volkswagen Group. We believe if we want to build our market share in the premium segment, we need to devote more resources and energy to manage the brand and the user community. Our focus is not going to cut the price of our product and then to increase the market share, because even if you cut the price of the product, probably in the end, you still cannot improve the market share. We believe after we reach a reasonable margin, then we can use this margin to improve our product, our services, and the infrastructures for our users.
This will be our long-term strategy. In the global premium market right now, the market volume is around 10 million, and we only account for a very small share. It means that there's still a huge room for us to grow in the future. For the mass market, this will be a different story, and the entry of the mass market will require a different strategy. What I can say right now with 100% certainty is we're not going to use a NIO brand to enter the mass market. Thank you.
Yeah. Thank you, Paul.
Next question.
Thank you very much.
Our next question comes from the line of Evelyn Zhang from Daiwa. Please ask your question.
Hello. Actually, it is Calvin from Daiwa. I have two questions about companies. First of all, I want to know, I noticed that you have a Norway launching, a Norway conference next week. I want to know, would there be any other overseas expansion plan that you can share with us? This is the first question. The second question is, can I know how because what we know is that the raw material cost and also auto chip costs are all increasing. Do we expect a month-on-month or even week-on-week increase affecting your component price? What's the trend or how fast is this accelerating? Thank you.
Calvin, this is Steven. Sure. Norway is the first stop for our long-term globalization strategy. For the May 6th conference call, we will still focus on the Norwegian market. Just for your information, actually, in March, we already set up our national sales company in Norway, and we also have already built up a local team who will take charge of our local operation and service. In the end, actually, we already selected the location for our NIO House in Oslo. For more details about the Norwegian market, please do join our May 6th media conference to get more details. Thank you. Okay. The raw material cost, we expect there will be some increase in the coming quarters, compared with the overall selling price, I think the cost can be well controlled and won't have a big impact to our gross profit margin.
但一方面的话，我们有一些零部件常规的降本，但是确实也有一些像大宗商品的一些，包括chip的一些价格的上升。但总体上来讲的话，我们节约的这一部分还是比上升那部分是要多不少的。所以总体上我们的BOM cost总体来说还是会下降的。
On one hand, we have some routine cost reductions. On the other hand, there are some cost increases, especially in terms of the chipsets recently. Overall speaking, the saving is bigger than the cost increases. We believe that the Bill of Material cost will continue to go down. Thank you.
Thank you.
Next question.
Our next question comes from the line of Vijay Rakesh from Mizuho. Please ask your question.
Hi, William and Steven. Good quarter and guide here. I just had a question on the longer term. When you look on your partnership with Sinopec, how do you expect them to roll out their stations? I know you have a 500 battery swap station target, but any thoughts on how Sinopec would be rolling out their 5,000 battery swap stations? Thanks.
Thank you, Vijay。Sinopec 宣布他们会建 5000 个充换电的设施在他们的加油站里面。当然他们也不光是跟我们家合作，他们也不光是建 swap station，他们也会有一些 charging station。当然这并不都是跟我们合作的，我们当然希望在合适的情况下，能够在里面多部署一点。但我们也不光是和 Sinopec 合作，我们其实有非常多的 partner，也有一些全国性的，也有一些 local 的，我们在换电站的场地方面是有足够的供应的。
Thank you, Vijay, for your question. Yes, Sinopec announced that they will build 5,000 swap and charging facilities in their gas stations. NIO is not the only partner working together with Sinopec, and they are not just only going to build the swap stations in the gas stations. They will also build the charging facilities. Of course, we hope to deploy more charging and swapping facilities from NIO in the gas stations. At the same time, we also have many other partners, both locally and nationally. We believe the site resources will not be a big issue for us.
Thank you, Vijay.
Also on the solid-state battery roadmap, on your own solid-state battery roadmap, can you give us an update? When do you see that in production or test? That's it. Thank you.
现在总体上我们的进展都还是顺利的，就是按照我们的计划在进展。
Overall speaking, the current process and the testing and production of the solid-state battery is on track.
Thank you.
Thank you. Thanks.
Okay. Moderator, we need to conclude our conference call today. It has been candid and thanks for all the great questions asked by the analysts. Operator. Hi, operator. We would like to conclude today's conference call.
Certainly. As there are no further questions now, I'd like to turn the call back over to the company for closing remarks. Thank you.
Thank you once again for joining us today. If you have further questions, please feel free to contact the 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.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.