Five Key Things NIO Management Said On Their Earnings Conference Call -- Barrons.com
DOW JONES & COMPANY, INC. 8:45 AM ET 3/2/2021
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Chinese electric vehicle maker NIO reported fourth-quarter numbers Monday evening and the usual quarterly earnings conference call happened shortly thereafter.
The conference call topics, however, were anything but typical. NIO management addressed everything from the EV supply chain, to new driving technologies and expanding sales into foreign markets.
There are five key things NIO management said Monday evening, along with some recent history.
Production Capacity
NIO can now make 7,500 units a month. "Our partner JAC has already kicked off further production capacity expansion in the Hefei plant and plans to expand the annual production capacity to 150,000 units under one shift and 300,000 units under two shifts to prepare for the production of ET7 and future products," added a company spokesperson.
JAC is a Chinese auto company NIO has partnered with for manufacturing and assembly support. The ET7 is NIO's new luxury sedan, coming in a few quarters.
NIO said it plans to deliver roughly 20,000 vehicles in the first quarter of 2021. January deliveries were more than 7,200, a bit short of the roughly 7,400 cars a month it needs to produce in the final nine months of 2021 to meet analysts' current expectations.
Supply Chain Constraints
Problems with supplies of parts could make it more difficult for the company to hit those production numbers. Management commented on the global chip shortage roiling the auto market lately. General Motors(GM) said the lack of chips would be a billion dollar profit headwind in 2021.
NIO said it had enough chips for its first and second-quarter production but that the risk of chip shortages is still "quite high."
Batteries
The threat of EV battery shortages could also affect second-quarter production, but shouldn't keep NIO from producing 7,500 vehicles a month though the end of June.
NIO also updated investors about its battery-as-a-service initiative. NIO will, essentially, sell a car without charging for the battery. Car drivers will then pay a monthly fee for batteries and charging. It's a little like the continuing cost of gasoline for vehicles powered by internal combustion engines.
The customer "take rate" on the battery service is at 55% and growing every month. NIO said.
Autonomous Driving
Batteries won't be the only recurring revenue NIO generates. The company is also considering autonomous driving as a service. Customers will pay monthly fees to access its top autonomous-driving software.
Providing autonomous driving via a subscription is a new idea. Even Tesla (TSLA) charges a one-time fee for its full self-driving-mode feature. Other auto executive will surely watch how NIO's rollout goes.
International Expansion
Executives will also be watching NIO's overseas expansion. European expansion appears imminent, but management said a U.S. expansion will require "lots of patience."
NIO bulls will be encouraged by what they heard Monday evening, but overall, investors appear disappointed. NIO shares were down about 5% in premarket trading. Futures on the S&P 500 and Dow Jones Industrial Average were both down about 0.1%.
Investors have lofty expectations for NIO and even good results can disappoint. The stock trades for roughly 14 times estimated 2021 sales, compared with roughly 4.4 times for the Russell 1000 Growth index.
The stock has fallen the day following its last four earnings reports, but the shares have rebounded fast. NIO stock is up about 1,100% over the past year.
Write to Al Root at allen.root@dowjones.com
