NIO Inc.

Hello, ladies and gentlemen. Thank you for standing by and welcome to the NIO Incorporated First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I would now like to hand the conference over to your host, Ms. Eve Chang from Capital Market. Please go ahead.

Good morning and good evening, everyone. Welcome to NIO's First Quarter 2023 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 Lee, founder, chairman of the board, and chief executive officer, Mr. Stephen Fong, chief financial officer, Mr. Stanley Chu, senior VP of finance, and Ms. Jade Wei, VP 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 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 Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that news earnings press release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial measures. Please refer to Neil's press release, which contains a reconciliation of the unaudited non-gap measures to comparable gap measures. With that, I will now turn the call over to our CEO, Mr. William Lee. William, please go ahead. 大家好,非常感谢各位参加未来2023年第一季度业绩沟通会议。 Hello, everyone. Thank you for joining NIO's 2023 first quarter earnings call.

In the first quarter of 2023, NIO delivered a total of 31,041 smart electric vehicles, up 20.5% year over year. In April and May, NIO delivered 6,658 and 6,155 vehicles respectively.

We expect the total deliveries in the second quarter of this year to be between 23,000 and 25,000 units.

As we ramp up the production of the all-new ES6 and other new models, we're confident in continuously driving up our delivery volumes.

Next, I would like to share with you the recent highlights of our products, R&D, and operations.

On May 24, we launched the all-new ES6.

an all-round mid-size smart electric SUV, and started its delivery the next day. The product quality of the all-new S6 has been widely acclaimed by the first batch of users.

In May, the 2023 ET7 and the smart electric electric SUV EC7 began to deliver to users. The 2023 ET7 brought more than 15 product updates and upgrades. In May, we also started the user delivery of the 2023 NIO EC7 and the flagship Coupe SUV EC7, coming with more than 15 new features and enhancements.

The 2023 NIO ET7 continues to lead the change in the premium smart electric mid-large sedan market. As a flagship coupe SUV, EC7 inherits NIO's high-performance DNA and boasts ultimate riding and handling experience.

未来的产品质量和安全性受到了传统机构的认可。 4月24日,ET5在获得中国保险汽车安全指数安全性全优评级。 NIO's product quality and safety are also recognized by authoritative institutions on April 24th.

NIO-ET5 was rated good, the highest safety level by China Insurance Automobile Safety Index, or CIASI. In J.D. Powers' 2023 China New Energy Vehicle Initial Quality Study released on June 1st, NIO-ES6 won first place in the premium BEV segment for the fourth consecutive year. Also in J.D. Powers' 2023, NEV appeal study, which evaluates new energy vehicles' performance, execution, and layout. NIO ET7 ranked number one among premium BEVs. We plan to launch the new ET5 Touring on June 15 and start the delivery in the same month. As the world's first smart electric tour, the ET5 Touring is designed to cover diversified scenarios for both individual and family users, significantly improving over competitiveness in the premium family vehicle market.

So what... The future flagship SUV model, the new ES8, will also start delivery in the near future. The new upgraded medium-sized sports SUV EC6 is planned to be released and delivered in three seasons. With the smooth promotion of the new model switching work, the eight products based on the NT2 platform in the future will combine to meet the diversified needs of the high-end smart electric car market to provide users with an experience beyond expectation.

Besides NIO's flagship SUV, the all-new ES8 will also commence delivery in the new 10. The new EC6, our second-generation midsize smart coupe SUV, will be launched and delivered in the third quarter. As we proceed with the product platform transition, NIO's complete NT2.0 lineup, featuring eight different products, will form a combined force to better cater to the diverse needs in the premium smart EV market and provide users with more experiences beyond expectations.

In June, new Smart System Banyan will be upgraded to version 2.0. This release includes over 120 new features and enhancements.

By connecting news products, services, and the community in a more seamless way, Banyan 2.0 will deliver a one-of-a-kind digital experience. It's particularly worth mentioning that Banyan 2.0 provides a new feature that is automatic planning of charging and swapping routes. Enabled by new Power Cloud and the comprehensive power infrastructure, it can let users plan for charging and swapping along the navigation route for long-distance trips with just one tap.

In terms of self-driving, since the NOP Plus Beta, the NOP Plus Beta has been significantly improved in terms of comfort, comfort, traffic efficiency, and other dimensions based on the self-driving technology and data. With the launch of the Banyan 2.0, In terms of intelligent driving,

Neo has released Navigate on Palette Plus Beta, or NLP Plus Beta, to all NT 2.0 users. Based on in-house developed Neo intelligent driving technologies and closed-loop data management, NLP Plus Beta has made significant improvements in making users' journeys more reassuring, comfortable, and efficient. In Bangin 2.0, NLP Plus will be using NEO's proprietary BEV model and occupancy network for perception and the large language model trained with a large-scale data set for planning and control. The experience of NLP Plus will be further enhanced. In the meantime, we have started to test over power swap pallet for highway at scale. and will make it available for 40 power swap stations on highways, starting from the third quarter this year. This feature will be gradually rolled out to more power swap stations, with which users can enjoy more seamless and navigate-on-palette experience from point A to point B on highways.

In terms of sales and service network, we have 365 future centers and future spaces, covering 136 cities. With respect to the sales and service network, we now have 365 new houses and new spaces in 136 cities and 359 new service centers and new delivery centers in 196 cities. The third generation of charging stations uses a three-way joint charging station. Compared to the second generation, the speed is faster, the service capacity is stronger, and the experience is more intelligent. So far, we have built a total of 1,474 charging stations around the world. Of which, there are 119 three-stage stations that provide more than 23 million times of charging services for users. We have also built more than 7,000 supercharging stations and 8,800 destination charging stations.

In terms of the charging and swapping network, on April 13, the first batch of the new PowerSwap Station 3.0 started operation. The PowerSwap Station 3.0 features the synchronization of three operating positions, making it faster than the previous generation with higher service capacity and more intelligent experiences. So far, NIO has installed 1,474 swap stations worldwide, including 119 third-generation power swap stations, and has completed over 23 million swaps for users. NIO has also installed 7,000 power chargers and 8,800 destination chargers. Besides, our power map has also been connected to over 1.1 million third-party chargers globally.

On April 17, new first 500 kilowatt power chargers went online, completing the new generation of power-up stations.

which is an integrated station featuring 500-kilowatt power chargers and the PowerSwap Station 3.0. Through efficient coordination between chargers and the swap stations and flexible capacity distribution, the power chargers can operate more stably and efficiently.

On April 22, the 4th Li Shih-Hui will be completed. The previous exchange election was held by global users.

On April 22, the fourth new user council was established after the new user council member election, which was actively participated by new users worldwide. This year, new users trust will continue their work centering on public welfare, user care, and the common growth.

On March 26, further deepening of a partnership with World Wide Fund for Nature, WWF, new announced to join the Science-Based Target Initiative

and plan to set a science-based target within the next two years, with the goal of contributing to global sustainable development and living up to the Blue Sky commitment. 面对不断变化的市场环境,我们将及时调整营销工作的重点, 确保产品与服务的市场竞争力。 2023年下半年,随着未来NT2平台车型全面进入高端纯电市场,

In the face of the changing market situation, we will timely adjust our sales and marketing priorities to ensure the market competitiveness of our products and services. In the second half of 2023,

with the entire NT2.0 product lineup entering the premium battery electric vehicle market and 1,000 new power swap stations put into operation. New product competitiveness powered by our decisive efforts into developing full-stack R&D capabilities and core technologies of smart EVs will be gradually unleashed, which in turn can better prepare us for the increasingly intensifying competition at the next stage.

As always, thank you for your support.

With that, I will now turn the call over to Stephen to provide the financial details for the first quarter. Over to you, Stephen.

Thank you, William. I will now go over our key financial results for the first quarter of 2023. And to be mindful of the length of this call, I will reference to RMB only in my discussion today. I encourage listeners to refer to our audience press release, which is posted online for additional details. Our total revenues in the first quarter were 10.7 billion RMB, representing an increase of 7.7% year-over-year and a decrease of 33.5% quarter-over-quarter. Our total revenues are made up of two parts, vehicle sales and other sales. Vehicle sales in the first quarter were 9.2 billion RMB, representing a decrease of 0.2 percent year-over-year and a decrease of 37.5 percent quarter-of-a-quarter. The decrease in vehicle sales year-over-year was mainly due to lower average selling price as a result of higher proportion of 85 and 75 kilowatt-hour standard range battery pack deliveries. Partially offset by increase in delivery volume. The decrease in vehicle sales quarter-by-quarter was mainly due to a decrease in delivery volume and lower average selling price as a result of higher proportion of 85 and 75 kilowatt-hour standard range back-to-back deliveries. Other sales in the first quarter were 1.5 billion RMB, which is an increase of 117.8 percent year-over-year and increase of 11.3 percent quarter-to-quarter. The increase in other sales year-over-year was mainly due to the increase in sales of accessories, provision of repair and maintenance services, provision of auto financing services, sales of used cars, and the provision of power solutions. The result of continued growth of our users. The increase in other sales was mainly due to the increase in provision of auto financing services, sales of accessories, provision of repair and maintenance services, provision of power solutions, and sales of used cars as a result of continued growth of our users. And the partial offset by a decrease in revenue from rendering of research and development services. Gross margin in the first quarter of 2023 was 1.5%, compared with 14.6% in the first quarter of 2022 and 3.9% in the fourth quarter of 2022. The decrease in gross margin year-over-year and quarter-of-quarter was mainly attributed to decreased vehicle margin. More specifically, vehicle margin in the first quarter was 5.1%, compared with 18.1% in the first quarter of 2022 and 6.8% in the fourth quarter of 2022. The decrease in vehicle margin year-over-year was mainly attributed to changes in product mix and increased battery cost per unit. The decrease in vehicle margin quota of culture was mainly due to changes in product mix and increased promotion discount for the previous generation of ES8, ES6, and EC6, which were partially offset by the inventory provisions, accelerated depression on production facilities, and losses on purchase commitments for the previous generation of ES8, ES6, and EC6. in the fourth quarter of 2022. Card expenses in the first quarter were 3.1 billion RMB, representing an increase of 74.6% year-over-year, a decrease of 22.7% quarter-of-quarter. The increase in research and development expenses year-over-year was a meaning attribute to the increased personal costs in research and development functions and increased share-based compensation expenses recognized in the first quarter of 2023. The decrease in research and development expenses quarter-to-quarter reflected fluctuations due to different design and development stages of new products and technologies. Exchanged expenses in the first quarter were 2.4 billion RMB, representing an increase of 21.4 percent year-over-year, and a decrease of 37 percent quarter of a quarter. The increase in SG&A expenses year-over-year was primarily due to the increase in personal costs related to sales and general corporate functions and increased expenses related to the company's sales and service staff work expansion. The decrease in SG&A expenses quarter of a quarter was mainly due to decrease in sales and marketing activities and professional services. loss from operations in the first quarter was 5.1 billion RMB, representing an increase of 133.6 percent year-over-year and a decrease of 24.1 percent quarter-of-quarter. Loss in the first quarter was 4.7 billion RMB, representing an increase of 165.9 percent year-over-year and a decrease of 18.1% quarter of quarter. Last, attributable to New York's ordinary shareholders in the first quarter was 4.8 billion RMB, representing an increase of 163.2% year over year, a decrease of 17.8% year quarter of quarter. Our balance of cash and cash equivalents restrict cash, short-term investment and long-term deposits was 37.8 billion RMB as of March 31, 2023. Now, this concludes our prepared remarks. I will now turn the call over to the operator to facilitate our Q&A session.

Thank you. If you wish to ask a question, please press dial 1 on your telephone and wait for a name to be announced. If you wish to cancel your request, please press dial 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. And if you have got more questions, you can re-enter the queue. Your first question comes from Tim Xiao from Morgan Stanley. Please go ahead.

First of all, from 2021, we are entering a phase of rapid expansion. So, we see that the sales, development, and investment of car brands, online networks, and sales are increasing. But as Mr. Lin mentioned, the market and economic situation are more severe. Will we consider the optimization and simplification of current car models and the layout of the overall image? And then, will we focus on the future brands that have limited resources In addition to that, for example, will the development and investment of mobile phones and chips be delayed? And the last one is, will the launch of the second-generation brand be carried out according to the previous plan? So my first question is about model cost control. Because NIO has been investing more aggressively since 2021 on new models, sales marketing, and energy replenishment network. So in light of the challenging industry in the macro outlook, would NIO consider streamlining the model portfolio and cutting back on investment in some projects like smartphone, battery, chipset, and to refocus resources on the new flagship models. And separately, does NIO still stick to its original schedule to launch our mass-market brand, Albus, next year? So that's my first question. Thank you.

Okay, thank you, Tim. Indeed, the market has changed a lot recently. The competition has further intensified. So from the perspective of our second-generation platform, all of our eight vehicles have been developed and completed. In the near future, they will be fully launched into the market. Our main focus at the moment is how to have a new organizational structure and a new marketing strategy that can ensure that each of our vehicles can reach its target users. Because from the time we define these products, each car still has its own positioning. So how can our entire sales team sell these eight cars at the same time? Whether it's from the layout of the exhibition hall, from this kind of online user contact, or the distribution of some of our first-line sales colleagues online. So it is indeed some new challenges. We have done a lot of work recently, to ensure that everyone can be responsible from headquarters to the area. At the same time, we also ensure that our resources can be in some key models. Of course, from some high-end models, our 5566, these four high-end models, including some strategic models such as our ES8, we will definitely have some blood on the resources. But in general, we are now focusing on how to ensure that these eight vehicles

Thank you, Tim, for your question. As you have mentioned, the market competition is intensifying and we do face a lot of changes in the market dynamics. For the new technology platform 2.0, we are about to show the whole lineup of the eight products. based on the NT 2.0, and these eight products will enter the market in the near term gradually. The current focus for us is to make sure we have the new organization structure to have a more targeted sales strategy and a marketing strategy for all the eight products to reach its own target user groups. Because when we design those products, we do have a specific positioning of the different products in their specific segment and target group. So the current challenge for us is to make sure our marketing and the sales team can be more dedicated on these eight products in terms of our showroom layout and the product reach and the marketing reach and the distribution of the resources at the sales and marketing teams. We want to make sure for each product that we have a dedicated team to take responsibility in terms of sales and marketing efforts. Of course, for those key products, we will put more resources to make sure we can reach much better sales performance. But just like I mentioned, the focus for us now is to make sure we can have more dedicated resources for the eight products separately and to make sure they can achieve a good market share in terms of their specific segment.

long-term competitiveness. Of course, we still need to build on it. Of course, in terms of some rhythm, we will definitely adjust according to the company's resources and focus. We will still follow our original plan for the Alps. In the second half of next year, we will deliver these products at the right time. Of course, we will also ensure that the investment period, especially at the market end, Yes, of course, we need to be more agile in terms of facing the challenges of the changing market situation to ensure our competitiveness in terms of the products and the services.

Regarding the topics of the R&D projects, overall speaking, we would like to insist on offer big directions in terms of the R&D projects. In the short term, yes, we do have some pressures, but we think it is really important and necessary for us to focus on those R&D capability building to build over long-term competitiveness. But at the same time, based on our resources and the priorities of the company, we can adjust the pace of the investment for all those different R&D projects. For the question regarding Alpes project, our timing for Alpes brand is still the same. That is the second half of 2024, where we plan to launch the Alpes product at that time, and we will choose the specific timings for those different products. However, at the same time, we want to make sure for the outpost products, we can have a much faster pace in terms of the go-to markets, because this can help us to improve the efficiency and have a much better planning of the resources, especially at the marketing and the sales front.

好,谢谢李定总的回答。 谢谢,Thank you. may be a little higher than the original market rate. Our own credit may include a new ES6 payment of 3,000 to 4,000 units. So I would like to ask the manager to share with us the current situation of ES6, which was officially listed at the end of May and has been paid off to the full extent to date. And then, is there any delay in ES6's current asset payment? Did we still mention 5566 before? So my second question is about the new ES6. The second quarter guidance came in stronger than market expectation, which could fit your quote to like a 3,000 to 4,000 units of additional sales of the new ES6. So could you share a little bit more about the order in tech of the new ES6 since its launch today? and is there any bottleneck to the delivery of new ES6? In the meantime, are you still expecting the sales average of E5, ES6, and the upcoming E5 touring to achieve 20,000 per month? And when do you expect to achieve that boiling target? So that's my second question. Thank you.

Thank you, Tim. ES6 is indeed very hot in the market. So far, we have achieved our expectations. The transfer rate after the test drive is very high. It is the highest transfer rate among all our cars so far. So we are very confident in its performance. Of course, in June, ES6 will still be a production process. Our current goal is to achieve This production and delivery can reach 10,000 such a target. We are still confident to achieve this goal. This is our supply chain in all aspects, manufacturing, quality, and all aspects of the colleagues are doing their best to make this preparation. Of course, 5566, in terms of direction, we must still think that there is a chance to achieve 20,000 such a target. Now, if you look at the challenge, We see that the main challenge is that the challenge of 1T5 is a little bigger. Because 1T5 is relatively speaking, compared to last year, because there is no subsidy. Last year, after all, there was a 12,000 yuan subsidy. So we have recently lowered some, for example, this charging kit. We also have to buy this. In fact, its price is compared to the end of last year. The consumer's purchase price is actually almost 20,000 yuan more expensive. We have to face such a reality. In general, we are also looking at how to expand this demand in a better way in terms of the whole direction. So, in general, in 5566, we feel that the challenge of ET5 is indeed greater. We will immediately issue ET5's Turing on the 15th. Its target audience will definitely be larger, because it is a very suitable family user. We believe that its competitiveness is still very strong. So, we still believe that these four vehicles have a chance to achieve the target of $20,000.

Thank you, Tim. ES6 is very well received by the users and also received very good feedback in the media. We think the order performance has reached all the expectations and the test drive conversion rate of the ES6 actually reached a record high in the history of new. So that's why we're very confident in terms of the sales performance of ES6. At this stage, especially in June, we need to focus on the ramp up of the ES6 first. But for the targets in July is we want to achieve 10,000 units in terms of the production and delivery. We're very confident to achieve this target in July. And the supply chain team, manufacturing team, and other teams are making all sorts of appropriations to make sure we can achieve this objective. Regarding the EG5, EG5 touring, and the ES6 overall volume, we believe that there is the opportunity for us to still achieve 20,000 units in one month. The big challenge for us right now is more about the EG5. Because if we look at the EG5's pricing, we can see that last year we still have around 12,000 RMB subsidies for the users. And at the same time, users can get the home chargers free of charge last year. But now users will need to pay for the home chargers for the EG5 pricing. So speaking probably for the EG5, if we make the Apple to Apple comparison, it's probably like a 20,000 RMB more expensive this year. This is the fact and the challenge we need to face, but what we need to focus on is to make sure we can find a better way to expand the user needs and the demands. The challenge we are facing right now is about the EG5, but just like I mentioned, we're going to launch the EG5 touring on June 15th. This is going to help us to improve overall product competitiveness because we believe EG5 touring can cater to the diversified needs of individuals and family users, and this can help us to boost other product competitiveness in this specific market segment.

Thank you. Thank you, Willie. Thank you, Kim.

Thank you. Your next question comes from Bin Wang from Credit Suites. Please go ahead.

Thank you. I've got two questions. Number one is about the margin outlook. When you reach the 10K per month for ES6 in the third quarter, so what's the gross margin expectation we can hide for the third quarter and the second half? That is number one question about gross margin guidance. My first question is about this maoli law guide. When we Thank you. This is Stanley. As William mentioned, with the delivery of our NT2 product with higher price from Q2 and Q3, the average selling price and gross profit margin

per car will recover. So we are confident that the gross profit margin will start to recover to double digits in Q3 and over 15% in Q4. Yeah. Thank you.

Okay, great. My second question about any further fundraising demands. I read it because right now people worry about your net cash position, which declined quite fast. And so you have to provide some update about your potential fundraising, especially when you're trying to IPO. This is my last question.

Thank you.

Of course, this year, because of Q1 and Q2, the delivery is indeed less than that of Q4 last year. This also affects some of the cash flow of operations. But we believe that with the return of the delivery in the third quarter, the cash flow of operations will definitely improve. Our current company's cash can support the company's future business development. Of course, as a listed company, We will also be very careful to manage some of our cash. Our financing channels, whether it is US dollars or RMB, are all public. If we have a suitable demand, we will of course communicate with the market. Of course, this year, we have also taken some measures. For example, there are some fixed asset investments that we have already pushed back, including some projects that have been developed. There are some projects that we have also pushed back, including the entry of our market, the entry of the global market, Thank you, Bing, for your question. Yes, for this year, if we look at the first quarter and the second quarter, because of the delivery performance, which is actually less than that of the

fourth quarter last year, so this has affected operating cash flow, but together with our delivery volume ramp up in the third quarter, we believe that operating cash flow will also improve. Currently, we believe our cash is sufficient to support the company's business development. As a publicly listed company, we make very prudent management of our cash positions and at the same time, we do have all the different channels to do the fundraising in different markets. But this year, we have made some adjustments in terms of our cash spending. For example, we have delayed our CapEx investment, and we have also delayed some R&D projects. At the same time, in terms of our global market expansion, we believe it's more important for us to focus on the markets that we have already entered. For example, for those countries we have already entered in Europe. So if we have any kind of plans in the capital markets, we will, of course, let everyone know.

Thank you, Wenbin. Thank you. Thank you.

Thank you. Your next question comes from Mingxun Li from DOFA. Thank you. Please go ahead.

Thank you, William and Stephen. So I also have two questions. My first question is what is the battery price decline in first quarter and how much does the battery price to help gross margin in first quarter? And also, could you also comment the second quarter and third quarters battery price trend? That's my first question. Thank you.

Generally, the price of lithium carbonates decreased a little bit from Q1. So this leads to a certain increase of our gross profit margin. Regarding amount-wise, I think the 2.5 thousand per car But recently I think we can also see the lithium carbonate price also recover a little bit to $310,000 per ton. So the volatile change of lithium price will bring uncertainty to our gross profit margin. That's generally the impact of LISM.

Thank you, Stanley. My question is regarding your latest CAPEX and operating expense guidance, because I think William just mentioned that you are starting to control some investment, especially for some long-term investment. But are you able to give some new guidance, if there's any? I remember last year the CAPEX is around 10 billion RMB. So I want to know your guidance for this year for CAPEX and OPEX. Thank you.

Yes, Ming. Our CAPEX will still concentrate on the construction of power source stations, charging network, cell service network, and also tooling and production facilities for our new models. We will control the cadence of those investments. But at this moment, I don't think we can give clear guidance of CapEx investment for this year. Yeah, we will make adjustments dynamically in line with the spending and also the status, yeah.

Also, any guidance on operating expense? Sorry. Okay.

Regarding operating expense, one is for the R&D expense. The upcoming years remains to be the crucial stage for our R&D and also mass production of our core technology as new models. So, on average, in each quarter of 2023, The non-GAAP R&D expense will be kept at 3 to 3.5 billion per quarter. Yes, we will also manage the spending curve and also keep improving our system efficiency. And for SG&A expense, yeah, we can see a decline in Q1. The main reason is because the reduced marketing activities and also seasonality impact of Chinese New Year. Along with more marketing events like Auto Show, Road Show, and also launch of new models, the FG&A total amount will increase from Q2, but the efficiency will be improved from Q3 since all NT2 products will be launched and more volume will be realized. That's the guidance for the OPACs of next quarters.

Thank you, Stanley. Thank you. Thank you, Ming.

Hi, operator. Next question, please.

Thank you. Your next question comes from Yi-Cheng Ding from HSBC. Please go ahead.

Thank you, Manager. I have two questions. The first one is that Mr. Ding just shared that the price of ET5 is more expensive than last year. Yes, go ahead. I'm sorry. So, 第一个是想请教一下, 就是我们刚刚有讲到ET5的价格对消费者来说有点贵, 那我们ET5还是一个比较跑量的这个车型, 或者说之前存在跑量的预期, 那管理层会不会做一些潜在的这个budget version, 就是低价的这个版本, 然后通过减配和版本的这个调整, 把这个价格调下来, 然后获得更好的这个销量。 然后第二个是想请教, 刚才讲到这个, So I got two questions. The first is, do we have planned to introduce any budget version of our existing model, especially the potential volume carrier ET5, but lower price and lower content to access more volume? And the second question, we talked about the dial down a little bit on OPEX burn. Generally, does that also affect or postpone our break-even point of the year?

Yes, thank you. Of course, we do see that the price of the entire market has changed a lot. But we certainly will not make such adjustments in a simplified way. Because many of our methods are There are some high-value products such as power generators, sensors, and computing power. We think this is very meaningful for long-term user value. Of course, there are many other flexible measures that we are considering. For example, we have better methods for those users who do not need to change power transmission. Of course, we are still doing some research on all aspects. Of course, this will still start from the interests of users. From our point of view, of course, we must also consider the interests of such users who have already bought our car. The second question is that in terms of profit and loss balance, of course, from the current situation, our profit and loss balance time table must be pushed back. This is a situation that we need to face. Of course, we still hope that Thank you, Yuchen, for your question.

We understand that there are many different kinds of pricing movements in the market, but regarding ETF5, we don't think it's reasonable for us to have a budget version of the ETF5. Because our philosophy is that we believe the different configurations or the important configurations should come as a standard for all of our NT2 products. For example, the dual motors, AD suites, and other important functions and features. We believe those standard package philosophy can serve the long-term interest to our users. But at the same time, we do have some flexibilities in many other different approaches, for example, user rights, such as the free battery swapping. When we make those kind of considerations and adjustments, of course, the important thing is to make sure we can put the user's interest first. So when we decide to make those kind of adjustments, we also need to consider the interest of our install base. For the second question regarding the break-even point, according to the current situation, we do think probably we need to delay of a break-even point to within one year, and we think this is probably a reasonable assumption.

Thank you, Yuchen.

Thank you. Your next question comes from Nick Lai from JP Morgan. Please go ahead.

Hello, Mr. Li and Ms. Guan. I have two simple questions. The first question I would like to ask is about the cash burn and the cap-ass. Because this industry is very competitive, I believe most people in the past year have not encountered this kind of competition. To a certain extent, this industry competition is a balancing competition. In 2024 or 2025, we will launch two other brands and build channels and so on. I know that the company may not have a number guide at the moment. Can you tell us how we should evaluate in 2024 or 2025, whether our CapEx and CashGround are up or down on the basis of 23? This is the first question. My first question is really following up the previous question regarding cash burn and capex cycle and so on. You just mentioned that we'll push back the R&D expense and so on, but I'm more curious about 24, 25 planning. How should we expect the capex or cash burn into 24 and 25? Would that be flat or up or down compared with 2023? Thank you.

Yes, of course, the whole market is changing very fast. From our perspective, how to reduce the risk of the company to the change of the market, and ensure the stability of the business, is certainly an important goal for us. From the current perspective, for example, the development plan of our second base, of course, we still proceed according to our plan. Our current factory can support the production of two brands, NIO and Alps. So from this point of view, we don't need to make a big capital investment in the production and manufacturing aspect. Then from the market point of view, we are actually also from this year, at a certain time, we have deployed exchange stations that can support the use of two brands. So in this respect, we are actually OK overall. Of course, if Alps is going to push the market, there will be some CapEx investments in the sales service network, including some OPEC investments. But we actually talked about it before. We will squeeze this time as tightly as possible. So in general, we think this is a market that changes very quickly. Our entire company has made such a quick response, such a preparation in all aspects. Of course, in terms of cash management, we will be more careful in managing cash. We also need to maintain the flow of various financing channels. As you all know, from a capital market point of view, whether it is US dollars or RMB, our channels are connected. So in general, we don't think that in terms of cash, Thank you for your question, Nick. Regarding the dynamic and the fluid market situation, we understand it's important for us to control the risk and to keep the stable and sound business operations.

For the Alpes brand, basically the project is moving forward according to our plan. For the production site, we believe the current production capacity is sufficient to support the needs of the new brand and Alpes brand. So it means that in terms of production facilities and capacities, there's no need for big capex investment. In the market front, we believe Starting from this year, we should have sufficient power swap stations to support both brands to share the power swap stations. Previously, we mentioned that probably for the go-to market of Alpes brand, we do need to make some investment in terms of CapEx and OPEX, but we would like to control the pace of the go-to markets. cadence to make sure we can have much faster movement and cadence and have a much agile mode to operate the go-to market of the Alpes brand. So this can help us to save the resources and the capital. In terms of the cash management, of course, as a publicly listed company, we need to be very prudent in terms of the cash management. For the financing channels, we do have a different channels in terms of the RMB and the U.S. dollar capital markets. So for us, we think cash is not going to be a big issue for the company, but at the same time, we still need to make a refined management of our cash and also the working capital of the company.

Thank you. My second question is also relatively simple. I would like to ask a question. In the long term, or in the coming year, the TP margin trend has just been mentioned that the monthly sales of 5566 should have a chance to go over 20,000 after the second half of the year. I want to know how high the average sales volume of the high-end model of 5566 should be in our planning. How do we predict the future of the GPP Margin and other high-end models? We just mentioned that the chance is 15%. If we enter 2024, how should we predict the GPP Margin? My second question is really simple, really about the product mix. Yeah, the new product suffice if it's going to account for a meaningful portion of the volume, and how should we think about the condition from this full major model, and how should we think about the product mix going forward?

Thanks. Hi, Nick.

Regarding the volume percentage 85, 85 touring. Yes, and ECC, I think from a long run, the percentage will be 80% around. Yeah, and from the long run, as I mentioned earlier, this year, I think with all the NT2 products launched, our gross profit margin can recover to 15%. And long term, considering the cost advantage brought by the in-house technology and capability and also the innovative supply chain development, the NT2 product growth profit margin target will still be 20% from the long run. Thank you. Thank you.

Thank you. Your next question comes from Paul Gong from UBS. Please go ahead.

谢谢各位。这是我的问题。 我的第一个问题来说的话就是, 其实最近所投放的几款车吧, 不管是那个ET7还是ET5, 其实都有一点高开低走的这么个现象。 So my first question is regarding the new model sales trends. It seems that a few recent new models all share a little similarity with strong stocks, but after a few months, it subsequently declines. Does our ES6 also face such kind of challenges, or how should we avoid this? happening again.

Yeah. Thank you, Paul.

Thank you, Paul. Last year, we released three cars, ET7, ES7, and ET5. This year, especially in the second quarter, the market performance is a little different from what we expected. China China China China China China China China The competition in the market is also very intense, including the big environment this year. The competition in our target market is also very intense, which leads to a group of users. Because of this competition, some competitive models have been left behind, including traditional brands and some new brands. The competition is definitely more intense. Of course, there are also some internal competition relationships. For example, There are some original ES7 users, so they may flow to ES6, including some ET5 users who may wait for our ET5 Turin version, etc. These are all some more real-life situations. So, of course, we will make some targeted adjustments and measures in the current situation. In the near future, we will also make some targeted adjustments in terms of channels, organizational structure, and marketing strategies.

Thank you, Paul, for your question. Last year, we launched three products, ET7, ES7, and ET5. To be honest, in terms of the recent performance of these three products, including the second quarter, we understand that the market performance of these three products is lagging behind of our expectations. If we look at the factors that are affecting the performance of these three products, Just like I mentioned before, last year for the users that purchased those three products, they have more user rights and benefits and they can enjoy the national subsidies. But this year, for the users purchasing these three products, Apple to Apple comparison, the cost increase is around 10,000 to 20,000 RMB. So at the same time, if we look at the microenvironment, we can see the market competition is also getting intensified. So some users are choosing probably some other new brands or some traditional brands over products. This is one factor. And another factor is internal cannibalization or competition. For example, some ES7 users may decide to choose ES6 instead of the ES7, and for some EG5 users, probably they decided to wait a little bit for the E5 touring. This is the situation that we're facing right now. That is why we decided probably we're going to make some adjustments in the near term in terms of our sales channel and network, as well as our organization structure and our sales and marketing strategy and policies.

Of course, I don't think we have such concerns about the new NT2 cars this year. From the current situation, for example, the first car we delivered this year is the EC7. After we delivered it, its demand is still very stable. As for the ES6, from the current situation, we are very confident about its performance. So, in general, these cars this year So in general, we think that the external interference factors are actually much less than last year, including the volume and rhythm of new cars listed. It should be said that we are doing these things in a more stable state. But for the

Five new products based on the new technology platform 2.0 that we launched this year. We do not have this concern. The first product we launched this year is EC7. After the delivery of EC7, we can see the demand is actually quite stable. As for the ES6, just now I have mentioned that we are very confident about the sales performance of ES6 after the product ran up. And then for this year, we are very confident of our speaking for all the new products that we launched this year, including the YES-8. We are about to start the delivery of the YES-8 in the near term. And currently, we can see that the reservation order performance is actually higher than our expectations. We believe right now the current pace of our product quality and the product go-to-market is actually much better than before. So we believe for these five new products based on the NT2 technology platform should be able to reach reasonable performance in terms of its delivery ramp-up. And recently we have also launched the 2023 ET7, After the delivery of H7, we believe it can also meet our expectations and the order performance is also quite stable.

Thank you, Bao. Thank you.

In the future, because of the excellent brand and service, there is still a certain pricing power. From the early days, the price of EF6 and Model Y was almost the same, but now it is actually more expensive than 100,000 yuan. However, in terms of this pricing, whether it is from the profit margin or the profit margin, in fact, it is still not in an ideal state. After we launched Alps, the price environment, including its block, should be said to be Sorry, I forgot to translate.

Sorry, I forgot to translate. So my second question is regarding the The marginal outlook of the high-end NIO brands versus the low-end IOPs brands.

NIO brands remains to be relatively expensive thanks to the branding and the excellent service the company has been offering, but yet to achieve satisfactory or kind of like excellent margins. So when you are moving towards IOPs to the relatively lower end, how do you foresee the margin would be like, especially compared to the high-end ones?

Thank you.

Actually, if you look at it now, it's still in the mark-up period of the brand. The users are still choosing based on the price. So the brand, for example, our product's advancedness, But I think in the long run, it will eventually return to this value. Of course, we will still have confidence in the value of products and services. In the long run, it will definitely be recognized by users. If you look at it, of course, there are some external factors. For example, some of these changes such as the price of this reason also affect some of our interest rates. If you look at it, when we were in 2021, of course, we can reach more than 20 interest rates. This is actually not an unachievable thing for us. If the price of reason is now We are not going to achieve a 20% net profit, which is not such a difficult thing. So it's more fair to look at this thing. In the long term, of course, with the scale, with the efficiency of management, with some of our key components, such as vertical integration and self-reliance, such progress, we certainly think that more than 20 to 20, we achieve 25% net profit, of course, there is a very realistic basis. China China China China China China China This is the calculation of more than 1,000 T's. This 30 sensor is standard. Where is the cost? You are a god. You can't lower the cost. So the key is to make the value so that the user can feel it. This is our main task. From the perspective of Alps, we are not worried at all about the situation of its efficiency. Because we are very clear about how to define its product definition. From Niel's point of view, we are based on the price to define our product.

Thank you for your question. Regarding the brand positioning, I believe right now is a very chaotic period for the brand positioning. For the users, for most of the users, in the majority of the times, they choose the products based on the price. So right now in terms of our product, our service, as well as our technology and experience, we believe we are much better than others in those different areas, but the values of our product and services and the technologies are not reflected in the perceived value and the price of the product. This is the reality that we're facing right now, but we believe for the long run, the value of a product and services will be recognized by the users and by the market. At the same time, we do face some challenges in the micro environment. For example, the lithium carbonate cost has significantly impacted over vehicle growth margin. Back in 2021, we have reached around 20% vehicle growth margin. At that time, we believe if the lithium carbonate cost goes back to a reasonable level, we should still have a chance to reach 20% of vehicle gross margin. In the long term, we believe in terms of the economies of scale and the efficiency improvement, as well as the vertical integration of our core components and the in-house R&D capabilities, there's a strong base for us to achieve a 20% vehicle gross margin. That's for NIO, but for output, the strategy is very different. Because we believe that in terms of the vehicle's gross margin, it's actually more about how you define the product and how you design the product. So for Alpes, it's more about finding the best solution in the specific segment that Alpes brand targets at customers. For us, if we look at the market, we see some companies that they sell the product at a price of around 200,000 RMB, but they can still achieve over 20% vehicle cost margin. So it shows that this is achievable. For NIO, because we have many high specs configurations in our product, for example, the over 1,000 top computing powers and all those smart features, it will be very difficult for us to lower the cost on those components, and this will affect us in terms of lowering the price of our products. But for Alpes, it's different. When we define Alpes' products, of course the target for us is to achieve a reasonable vehicle cost margin, and we believe it is reasonable and it is possible for us to achieve the 20% vehicle cost margin.

Thank you so much, William, for your kind sharing. Thank you.

Thank you.

Your next question comes from Jing Zhang from CICC. Please go ahead.

谢谢管理层的分享。 我这边跟您两个问题就是分别是关于OT+.

My first question is about our OOP Plus. Our OOP Plus beta version has been open for TRIO for several months. So can you share some users' data, such as the usage time or accumulated mailage or average takeover mailage during this period? and how is their feedback? And we can see the official version will be charged for subscription. So can you share more of your understanding of subscription charge? And also, in the second half of this year, we can see that highway navigation function to swapping station will be further launched. So what do we think of the improvement of customers' experience with this new function? Last one is, is there any time plan for our CTO NOA function in the second half year?

Yeah.

The total use journey has exceeded 41 million kilometers. There are more than 2 million kilometers of use per week. It should be said that its performance is still very good. We are already testing, we are already starting to test some of the navigation support functions in our city area. Of course, it will have this application scene in the city area. We will also Thank you.

Thank you for your question. I will answer the NLP Plus related question, and Stephen is going to address the question about the power swap stations. For the NLP Plus, right now we have over 50,000 users using the NLP Plus services. And for us, the accumulated mileage of the NLP Plus is over 41 million kilometers. And every week, the mileage is around 2 million kilometers. We have already started the test of the NLP Plus in the city scenarios and use cases. This year, we're going to accelerate the test of the NLP Plus in the city use cases or the urban use cases. When you get ready, we will also release this feature to the users. Based on our internal evaluation right now, we are very confident regarding the performance of the NLP Plus in the urban scenarios. At the same time, regarding the NAD, we are also doing some tests, and if in the future the regulations and the laws change, are in the right place for the NLP Plus release, then we will release the NAD for our users when the regulation is in the right place. And we believe that this is probably right now all the R&D of our NLP Plus and NAD is basically on track and according to our schedules.

My second question is about the battery swapping station. You can see that you have gotten nearly 1,500 stations at present. and nearly we can see 200 set of stations have been added since this year. So have you seen that the denser of our battery-solving stations network has been built and is quite good for our sales of our new models, especially for our penetration of lower tier cities?

My name is Steven. I think the short answer is a very clear yes. We have seen a very clear flywheel effect between the power swap station network and our sales growth. As Min just mentioned, we have already deployed 1,500 power swap stations across China, and at the end of this year, the number of power swap stations will rise to around 2,400. And every day, we offer around 70,000 60,000 to 70,000 times a password source to our users. So in average, every day, one password station offers 40 to 50 times of passwords to our users. So that means, on one hand, our users rely on password stations as their favorite charging method. On the other hand, the password stations are very efficiently utilized. So that's why we see a clear flywheel effect, and that's why we're very determined to accelerate our power station deployment, and also we're very confident that more power stations will lead to more sales growth. And actually in the Yangtze River and some tier one cities, we have seen that after the charging insurance improves, our sales volume also grows. So that's why we are very confident that with more and more possibilities penetrate into the low-tier cities, naturally, new sales will lead to a very strong momentum or a solid growth in the low-tier cities. Last but not least, I think looking forward, as more and more OEMs seriously look at password stations as a more or less standard way, the password stations will become a more and more convenient way for more and more EV users.

Thank you.

Thank you. Your next question comes from Vijay Rakesh from Mizuho Securities. Please go ahead.

Yeah, hi, just a quick question. You know, given some of the new ramps of the five-year models and looks like you're getting good response on it, would you expect second half or even third quarter production run rates to get to the 20,000 per month on average? And just wondering what the expectation is of second half to first half deliveries?

Thank you, Vijay, for your question.

Of course, for us, the target for the second quarter of this year is to deliver over 20,000 units every month, and we are very competent to achieve this target.

Got it. And just one other question. If you look at some of the subsidies moving to Tier 2 cities, is that a near-term, could that be a challenge for New York? You don't have enough substations, et cetera, on the Tier 2 cities, et cetera. Thanks. Thank you.

This year, we will deploy 1,000 exchange stations. Most of them are in high speed, but we have many other ones that will be deployed to some Tier 3, Tier 4 cities. We think this will be a very direct promotion of sales. We are already starting to increase speed. We have been deploying three-stage stations since May. We started to increase speed from April. This year, our target is to deploy 1,000 additional power swap stations, and the full majority of those power swap stations will be deployed on highways, and some of them will be installed

in the Tier 3 and the Tier 4 cities. We believe that this is going to directly boost the sales performance of our products. Actually, in April, we started the deployment of the PowerSwap Station 3.0, and we accelerated the deployment in May. In June, we believe we're going to deploy around 100 PowerSwap Station 3.0, and we believe Gradually, from now on, we're going to speed up the deployment of the power swap stations.

Thank you.

Thank you, Vijay.

As there are no further questions at this time, I'll now like to turn the call back to the company for closing remarks.

Thank you once again for joining us today.

If you have further questions, please feel free to contact the Nielsen 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.

Thank you. you Thank you. Thank you. music music

Hello ladies and gentlemen. Thank you for standing by and welcome to the NIO Incorporated first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I would now like to hand the conference over to your host, Ms. Eve Chang from Capital Market. Please go ahead.

Good morning and good evening everyone. Welcome to News First Quarter 2023 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 Lee, Founder, Chairman of the Board, and Chief Executive Officer, Mr. Stephen Fung, Chief Financial Officer, Mr. Stanley Chu, Senior VP of Finance, and Ms. Jade Wei, VP 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 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 Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that news earnings press release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial measures. Please refer to the news press release, which contains a reconciliation of the unaudited non-gap measures to comparable gap measures. With that, I will now turn the call over to our CEO, Mr. William Lee. William, please go ahead. 大家好,非常感谢各位参加未来2023年第一季度业绩沟通会议。 Hello, everyone. Thank you for joining NIO's 2023 first quarter earnings call.

In the first quarter of 2023, NIO delivered a total of 31,041 smart electric vehicles, up 20.5% year over year. In April and May, NIO delivered 6,658 and 6,155 vehicles respectively.

We expect the total deliveries in the second quarter of this year to be between 23,000 and 25,000 units.

As we ramp up the production of the all-new ES6 and other new models, we're confident in continuously driving up our delivery volumes.

Next, I would like to share with you the recent highlights of our products, R&D, and operations.

On May 24, we launched the all-new ES6.

an all-round mid-size smart electric SUV, and started its delivery the next day. The product quality of the all-new S6 has been widely acclaimed by the first batch of users.

In May, the 2023 ET7 and the smart electric flagship SUV EC7 began to deliver to users. The 2023 ET7 brought more than 15 product updates and upgrades. In May, we also started the user delivery of the 2023 new EC7 and the flagship coupe SUV EC7, coming with more than 15 new features and enhancements.

The 2023 NIO ET7 continues to lead the change in the premium smart electric mid-large sedan market. As a flagship coupe SUV, EC7 inherits NIO's high-performance DNA and boasts ultimate riding and handling experience.

未来的产品质量和安全性受到了传统机构的认可。 4月24日,ET5在获得中国保险汽车安全指数安全性全优评级。 NIO's product quality and safety are also recognized by authoritative institutions on April 24th.

NIO-ET5 was rated good, the highest safety level by China Insurance Automobile Safety Index, or CIASI. In J.D. Powers' 2023 China New Energy Vehicle Initial Quality Study released on June 1st, NIO-ES6 won first place in the premium BEV segment for the fourth consecutive year. Also in J.D. Powers' 2023, NEV Appeal Study, which evaluates new energy vehicles' performance, execution, and layout. NIO ET7 ranked number one among premium BEVs. We plan to launch the new ET5 Touring on June 15 and start the delivery in the same month. As the world's first smart electric tour, the ET5 Touring is designed to cover diversified scenarios for both individual and family users, significantly improving over competitiveness in the premium family vehicle market.

So what... The future flagship SUV model, the new ES8, will also start delivery in the near future. The new upgraded medium-sized sports SUV EC6 is planned to be released and delivered in three seasons. With the smooth promotion of the new model switching work, the future 8 products based on the NT2 platform will combine to meet the diversified needs of the high-end smart electric car market to provide users with an experience beyond expectation.

Besides NIO's flagship SUV, the all-new ES8 will also commence delivery in the new 10. The new EC6, our second-generation midsize smart coupe SUV, will be launched and delivered in the third quarter. As we proceed with the product platform transition, NIO's complete NT2.0 lineup, featuring eight different products, will form a combined force to better cater to the diverse needs in the premium smart EV market and provide users with more experiences beyond expectations.

In June, new Smart System Banyan will be upgraded to version 2.0. This release includes over 120 new features and enhancements.

By connecting news products, services, and the community in a more seamless way, Banyan 2.0 will deliver a one-of-a-kind digital experience. It's particularly worth mentioning that Banyan 2.0 provides a new feature that is automatic planning of charging and swapping routes. Enabled by new Power Cloud and the comprehensive power infrastructure, it can let users plan for charging and swapping along the navigation route for long-distance trips with just one tap.

In terms of self-driving, since the NOP Plus Beta, the NOP Plus Beta has been significantly improved in terms of comfort, comfort, traffic efficiency, and other dimensions based on the self-driving technology and data. With the launch of the Banyan 2.0, In terms of intelligent driving,

Neo has released Navigate on Palette Plus Beta, or NLP Plus Beta, to all NT 2.0 users. Based on in-house developed Neo intelligent driving technologies and closed-loop data management, NLP Plus Beta has made significant improvements in making users' journeys more reassuring, comfortable, and efficient. In Bangin 2.0, NLP Plus will be using NEO's proprietary BEV model and occupancy network for perception and the large language model trained with a large-scale data set for planning and control. The experience of NLP Plus will be further enhanced. In the meantime, we have started to test over power swap pallet for highway at scale. and will make it available for 40 power swap stations on highways, starting from the third quarter this year. This feature will be gradually rolled out to more power swap stations, with which users can enjoy more seamless and navigate-on-palette experience from point A to point B on highways.

In terms of sales and service network, we have 365 future centers and future spaces, covering 136 cities. With respect to the sales and service network, we now have 365 new houses and new spaces in 136 cities, and 359 new service centers and new delivery centers in 196 cities.

On the Internet, on April 13, the third Huan Nian Zan will be launched,

The third generation is equipped with a three-position co-switch. Compared to the second generation, it is faster, more serviceable, and more intelligent. So far, we have deployed a total of 1,474 switch stations around the world, including 119 three-stage stations, which provide more than 23 million switch services for users. We have also deployed more than 7,000 superchargers and 8,800 power chargers.

In terms of the charging and swapping network, on April 13, the first batch of the new PowerSwap Station 3.0 started operation. The PowerSwap Station 3.0 features the synchronization of three operating positions, making it faster than the previous generation with higher service capacity and more intelligent experiences. So far, NIO has installed 1,474 swap stations worldwide, including 119 third-generation power swap stations, and has completed over 23 million swaps for users. NIO has also installed 7,000 power chargers and 8,800 destination chargers. Besides, our power map has also been connected to over 1.1 million third-party chargers globally.

On April 17, new first 500 kilowatt power chargers went online, completing the new generation of power-up stations.

which is an integrated station featuring 500-kilowatt power chargers and the PowerSwap Station 3.0. Through efficient coordination between chargers and the swap stations and flexible capacity distribution, the power chargers can operate more stably and efficiently.

On April 22, the 4th Li Shih-Hui will be completed. The previous exchange elections were held by global users.

On April 22, the fourth new user council was established after the new user council member election, which was actively participated by new users worldwide. This year, new users trust will continue their work centering on public welfare, user care, and the common growth.

On March 26th, further deepening of a partnership with World Wide Fund for Nature, WWF, new announced to join the science-based target initiative

and plan to set a science-based target within the next two years, with the goal of contributing to global sustainable development and living up to the Blue Sky commitment. 面对不断变化的市场环境,我们将及时调整营销工作的重点, 确保产品与服务的市场见证力。 2023年下半年,随着未来NT2平台车型全面进入高端纯电市场,

In the face of the changing market situation, we will timely adjust our sales and marketing priorities to ensure the market competitiveness of our products and services. In the second half of 2023,

With the entire NT 2.0 product lineup entering the premium battery electric vehicle market and 1,000 new power swap stations put into operation, new product competitiveness powered by our decisive efforts into developing full-stack R&D capabilities and core technologies of smart EVs will be gradually unleashed, which in turn can better prepare us for the increasingly intensifying competition at the next stage.

As always, thank you for your support.

With that, I will now turn the call over to Stephen to provide the financial details for the first quarter. Over to you, Stephen.

Thank you, William. I will now go over our key financial results for the first quarter of 2023. And to be mindful of the length of this call, I will reference to RMB only in my discussion today. I encourage listeners to refer to our audience press release, which is posted online for additional details. Our total revenues in the first quarter were 10.7 billion RMB, representing an increase of 7.7% year-over-year and a decrease of 33.5% quarter-over-quarter. Our total revenues are made up of two parts, vehicle sales and other sales. Vehicle sales in the first quarter were 9.2 billion RMB, representing a decrease of 0.2% year-over-year and a decrease of 37.5% quarter-of-a-quarter. The decrease in vehicle sales year-over-year was mainly due to lower average selling price as a result of higher proportion of 85 and 75 kilowatt-hour standard range battery pack deliveries. Partially offset by increase in delivery volume, the decrease in vehicle sales quarter-to-quarter was mainly due to a decrease in delivery volume and lower average selling price as a result of higher proportion of 85 and 75-kilowatt-hour standard range back-to-back deliveries. Other sales in the first quarter were 1.5 billion RMB, representing an increase of 117.8 percent year-over-year and increase of 11.3 percent quarter-to-quarter. The increase in other sales year-over-year was mainly due to the increase in sales of accessories, provision of repair and maintenance services, provision of auto financing services, sales of used cars, and the provision of power solutions. The result of continued growth of our users. The increase in other sales was mainly due to the increase in provision of auto financing services, sales of accessories, provision of repair and maintenance services, provision of power solutions, and sales of used cars as a result of continued growth of our users. And the partial offset by a decrease in revenue from rendering of research and development services. Gross margin in the first quarter of 2023 was 1.5%, compared with 14.6% in the first quarter of 2022 and 3.9% in the fourth quarter of 2022. The decrease in gross margin year-over-year and quarter-of-quarter was mainly attributed to decreased vehicle margin. More specifically, vehicle margin in the first quarter was 5.1 percent, compared with 18.1 percent in the first quarter of 2022 and 6.8 percent in the fourth quarter of 2022. The decrease in vehicle margin year-over-year was mainly attributed to changes in product mix and increased battery cost per unit. The decrease in vehicle margin quota of culture was mainly due to changes in product mix and increased promotion discount for the previous generation of ES8, ES6, and EC6, which were partially upset by the inventory provisions, accelerated depression on production facilities, and losses on purchase commitments for the previous generation of ES8, ES6, and EC6. in the fourth quarter of 2022. Current expenses in the first quarter were 3.1 billion RMB, representing an increase of 74.6% year-over-year, a decrease of 22.7% quarter-to-quarter. The increase in research and development expenses year-over-year was mainly attributed to the increased personal costs in research and development functions and increased share-based compensation expenses recognized in the first quarter of 2023. The decrease in research and development expenses quarter-to-quarter reflected fluctuations due to different design and development stages of new products and technologies. Exchanged expenses in the first quarter were 2.4 billion RMB, representing an increase of 21.4 percent year-over-year, and a decrease of 37 percent quarter of a quarter. The increase in SG&A expenses year-over-year was primarily due to the increase in personal costs related to sales and general corporate functions and increase in expenses related to the company's sales and service staff work expansion. The decrease in SG&A expenses quarter of a quarter was mainly due to decrease in sales and marketing activities and professional services. loss from operations in the first quarter was 5.1 billion RMB, representing an increase of 133.6 percent year-over-year and a decrease of 24.1 percent quarter-of-quarter. Loss in the first quarter was 4.7 billion RMB, representing an increase of 165.9 percent year-over-year and a decrease of 18.1% quarter-of-quarter. Last, attributable to New York's ordinary shareholders in the first quarter was 4.8 billion RMB, representing an increase of 163.2% year-over-year, and a decrease of 17.8% year-quarter-of-quarter. Our balance of cash and cash equivalents restrict cash, short-term investment, and long-term deposits was 37.8 billion RMB as of March 31, 2023. Now, this concludes our prepared remarks. I will now turn the call over to the operator to facilitate our Q&A session.

Thank you. If you wish to ask a question, please press dial 1 on your telephone and wait for a name to be announced. If you wish to cancel your request, please press dial 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. And if you have got more questions, you can re-enter the queue. Your first question comes from Tim Xiao from Morgan Stanley. Please go ahead.

Hello, Manager Chen. Thank you very much for accepting my question. I have two questions. The first question is about the possible discount. First of all, from 2021, we are entering a phase of rapid expansion. So, we see that car brands, online sales, and development are all investing more. But as Mr. Lin mentioned, the market and economic trend are more severe. Will we consider optimizing and simplifying the current car and physical marketing layout? And then, will we focus on the future brands that may have limited resources? For the rest, for example, will the investment in cell phone chips and R&D be delayed? And the last one is, will the launch of the second-generation R&D brand be carried out according to the previous plan? So my first question is about model cost control. Because NIO has been investing more aggressively since 2021 on new models, sales marketing, and energy replenishment network. So in light of the challenging industry in the macro outlook, would NIO consider stringlining the model portfolio and cutting back on investment in some projects like smartphone, battery, chipset, and to refocus resources on the new flagship models. And separately, does NIO still stick to its original schedule to launch our mass-market brand, Albus, next year? So that's my first question. Thank you.

Thank you, Tim. Indeed, the market has changed a lot recently. The competition has further intensified. So from the perspective of our second-generation platform, all of our eight vehicles have been developed and completed. In the near future, they will be fully launched into the market. Our main focus at the moment is how to have a new organizational structure and a new marketing strategy that can ensure that each of our vehicles can reach all of its target users. Because when we define these products, each car still has its own positioning. So how can our entire marketing team sell these eight cars at the same time? Whether it's from the layout of the exhibition hall, from this kind of online user contact, or the distribution of some of our first-line sales colleagues online. So there are indeed some new challenges. We have done a lot of work recently, to ensure that everyone can be responsible from headquarters to the area. At the same time, we also ensure that our resources can be in some key models. Of course, from some high-end models, our 5566, these four high-end models, including some strategic models such as our ES8, we will definitely have some blood on the resources. But in general, we are now focusing on how to ensure that the eight cars

Thank you, Tim, for your question. As you have mentioned, the market competition is intensifying and we do face a lot of changes in the market dynamics. For the new technology platform 2.0, we are about to show the whole lineup of the eight products. based on the NT 2.0, and these eight products will enter the market in the near term gradually. The current focus for us is to make sure we have the new organization structure to have a more targeted sales strategy and a marketing strategy for all the eight products to reach its own target user groups. Because when we design those products, we do have a specific positioning of the different products in their specific segment and target group. So the current challenge for us is to make sure our marketing and the sales team can be more dedicated on these eight products in terms of our showroom layout and the product reach and the marketing reach and the distribution of the resources at the sales and marketing teams. We want to make sure for each product, we have a dedicated team to take responsibility in terms of sales and marketing efforts. Of course, for those key products, we will put more resources to make sure we can reach much better sales performance. But just like I mentioned, the focus for us now is to make sure we can have more dedicated resources for the eight products separately and to make sure they can achieve a good market share in terms of their specific segment.

Long-term competitiveness, of course, we still have to build on it. Of course, in terms of some rhythm, we will definitely adjust according to the company's resources and focus. We will still follow the original plan of Alps. In the second half of next year, we will deliver these products at the right time. Of course, we will also ensure that the investment cycle, especially at the market end, Yes, of course, we need to be more agile in terms of face the challenges of the changing market situation to ensure our competitiveness in terms of the products and the services.

Regarding the topics of the R&D projects, overall speaking, we would like to insist on offer big directions in terms of the R&D projects. In the short term, yes, we do have some pressures, but we think it is really important and necessary for us to focus on those R&D capability building to build over long-term competitiveness. But at the same time, based on our resources and the priorities of the company, we can adjust the pace of the investment for all those different R&D projects. For the question regarding Alpes project, our timing for Alpes brand is still the same. That is the second half of 2024, where we plan to launch the Alpes product at that time, and we will choose the specific timings for those different products. However, at the same time, we want to make sure for the outpost products, we can have a much faster pace in terms of the go-to markets, because this can help us to improve the efficiency and have a much better planning of the resources, especially at the marketing and the sales front.

好,谢谢李彬总的回答。 谢谢,Thank you. may be a little higher than the original market rate. We have 3,000 to 4,000 new ES6 payments. So, could you please share with us the current situation of ES6, which was officially listed at the end of May and has been paid off so far? Is there any problem with ES6's real estate payments? We mentioned 5566 before. So my second question is about the new ES6. The second quarter guidance can be stronger than market expectation, which could fit your quote to like a 3,000 to 4,000 units of additional sales of the new ES6. So could you share a little bit more about the older intake of the new ES6 since it's launched today? and is there any bottleneck to the delivery of new ES6? In the meantime, are you still expecting the sales average of E5, ES6, and the upcoming E5 touring to achieve 20,000 per month? And when do you expect to achieve that boiling target? So that's my second question. Thank you.

Thank you, Tim. ES6 is indeed very hot in the market. So far, we have achieved our expectations. The transfer rate after the test drive is very high. It is the highest transfer rate among all our cars so far. So we are very confident in its performance. Of course, in June, ES6 will still be a production process. Our current goal is to achieve This production and delivery can reach 10,000 such a target. We are still confident to achieve this goal. This is our supply chain in all aspects, manufacturing, quality, and all aspects of the colleagues are doing their best to make this preparation. Of course, 5566, in terms of direction, we must still think that there is a chance to achieve 20,000 such a target. Now, if you look at the challenge, We see that the main challenge is that the challenge of 1T5 is a little bigger. Because 1T5 is relatively speaking, compared to last year, because there is no subsidy. Last year, after all, there was a 12,000 yuan subsidy. So we have recently lowered some, for example, this charging kit. We also have to buy this. In fact, its price is compared to the end of last year. The consumer's purchase price is actually almost 20,000 yuan more expensive. We have to face such a reality. In general, we are also looking at how to expand this demand in a better way in terms of the whole direction. So, in general, in 5566, we feel that the challenge of ET5 is indeed greater. We will immediately send ET5 to Turin on the 15th. Its target user group will definitely be larger, because it is a very suitable family user. We believe that its competitiveness is still very strong. So we still believe that these four vehicles have a chance to achieve the 20,000-dollar target.

Thank you, Tim. ES6 is very well received by the users and also received very good feedback in the media. We think the order performance has reached all the expectations and the test drive conversion rate of the ES6 actually reached a record high in the history of new. So that's why we're very confident in terms of the sales performance of ES6. At this stage, especially in June, we need to focus on the ramp up of the ES6 first. But for the target in July is we want to achieve 10,000 units in terms of the production and delivery. We're very confident to achieve this target in July. And the supply chain team, manufacturing team, and other teams are making all sorts of appropriations to make sure we can achieve this objective. Regarding the EG5, EG5 touring, and the ES6 overall volume, we believe that there is the opportunity for us to still achieve 20,000 units in one month. The big challenge for us right now is more about the EG5. Because if we look at the EG5's pricing, we can see that last year we still have around 12,000 RMB subsidies for the users. And at the same time, users can get the home chargers free of charge last year. But now users will need to pay for the home chargers for the EG5 pricing. So speaking probably for the EG5, if we make the Apple to Apple comparison, it's probably like a 20,000 RMB more expensive this year. This is the fact and the challenge we need to face, but what we need to focus on is to make sure we can find a better way to expand the user needs and the demands. The challenge we are facing right now is about the EG5, but just like I mentioned, we're going to launch the EG5 touring on June 15th. This is going to help us to improve overall product competitiveness because we believe E25 Touring can cater to the diversified needs of individuals and family users, and this can help us to boost over-product competitiveness in this specific market segment.

Thank you. Thank you, really. Thank you, Kim.

Thank you. Your next question comes from Bin Wang from Credit Suites. Please go ahead.

Thank you. I've got two questions. Number one is about the margin outlook. When you reach the 10K per month for ES6 in the third quarter, so what's the gross margin expectation we can hide for the third quarter and the second half? That is number one question about gross margin guidance. My first question is about the policy guidance. Thank you. This is Stanley. As William mentioned, with the delivery of our NT2 product with higher price from Q2 and Q3, the average selling price and gross profit margin

per car will recover. So we are confident that the gross profit margin will start to recover to double digits in Q3 and over 15% in Q4. Thank you.

Okay, great. My second question about any further fundraising demands. I read it because right now people worry about your net cash position, which declined quite fast. And so you have to provide some update about your potential fundraising, especially when you're trying to IPO. This is my last question.

Thank you.

Of course, this year, because of Q1 and Q2, the delivery is indeed less than last year's Q4. This also affects some of the cash flow. But we believe that with the return of the delivery in the third quarter, the cash flow will definitely improve. Our current company's cash can support the company's future business development. Of course, as a listed company, of course, We will also be very careful to manage some of our cash. Our financing channels, whether it is US dollars or RMB, are all public. If we have a suitable demand, we will of course communicate with the market. Of course, this year, we have also taken some measures. For example, there are some fixed asset investments that we have already pushed back, including some projects that have been developed. There are some projects that we have also pushed back. Including the entry of our market, the entry of the global market, Thank you, Bing, for your question. Yes, for this year, if we look at the first quarter and the second quarter, because of the delivery performance, which is actually less than that of the

fourth quarter last year, so this has affected operating cash flow, but together with our delivery volume ramp up in the third quarter, we believe that operating cash flow will also improve. Currently, we believe our cash is sufficient to support the company's business development. As a publicly listed company, we make very prudent management of our cash positions, and at the same time, we do have all the different channels to do the fundraising in different markets. But this year, we have made some adjustments in terms of our cash spending. For example, we have delayed our CapEx investment, and we have also delayed some R&D projects. At the same time, in terms of our global market expansion, we believe it's more important for us to focus on the markets that we have already entered. For example, for those countries we have already entered in Europe, So if we have any kind of plans in the capital markets, we will, of course, let everyone know.

Thank you, Wenbin. Thank you. Thank you.

Thank you. Your next question comes from Mingxun Li from DOFA. Thank you. Please go ahead.

Thank you, William and Stephen. So I also have two questions. My first question is, what is the battery price decline in first quarter, and how much does the battery price to help gross margin in first quarter? And also, could you also comment the second quarter and third quarters battery price trend? That's my first question. Thank you.

Generally, the price of lithium carbonate decreased a little bit from Q1. So this leads to a certain increase of our gross profit margin. Regarding amount-wise, I think the 2.5 thousand per car But recently, I think we can also see the lithium carbonate price also recover a little bit to $310,000 per ton. So the volatile change of lithium price will bring uncertainty to our gross profit margin. That's generally the impact of LISM.

Thank you, Stanley. My question is regarding your latest CAPEX and operating expense guidance, because I think William just mentioned that you are starting to control some investment, especially for some long-term investment. But are you able to give some new guidance, if there is any? I remember last year the CAPEX is around 10 billion RMB. So I want to know your guidance for this year for CAPEX and OPEX. Thank you.

Yes, Ming. Our CAPEX will still concentrate on the construction of power source stations, charging network, cell service network, and also tooling and production facilities for our new models. We will control the cadence of those investments. But at this moment, I don't think we can give clear guidance of CapEx investment for this year. Yeah, we will make adjustments dynamically in line with the spending and also the status, yeah.

Also, any guidance on operating expense? Sorry. Okay.

Regarding operating expense, one is for the R&D expense. The upcoming years remains to be the crucial stage for our R&D and also mass production of our core technology as new models. So, on average, in each quarter of 2023, The non-GAAP R&D expense will be kept at 3 to 3.5 billion per quarter. Yes, we will also manage the spending curve and also keep improving our system efficiency. And for SG&A expense, yeah, we can see a decline in Q1. The main reason is because the reduced marketing activities and also seasonality impact of Chinese New Year. Along with more marketing events like auto show, road show, and also launch of new models, the FG&A total amount will increase from Q2, but the efficiency will be improved from Q3 since all NT2 products will be launched and more volume will be realized. That's the guidance for the OPEX of next quarters.

Thank you, Stanley. Thank you. Thank you, Ming.

Thank you. Your next question comes from Yi-Cheng Ding from HSBC. Please go ahead.

Thank you, Director. I have two questions. Yeah, go ahead. Yes, please. So, 第一个是想请教一下, 就是我们刚刚有讲到ET5的价格对消费者来说有点贵, 那我们ET5还是一个比较跑量的这个车型, 或者说之前存在跑量的预期, 那管理层会不会做一些潜在的这个budget version, 就是低价的这个版本, 然后通过减配和版本的这个调整, 把这个价格调下来, 然后获得更好的这个销量。 然后第二个是想请教, 刚才讲到这个, So I got two questions. The first is, do we have planned to introduce any budget version of our existing model, especially the potential volume carrier ET5, but lower price and lower content to access more volume? And the second question, we talked about the dial down a little bit on OPEX burn. Generally, does that also affect or postpone our break-even point of the year?

Yes, thank you. Of course, we see that the price of the entire market has changed a lot. Of course, we will not make adjustments in a simplified way. Because many of our methods are These are all standard devices, such as batteries, sensors, and computing power. We think this is very meaningful for long-term user value. Of course, there are many other flexible measures that we are considering. For example, we have better methods for users who do not need to change power transmission. Thank you, Yuchen, for your question.

We understand that there are many different kinds of pricing movements in the market. But for us, regarding ETF-5, we don't think it's reasonable for us to have a budget version of the ETF-5. Because our philosophy is that we believe the different configurations or the important configurations should come as a standard for all of our NT2 products. For example, the dual motors, AD suites, and other important functions and features. We believe those standard package philosophy can serve the long-term interest to our users. But at the same time, we do have some flexibilities in many other different approaches, for example, user rights, such as the free battery swapping. When we make those kind of considerations and adjustments, of course, the important thing is to make sure we can put the user's interest first. So when we decide to make those kind of adjustments, we also need to consider the interest of our install base. For the second question regarding the break-even point, according to the current situation, we do think probably we need to delay of a break-even point to within one year, and we think this is probably a reasonable assumption.

Thank you, Yuchen.

Thank you. Your next question comes from Nick Lai from JP Morgan. Please go ahead.

Hello, Mr. Li and Mr. Guan. I have two simple questions. The first question I would like to ask is about the problem of cash burn and CapEx. Because this industry is very competitive, I believe that most people in the past year have been surprised by the competitive environment. To a certain extent, this industry is a balance competition. In 2024 or 2025, we will launch two other brands and build channels and so on. I know that the company may not have a number guide at the moment. How should we evaluate in 2025, is our cash pass and cash burn going up or down on the basis of 23? This is the first question. My first question is really following up the previous question regarding cash burn and capex cycle and so on. You just mentioned that we'll push back the R&D expense and so on, but I'm more curious about 24, 25 planning. How should we expect the capex or cash burn into 24 and 25? Would that be flat or up or down compared with 2023?

Thank you.

Yes, of course, the market is changing in a very dynamic way. From our point of view, how to reduce the risk of the company in the change of the market dynamics and ensure the stability of the business is definitely an important goal for us. From the current point of view, for example, we are still advancing according to our plan. Our current factory is can support the production of two brands, NIO and Alps. So from this point of view, we don't need to make a big CapEx investment in terms of production and manufacturing. Then from the market point of view, in fact, from a certain time this year, we can support the use of two brands. So in this respect, we are actually OK in general. Of course, if Alps is going to push the market, there will be some CapEx investments in the sales service network, including some OPEC investments. But as we mentioned earlier, we will squeeze the time as much as possible. So in general, we think that this is a market that is changing very quickly. Our entire company has made such a quick response, such a preparation in all aspects. Of course, in terms of cash management, we will be more careful in managing cash. We also need to maintain the flow of various financing channels. As you all know, from a capital market point of view, whether it is US dollars or RMB, our channels are connected. So in general, we don't think that in terms of cash, Thank you for your question, Nick. Regarding the dynamic and the fluid market situation, we understand it's important for us to control the risk and to keep the stable and sound business operations.

For the Alpes brand, basically the project is moving forward according to our plan. For the production site, we believe the current production capacity is sufficient to support the needs of the new brand and Alpes brand. So it means that in terms of production facilities and capacities, there's no need for big capex investment. In the market front, we believe Starting from this year, we should have sufficient power swap stations to support both brands to share the power swap stations. Previously, we mentioned that probably for the go-to market of Alpes brand, we do need to make some investment in terms of CapEx and OPEX, but we would like to control the pace of the go-to markets. cadence to make sure we can have much faster movement and cadence and have a much agile mode to operate the go-to market of the Alpes brand. So this can help us to save the resources and the capital. In terms of the cash management, of course, as a publicly listed company, we need to be very prudent in terms of the cash management. For the financing channels, we do have a different channels in terms of the RMB and the U.S. dollar capital markets. So for us, we think cash is not going to be a big issue for the company, but at the same time, we still need to make a refined management of our cash and also the working capital of the company.

Okay, thank you. My second question is also relatively simple. I would like to ask, in the long term, or in the coming year, the GP margin trend mentioned that the monthly sales of 5566 should have a chance to go over 20,000 in the second half of the year. I would like to know how high the average monthly sales volume of 5566 is in our plan. GDP margin and other high-end models. How much is the difference? How do we predict or judge the future GDP margin in the medium term? As I said, the trend is 15%. If we enter 2024, how should we forecast or judge the GDP margin? My second question is really simple, really about the product mix. Yeah, the new product suffice if it's going to account for a meaningful portion of the volume, and how should we think about the condition from this full major model, and how should we think about the product mix going forward? Thanks.

Hi, Nick.

Regarding the volume percentage 85, 85 touring, yes, and ECC, I think, from a long run, the percentage will be 80% around. Yeah, but from, and from the long run, as I mentioned earlier, this year, I think with all the NT2 product launched, our gross profit margin can recover to 15%, and long term, considering the cost advantage brought by the in-house technology and capability and also the innovative supply chain development, the NT2 product growth profit margin target will still be 20% from the long run. Thank you. Thank you.

Thank you. Your next question comes from Paul Gong from UBS. Please go ahead.

谢谢各位。这是我的问题。 我的第一个问题来说的话就是, 其实最近所投放的几款车吧, 不管是那个ET7还是ET5, 其实都有一点高开低走的这么个现象。 So my first question is regarding the new model sales trends. It seems that a few recent new models all share a little similarity with strong starts, but after a few months, it subsequently declines. Does our ES6 also face such kind of challenges, or how should we avoid this? happening again.

Yeah. Thank you, Paul.

Thank you, Paul. Last year, we released three cars, ET7, ES7, and ET5. This year, especially in the second quarter, the market performance is a little different from what we expected. Taiwan Taiwan Taiwan Taiwan Taiwan The competition in the market is also very intense, including the big environment this year. The competition in our target market is also very intense, which leads to a group of users. Because of this competition, some competitive models have been left behind, including traditional brands and some new brands. The competition must be more intense. Of course, there are also some internal competition. For example, There are some original ES7 users, so they may flow to ES6, including some ET5 users who may wait for our ET5 Turin version, etc. These are all some more real-life situations. So, of course, we will have some targeted adjustments and measures in the current situation. In the near future, we will also carry out some targeted adjustments in terms of channels, organizational structure, and marketing strategies.

Thank you, Paul, for your question. Last year, we launched three products, ET7, ES7, and ET5. To be honest, in terms of the recent performance of these three products, including the second quarter, we understand that the market performance of these three products is lagging behind of our expectations. If we look at the factors that are affecting the performance of these three products, Just like I mentioned before, last year for the users that purchased those three products, they have more user rights and benefits, and they can enjoy the national subsidies. But this year, for the users purchasing these three products, Apple to Apple comparison, the cost increase is around 10,000 to 20,000 RMB. So at the same time, if we look at the microenvironment, we can see the market competition is also getting intensified. So some users are choosing probably some other new brands or some traditional brands over products. This is one factor. And another factor is internal cannibalization or competition. For example, some ES7 users may decide to choose ES6 instead of the ES7, and for some EG5 users, probably they decided to wait a little bit for the E5 touring. This is the situation that we're facing right now. That is why we decided probably we're going to make some adjustments in the near term in terms of our sales channel and network, as well as our organization structure and our sales and marketing strategy and policies.

Of course, I don't think we don't have to worry about those NT2 cars this year. From the current situation, for example, the first car we called this year was the EC7. After we paid for it, its demand is still very stable. As for the ES6, from the current situation, we are very confident about its performance. So, in general, these cars this year, We are very confident in these new models, including the ES8. In fact, we will deliver the ES8 in the near future, but the number of these pre-ordered orders should be far beyond our own expectations. So in general, we feel that some of the external interference factors are actually much less than last year, including the quality and rhythm of the new cars. It should be said that we are doing these things in a more stable state. But for the

Five new products based on the new technology platform 2.0 that we launched this year. We do not have this concern. The first product we launched this year is EC7. After the delivery of EC7, we can see the demand is actually quite stable. As for the ES6, just now I have mentioned that we are very confident about the sales performance of ES6 after the product ran up. And then for this year, we are very confident of our speaking for all the new products that we launched this year, including the ES8. We are about to start the delivery of the ES8 in the near term. And currently, we can see that the reservation order performance is actually higher than our expectations. We believe right now the current pace of our product quality and the product go-to-market is actually much better than before. So we believe for these five new products based on the NT2 technology platform should be able to reach reasonable performance in terms of its delivery ramp-up. And recently we have also launched the 2023 ET7, After the delivery of H7, we believe it can also meet our expectations and the order performance is also quite stable.

Thank you, Bao. My second question is about the difference between high-end and low-end brands.

In the future, because of the excellent brand and service, there is still a certain price range. In the past, the price of EF6 and Model Y was almost the same, but now it is actually 100,000 yuan more expensive. However, in terms of this price range, whether it is from profit margin or profit margin, to be honest, it is still not in an ideal state. After we launched Alps, the price environment Sorry, I forget. Sorry, I forget to translate. So my second question is regarding the marginal outlook of the high-end NIO brands versus the low-end output-based brands. NIO brands remains to be relatively expensive thanks to the branding and the excellent service the company has been offering, but yet to achieve satisfactory or kind of like excellent margins. So when you are moving towards the output-based to the relatively lower end, how do you foresee the margin would be like, especially compared to the high-end ones?

Thank you.

Yes, actually, if you look at it now, it is indeed still in the mark-up period of a brand. The users are still choosing according to the price. So brands, for example, our product's advancedness We serve such an experience, such a priority, including our product service community, such a whole system, such a full-scale experience, such an experience. I think it may not be able to react to the price of this product, that is, the value has no way to react to the price. This is actually a reality at the moment. But I think in the long term, it will eventually return to this value. Of course, we will still have confidence in the value of products and services. In the long term, it will certainly be recognized by users. If you look at it, of course, there are some external factors, such as this price, etc. Some of these changes also affect some of our interest rates. If you look at it, when we were in 2021, of course, we can reach more than 20 interest rates. This is actually not an unachievable thing for us. If the price is now We are not going back to a rational level. Of course, it is not such a difficult thing to achieve 20 horsepower, so it is more fair to look at this matter. In the long term, of course, with the scale, with the efficiency of management, with some of our key components, such as vertical integration and speech, we certainly think that more than 20 to 20, we achieve 25 horsepower, of course, there is a very realistic basis. Then from the perspective of Abyss, it will certainly not be the same. It may be around its price range to find the best solution. Of course, we also saw that some companies can make more than $200,000 in a price of more than $200,000. I don't think there is any trick in the middle. There are more problems in terms of product definition. Of course, if you have all the This is the calculation of more than 1,000 T. This 30 sensor is standard. Where is the cost? You are a god. You can't lower the cost. So the key is to make the value so that the user can feel it. This is our main task. From the perspective of Alpais, we are not worried about its risk-saving rate at all. Because we are very clear about how to define its product definition. From Nia's point of view, we define our product according to this price.

Thank you for your question. Regarding the brand positioning, I believe right now is a very chaotic period for the brand positioning. For the users, for most of the users, in the majority of the times, they choose the products based on the price. So right now in terms of our product, our service, as well as our technology and experience, we believe we are much better than others in those different areas, but the values of our product and services and the technologies are not reflected in the perceived value and the price of the product. This is the reality that we are facing right now, but we believe for the long run, the value of our product and services will be recognized by the users and by the market. At the same time, we do face some challenges in the micro environment. For example, the lithium carbon net cost has significantly impacted our vehicle growth margin. Back in 2021, we have reached around 20% vehicle growth margin. At that time, we believe if the lithium carbon net cost goes back to a reasonable level, we should still have a chance to reach 20% of vehicle gross margin. In the long term, we believe in terms of the economies of scale and the efficiency improvement, as well as the vertical integration of our core components and the in-house R&D capabilities, there's a strong base for us to achieve a 20% vehicle gross margin. That's for NIO, but for output, the strategy is very different. Because we believe that in terms of the vehicle's gross margin, it's actually more about how you define the product and how you design the product. So for Outputs, it's more about finding the best solution in the specific segment that Outputs brand targets at. For us, if we look at the market, we see some companies, they sell the product at a price of around 200,000 RMB, but they can still achieve over 20% vehicle cost margin. So it shows that this is achievable. For NIO, because we have many high specs configurations in our product, for example, the over 1,000 top computing powers and all those smart features, it will be very difficult for us to lower the cost on those components, and this will affect us in terms of lowering the price of our products. But for Alpes, it's different. When we define Alpes' products, of course the target for us is to achieve a reasonable vehicle cost margin, and we believe it is reasonable and it is possible for us to achieve the 20% vehicle cost margin.

Thank you so much, William, for your kind sharing. Thank you.

Thank you.

Your next question comes from Jing Zhang from CICC. Please go ahead. 谢谢管理层的分享。 我这边跟您两个问题就是分别是关于OT+.

My first question is about our OOP Plus. Our OOP Plus data version has been open for TRIO for several months. So can you share some users' data, such as usage time or accumulated mailage or average takeover mailage during this period? And how is their feedback? And we can see the official version will be charged for subscription. So can you share more of your understanding of subscription charge? And also, in the second half of this year, we can see that highway navigation function to swapping station will be further launched. So what do we think of the improvement of customers' experience with this new function? uh last one is is there any time plan for our cto function in the second half year yeah uh

The total use journey has exceeded 41 million kilometers. There are more than 2 million kilometers of use per week. It should be said that its performance is still very good. We are already testing, we are already starting to test some of our city-level navigation support functions. Of course, it will have the application scene of the city area. When we do it this year, Thank you.

Thank you for your question. I will answer the NLP Plus related question, and Stephen is going to address the question about the power swap stations. For the NLP Plus, right now we have over 50,000 users using the NLP Plus services. And for us, the accumulated mileage of the NLP Plus is over 41 million kilometers. And every week, the mileage is around 2 million kilometers. We have already started the test of the NLP Plus in the city scenarios and use cases. This year, we're going to accelerate the test of the NLP Plus in the city use cases or the urban use cases. When it gets ready, we will also release this feature to the users. Based on our internal evaluation right now, we are very confident regarding the performance of the NLP Plus in the urban scenarios. At the same time, regarding the NAD, we are also doing some tests, and if in the future the regulations and the laws change, are in the right place for the NLP Plus release, then we will release the NAD for our users when the regulation is in the right place. And we believe that this is probably right now all the R&D of our NLP Plus and NAD is basically on track and according to our schedules.

My second question is about the battery swapping station. You can see that you have gotten nearly 1,500 stations at present. and nearly we can see 200 stations have been added since this year. So have you seen that the denser of our battery-solving stations network has been built, and it's quite good for ourselves of our new models, especially for our penetration of lower-tier cities?

My name is Steven. I think the short answer is a very clear yes. We have seen a very clear flywheel effect between the power swap station network and our sales growth. As Min just mentioned, we have already deployed 1,500 power swap stations across China, and at the end of this year, the number of power swap stations will rise to around 2,400. And every day, we offer around 70,000 60,000 to 70,000 times a password source to our users. So in average, every day, one password station offers 40 to 50 times a password to our users. So that means, on one hand, our users rely on password stations as their favorite charging method. On the other hand, the password stations are very efficiently utilized. So that's why we see a clear flywheel effect, and that's why we're very determined to accelerate our power association deployment, and also we're very confident that more power associations will lead to more sales growth. And actually in the Yangtze River and some tier one cities, we have seen that after the charging insurance improves, our sales volume also grows. So that's why we are very confident that with more and more possibilities penetrate into the low-tier cities, naturally, new sales will lead to a very strong momentum or a solid growth in the low-tier cities. Last but not least, I think looking forward, as more and more OEMs seriously look at password stations as a more or less standard way, the password stations will become a more and more convenient way for more and more EV users.

Thank you.

Thank you. Your next question comes from Vijay Rakesh from Mizuho Securities. Please go ahead.

Yeah, hi, just a quick question. You know, given some of the new ramps of the five-year models and looks like you're getting good response on it, would you expect second half or even third quarter production run rates to get to the 20,000 per month on average? And just wondering what the expectation is of second half to first half deliveries?

Thank you, Vijay, for your question.

Of course, for us, the target for the second quarter of this year is to deliver over 20,000 units every month, and we are very competent to achieve this target.

Got it. And just one other question. As you look at some of the subsidies... If you look at some of the subsidies moving to Tier 2 cities, is that a near-term... Could that be a challenge for New York, Iran? You don't have enough substations, et cetera, on the Tier 2 cities, et cetera. Thanks. Thank you.

Yes, this year we will deploy 1,000-seat fantasy stations. Of course, most of them are at high speed. Of course, we have many others that will be deployed to some Tier 3, Tier 4 cities. We think this will be a very direct promotion of sales. So, we are already starting to increase speed. So, from May, no, from May, we have already deployed three-stage stations. From April, we started to increase speed in May. This year, our target is to deploy 1,000 additional power swap stations, and the full majority of those power swap stations will be deployed on highways, and some of them will be installed

in the Tier 3 and the Tier 4 cities. We believe that this is going to directly boost the sales performance of our products. Actually, in April, we started the deployment of the PowerSwap Station 3.0, and we accelerated the deployment in May. In June, we believe we're going to deploy around 100 PowerSwap Station 3.0, and we believe Gradually, from now on, we're going to speed up the deployment of the power swap stations.

Thank you.

Thank you, Vijay.

Thank you. As there are no further questions at this time, I'd now like to turn the call back to the company for closing remarks.

Thank you once again for joining us today.

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