NIO Inc.

Hello, ladies and gentlemen. Thank you for standing by for NEO Incorporated's second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Head of Investor Relations and Corporate Finance of the company. Please go ahead, Rui.

good morning and good evening everyone welcome to new second quarter 2025 earnings conference call the company's financial and operating results were published in the press release earlier today and are posted on the company's ir website on today's call we have mr william lee founder chairman of the board and ceo and mr stanley chu cfo Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Security 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 Neil's 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 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 Li. William, please go ahead.

大家好,非常感謝各位參加未來2025年第二季度業績溝通會議。 Hello everyone, thank you for joining NIO's 2025 Q2 earnings call.

In Q2, the company delivered 72,056 smart EVs, up 25.6% year-over-year.

In Q2, the company delivered 72,056 smart EVs, The new brand refreshed four products to model year 2025.

further enhancing its product competitiveness. With improved organizational efficiency and growing brand awareness, the Envo brand is gaining momentum in the mainstream family market. And thanks to the clear product positioning and deep market insight into the high-end small car market, the Firefly has been well-received by the target audience.

In July and August of 2025, the company delivered 21,017 units and 31,305 smart electric vehicles. After the launch of the Renault R90 at the end of July and the release of the new ES8 in late August, the market demand is strong. At the same time, it greatly strengthens user confidence and promotes the overall sales of the company. We expect that the total delivery volume of the third quarter will be 87,000 to 91,000, and the growth rate will be 40.7% to 47.1%.

The company delivered 21,017 vehicles in July and 31,305 in August. The launch of the Anvo L90 in late July and the pre-launch of the all-new ES8 in late August dropped strong market demand, boosted user confidence, and lifted overall sales. We expect total deliveries in Q3 to range from 87,000 to 91,000. representing a new high of 40.7% to 47.1% growth year over year.

财务表现方面,公司总体毛利率保持稳健, 其他业务的毛利率实现显著突破。 费用方面,通过基于基本金单元机制的 全面降本增效举措的落地,成本优化效果显著。 二季度,non-GAAP经营亏损环比收窄超过30%。

On the financial side, vehicle growth margin remained stable while other cells saw significant margin improvements. Moreover, the implementation of the cell business unit mechanism has begun to yield tangible cost reductions and efficiency gains. In Q2, the non-gap operating loss narrowed more than 30% quarter over quarter.

未来品牌方面,旗舰车型ET9自二季度全面开启交付以来, in the administrative flagship car teaching market. Based on the continuous research and investment, we first installed on the flagship model ET9 the self-propelled God machine chip and the whole car full operation system. The 2025 ET5, ET5T, ES6, EC6 will also achieve the stable installation and smooth application of the chip. At the same time, the future world model will be fully launched at the end of June and installed on the God chip chip model. Since the start of deliveries in Q2, NIO ET9 has performed strongly in the executive flagship sedan market.

Building on continuous R&D investments, NIO was the first to bring the in-house developed smart driving chip and full domain vehicle operating system on production models, such as ET9, as well as the 2025 ET5, ET5T, ES6, and EC6. In late June, we rolled out the NIO world model across all NIO vehicles equipped with our proprietary smart driving chips. Within just five months, this in-house developed chip enabled the mass release of functions and the seamless migration of core models and applications across five vehicle models, representing China's and also the industry's first full-function delivery on a self-developed flagship smart driving chip.

On August 21, we held the third year of the S8 product technology conference. The new S8 is positioned as a fully-fledged technology flagship SUV, which satisfies users' needs for a new night, a new family, and a new month. It is a masterpiece of future technological innovation. The new S8 has original and exquisite design language, as well as the largest storage and storage space, luxury flagship safety insurance, and leading generation of intelligent driving and riding experience. It is the most competitive model in the high-end three-segment SUV market. On August 21st, NIO hosted the product and technology launch of its core strategic model, the all-new ES8.

As an all-around tech flagship SUV designed for the success of business, family, and individuals, The third-generation ES8 is an epitome of new tech innovation. The all-new ES8 features original and distinctive design language, class-leading cabin and storage space, premium features and comfort experience, flagship safety, as well as smart driving and cabin experience ahead of its time. It is the most competitive model in the premium large three-row SUV segment, receiving significant attention and recognition from both media and users. Pre-orders have started, with test drives starting in mid-September, followed by the official launch at NIO Day in late September and deliveries afterward.

On July 31st, LeDou brand's new family three-seater SUV, LeDou i90, will be officially launched. LeDou i90, based on its spacious design and comfort, full-fledged smart safety protection, and very authentic product pricing, On July 31st, the Anvo L90, a game-changing product among large three-row family SUVs, was launched.

With ingenious space and comfort design, all-around smart safety, competitive pricing, and comprehensive charging and swapping services, the L90 redefines the large zero SUV experience, making it a good fit for large families.

The Anvo L90's self-performance exceeds our expectations.

In its first full delivery month, its deliveries reached a history high of 10,575. We are working closely with our supply chain partners to further ramp up production capacity and keep pace with the strong market demand.

乐道L90的热销提升了乐道品牌的势能,也促进了L60的需求增长。 8月份,L60的订单创造了今年新高。

L90's strong market performance has also boosted Anvo's brand awareness and the demand for the L60. In August, the L60's order intake also hit a new high this year.

融合虫品牌方面,自开启交付以来仅三个月, 融合虫便实现了超一万辆新车的正式交付, 已经成为高端纯电小车市场的第一名。 融合虫的原创设计,旗舰安全,临动驾驶体验, As for Firefly, since delivery has begun, over 10,000 Firefly have been delivered within just three months.

It's already the best-selling model in the high-end small bath market. Its novel design, flagship-level safety, and agile driving dynamics have been well-received. Notably, in recent CIASI tests, Firefly, together with the AMO-L60, achieved the highest safety rating ever. We are pleased to see the growing brand awareness is driving growing demand for Firefly.

In terms of product quality, in June,

NIO ET5 and ET5T ranked segment first in J.D. Power's NEV IQS study, while the EC6 and ES6 ranked top two in the premium BAP segment in J.D. Power's NEV Appeal study. With outstanding product quality, NIO has been the segment leader in J.D. Power's quality study for seven consecutive years since 2019.

In terms of the network, As of now,

the company operates 176 new houses and 416 new spaces, as well as 414 animal stores. On the service side, the company has 388 service centers and 68 delivery centers. Our sales and service network now operates efficiently and cohesively across all three brands, earning recognition from our users.

In terms of charging network, currently, We have set up 3,542 charging stations all over the world, including 1,000 high-speed charging stations in China, and we have set up more than 84 million charging services for users. In July, we completed the high-speed road charging network deep coverage in major cities across the country. All 550 cities across the country can use three-minute charging to connect and direct, completely eliminating users' long-distance travel anxiety. Regarding charging and swapping, the company has 3,542 power swap stations worldwide.

including over 1,000 stations on highways in China, and has provided over 84 million swaps to users. By July this year, the battery swap network has thoroughly covered the highways between major cities in China, connecting 550 cities with three-minute swaps and eliminating users' range anxieties on long trips. In August, we completed the power swap route along China's iconic G318 Sichuan-Xizang Highway, New and old users now can drive their cars and swap all the way to the base camp of Mount Kumulama. Besides, the company has built over 27,000 superchargers and destination chargers. So far, NIO is the car company with the most chargers in China.

从二季度开始,未来开始进入新的周期。 我们过去几年持续的研发投入、基建投入和多品牌布局开始展现出市场竞争力。

In Q2, NIO has entered a new cycle where its continuous investment in technology innovation, infrastructure, and the multi-brand strategy in the past decade has begun to translate into market competitiveness.

未来全新S8和乐道L90的热销充分证明了我们在过去十年坚持的可充可换可升级纯电技术路线能够创造超越期待的用户价值,并越来越被用户所感知和认可。

我相信全新ES8和乐道L90 将引领大三排SUV进入纯电时代, 也将带动其他车型的销量增长。 The strong sales momentum of the new All-New ES8 and Anvo L90 proves that our decades-long commitment to the BAB roadmap with chargeable, swappable, and upgradable technologies can create user value beyond expectations, increasingly recognized and embraced by a growing base of users. We believe the all-new ES8 and L90 will drive the transition of the large Vero SUV market towards full electrification and boost sales growth across other models.

未來持續進行充換電基礎設施的建設, 隨著高速換電網絡的建成, 以及換電線線通車持續推進, 換電的網絡效應逐步顯現, 隨著時間的推移, 用戶將越來越體會到未來換電網絡的體驗優勢。

At the same time, with Niel's continued efforts in the charging and swapping infrastructure, its PowerSwap network now covers major highways and expands into more counties in China. As the network effect of PowerSwap is becoming more evident, over time, more users will experience and understand the unique benefits of Niel's PowerSwap.

In sharing the technology innovation of the future 12 power stations and the charging and charging network infrastructure covering the country, built on the company's 12 full-stack technological capabilities and the nationwide charging and swapping network.

The three brands are reaching a broader user base.

Starting in Q3, the multi-brand strategy will drive our sales growth and capture greater market shares across various segments, helping to advance our mission of shaping a sustainable and brighter future.

Since the beginning of this year, the company has focused on systematically enhancing operational efficiency and execution, leading to significant improvement in both R&D as well as sales and service. With rising sales, improving growth margin, and more efficient cost control, we expect to see a substantial improvement in the company's financial performance, paving the way for the next phase of rapid growth.

Thank you for your support.

With that, I will now turn the call over to Stanley for Q2's financial details. Over to you, Stanley.

Thank you, William. Let's now review our key financial results for the second quarter of 2025. Our total revenues reached 19 billion RMB, increased 9% year-over-year. and 57.9% quarter-over-quarter. Vehicle sales were 16.1 billion RMB, up 2.9% year-over-year and 62.3% quarter-over-quarter. The year-over-year growth was mainly due to higher deliveries, partially offset by a lower average selling price from product mix changes. The quarter-over-quarter increase was mainly from higher deliveries. Other sales were 2.9 billion RMB, grew by 62.6% year-over-year and 37.1% quarter-over-quarter. The annual growth was driven by increased sales of used cars, technical R&D services, sales of cars, and after-sales vehicle services at Power Solutions. While the quarter-over-quarter increase was mainly due to the increase in revenues from used cars, technical R&D services, parts, accessories, and after-sales vehicle services. Looking at margins, vehicle margin was 10.3% compared with 12.2% in the Q2 last year and 10.2% last quarter. The year-over-year decline was mainly due to changes in product mix, partially offset by lower material cost per unit, while quarter-over-quarter vehicle margin remained stable. Overall growth margin was 10% versus 9.7% in Q2 last year and 7.6% last quarter. The year-over-year growth margin stayed stable and the quarter-over-quarter increase was mainly attributable to positive mixed effects given by the increase in revenue from used cars and technical R&D services. Turning to OPEX, R&D expenses were 3 billion RMB, decreased 6.6% year-over-year and 5.5% quarter-over-quarter. The decreases year-over-year and quarter-over-quarter was mainly driven by lower design and development costs from different development stages, with the year-over-year also reflecting reduced depreciation and amortization expenses. SG&E expenses were 4 billion RMB, up 5.5 year-over-year, and down 9.9% quarter-over-quarter. The year-over-year increase was mainly driven by higher personnel costs, rental, and related expenses associated with the expansion of sales and service network, partially offset by decreased sales and marketing activities. The quarter-over-quarter decrease was mainly due to the decrease in personnel costs and marketing and promotional expenses primarily driven by the company's comprehensive organizational optimization efforts in marketing and other supporting functions. Loss from operations was 4.9 billion RMB, down 5.8% year-over-year and 23.5% quarter-over-quarter. Excluding share-based compensation expenses and organizational optimization charges, adjusted loss from operation was 4 billion RMB, representing a decrease of 14% year-over-year and 32.1% quarter-over-quarter. Net loss was 5 billion RMB, showing a decrease of 1% year-over-year and a decrease of 22% quarter-over-quarter. Excluding share-based compensation expenses and organizational optimization charges, adjusted net loss was 4.1 billion RMB, representing a decrease of 9% year-over-year and 34.3% quarter-over-quarter. That wraps up our prepared remarks. For more information and the details of our unaudited second quarter 2025 financial results, please refer to our earnings press release. Now I will turn the call over to the operator to start our Q&A session. Thank you.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. 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 additional questions, you can re-enter the queue. Your first question comes from Jeff Chung from Citi. Please go ahead.

Hi, this is Jeff from Citi.

Thank you, Li Bingzong and Stanley Zong, and congratulations with the good result. My first question is about ES8 and the L90's capacity ramp-up pace and the delivery target for the rest of the year. And due to the strong order backlog, can we expect the December single-month run rate for the group to hit 55,000 units or above?

This is my first question.

Thank you, Jeff.

The demand for L90 and ES8 is very strong. The demand for L90 and ES8 is very strong. The demand for L90 and ES8 is very strong. The demand for L90 and ES8 is very strong. The demand for L90 and ES8 is very strong. The demand for L90 and ES8 is very strong. Our current goal is to achieve a total supply chain of 15,000 units in October. ES8 is a process of production. We hope to achieve a total supply chain of 15,000 units in December. The demand and supply This is the case. Our current goal is to have an average of 50,000 deliveries per month in the fourth quarter of this year. That is to say, the fourth quarter can be more than 150,000. The whole three brands add up to a total of more than 150,000 deliveries. This is currently one of our entire company's goals. Thank you.

Thank you for the question. It's true that with the launch of the Envoy L90 and also the new Audio ES8, we actually see a stronger market demand, higher than what we've expected before the launch. In that case, we've been working closely with our supply chain partners to improve and enhance the production capacity throughout the value chain and also the supply chain. Our target is that in October, the food supply chain capacity for the Envo L90 can achieve and reach 15,000 units a month. And for the ES8, as the ramp-up of production takes slightly longer, we hope that the food supply chain capacity can achieve 150,000 units in December. With that, by looking at both the demand and the supply availabilities and capacity, our Q4 target is to achieve an average of 50,000 units delivered per month. for all three brands, which means that in Q4, our quarterly delivery target, combining all three brands, is 150,000 units. Thank you.

Thank you, Li Binzong. So my second question is about the gross profit margin and whether fourth quarter can break even at the bottom line level. So if we look at the second quarter, Our revenue up 58%, but our gross profit up more than 100% Q on Q. So could you give us more color on the second half vehicle GP margin trend and the non-vehicle GP margin trend? And also, to be specific, how do you see the L90 and the ES8 GP margin independently? Thank you very much.

Hi, Jeff. I'd like to tell you about the trend of the second quarter's profit. The profit of the second quarter's whole car is at 10.3%. The main reason is that we are in the period of replacement of the product in the second quarter. Our 2025 5566 was gradually replaced in mid-May. In terms of sales, the second quarter sales of 72,000 units Thank you for the question.

I would like to walk you through our Q2 product margin. In terms of the vehicle margin in the second quarter of this year, it was 10.3%. As in the second quarter, we have conducted the model year upgrades on the ET5, ET5T, EC6, and ES6. As the product upgrades happened in the mid and late May, in that case, among the 72,000 units we've delivered in Q2, only around 20% was contributed by the model year 25 products. In that case, the actual margin improvement contributed by these four models is not that significant in comparison to Q1.

In the third quarter, with the completion of our future brand 5566 replacement, and the delivery of L90 in the third quarter, our car's horsepower will gradually increase. In the fourth quarter, William just mentioned that ES8 will be delivered from the end of September. In the fourth quarter, L90 and ES8 will be delivered throughout the quarter. Our horsepower target is And then in the third quarter, as we have the full quarter deliveries for the model year 25 products, as well as the start of deliveries of the L90s,

which will further improve the vehicle growth margin. And then in Q4, as William mentioned, starting late September, we are going to start the deliveries of the ES8. We expect the vehicle margin to further grow. So Q4 also represents the first full quarter for the deliveries of both L90 and the ES8. With that, we expect the Q4 vehicle margin to be around 16 to 17% for the entire group to be able to achieve break-even.

In the past 10 years, the accumulation of pure electric technology, the self-sufficiency of key parts, and our continuous purchase and cost control measures have allowed us to make competitive products on new models such as the L90 and ES8, and also achieved a systematic full-face discount. In the fourth quarter,

我们在L90和ES8的这个毛利目标呢,我们是希望能够做到20%。 As based on the decade-long battery bath tech innovation, the in-house development of core parts and components as well as the continuous efforts in the cost control and the savings on the supply side as well as the product cost structure. we achieved not only competitive product performance for the L90 and the all-new ES8, but also a very competitive cost structure and the pricing point. With that in queue for our growth margin target for the L90 and ES8 is 20%.

其他业务的利润在今年的二季度实现了8.2%的正向的毛利率。 当然这里面主要得益于一个是我们 the savings that the users bring, including our sales services and financial services, such an increase in profits, and the reduction in losses of energy services. Of course, more importantly, our second quarter has also achieved a bigger profit in foreign technical services. So, overall, the second quarter has achieved a relatively large increase compared to the previous quarter.

In terms of the growth margin of other cells, it's 8.2% in Q2, and it's mainly contributed by two factors. The first is regarding the revenues contributed by our existing users, including via our aftermarket services, our auto financing business, as well as the narrowed loss on the power services. And the second factor is regarding the margin contributed by our technological service provided to our partners. With these two combined, we've achieved a good and positive growth margin on other cells in Q2.

当然考虑到刚刚提到的对外技术服务呢, 它有一些跟着车型的周期走的这样的一些趋势, 所以不是每个季度都是相对稳定的。 在整个的季度白,季度的预期里面呢, 我们对于其他业务的毛利呢, 希望是能够实现盈亏平衡或者保持一个微亏的状态。

And in terms of the revenues or margin contributed by the technological services we provide to the partners, as it is highly dependent on the project and the project stage, the actual revenues contributed may not be consistent from quarter to quarter. In that case, excluding that part, our expectation for the gross margin on other cells is to be break-even or with a slight loss. quarter over quarter.

Thank you, Jeff.

Thank you for the new guidance. Looking forward to the fourth quarter. Thank you. Thank you.

Thank you. Your next question comes from Bin Wang from Deutsche Bank. Please go ahead.

Thank you. I just want to ask for more detail about number four quarter break-even. Number one is that what's your R&D expense for number three and number four quarter? I think you actually guide close to 2 billion R&D in the number four quarter. Do you still maintain the same R&D guidance for the number four quarter? And secondly, is the same for SG&A? Lastly, what's the breakeven means? Do you breakeven in the OP level or that profit level? Is gap or non-gap?

Thank you very much for my question.

Thank you, Wang Bin. Regarding the goal of equal balance, we still to maintain a non-gap climate balance. I will talk about this in advance. Back to the two questions you mentioned, one is the guidance of R&D. Actually, since the second season, we have done a lot of work in terms of research and development, combining our basic business unit mechanism. Our entire goal is to gradually improve the research efficiency without affecting the production of our main line. So, on one hand, our entire output means that our next product planning and product development will not be affected. But secondly, we still have to push the entire team to improve efficiency. So from the guidance of the entire development, we still hope to achieve a goal of 2 billion in the third quarter and the fourth quarter.

Thank you for the question. Regarding the break-even target, our quarterly break-even target is based on the non-GAAP basis. And regarding the R&D and SG&A guidance, starting Q2 this year, we have conducted a series of measures combining our CBU mechanism to control our R&D expenses. Our principle is that without compromising on the major and the core R&D activities and also project planning, we will keep improving the R&D efficiency, which means that without compromising or affecting our major product planning and R&D, we will push for higher efficiencies in the R&D activities. With that, our target for the Q3 and the Q4 R&D expenses on the non-GAAP basis will be $2 billion per quarter.

关于SDA,公司也会结合基本经营单元的经营机制去逐步提升这方面的效率, From the second quarter, because the sales are still at 70,000 units, the sales ratio of the entire SGA station will still be higher. But with the increase in sales and sales revenue, the efficiency in this area will gradually increase. Of course, in the third quarter, because of the listing of many of our new models, the entire market activity and market cost will be a little more. We still can't reach our entire And in terms of the SG&A expenses, also based on our CBO mechanism, we've conducted measures to improve the overall SG&A efficiency.

In the second quarter, our sales volume is at the magnitude of around 70,000 units. So the SG&A ratio to the sales revenue still accounts for a relatively high percentage. But as in Q3 and Q4, we grow our sales volume and also sales revenue, we expect the percentage of SG&A in the sales revenue to actually coming down to a more reasonable range. But as in Q3, we're planning several new product launches, there will also be corresponding marketing and go-to-market expenses. In that case, in Q3, we are still not able to achieve a break-even on the SG&A expenses. But in Q4, the non-GAAP target for the SG&A expenses will be within 10% of the sales revenue.

Thank you, Wanbin.

Thank you. Your next question comes from Tim Huizhou from Morgan Stanley.

Please go ahead.

Hi, this is Tim from Morgan Stanley. Thanks for taking my question.

So I have two questions. The first one is about the new model pipeline. Given the robustness of L90 and DSC that occupy our capacity, will the company adjust the launch schedule for the upcoming models? And we noticed that the new days have notably moved forward to late September. Can management team also share more insight into the update model pipeline in the following quarters?

That's my first question. Thank you. Thank you, Tim.

Indeed, from a production point of view, we are definitely prioritizing and protecting L90 and the new ES8. If you take a look at it, on the road, even L60's production capacity is for L90 to make some waves. Now, L60 has become a product that we need to wait according to OTD. uh uh Thank you for the question.

It's true that At the moment, we actually prioritize the production of the L90 and also the Onyo ES8 from the production capacity perspective. For the Anwo brand, we even have to really give way to the L90 productions and compromising on the production of the L60, so that you will find that our L60 users are also waiting up to pick up their cars. So right now, we actually have four models with other backlogs accumulated, and users will need to wait for the new car pickup, including L90, all new ES8, L60, and also Firefly. And regarding the production capacity for the Anvo product, starting October, we expect the capacity to come back to a normal range, mainly supported and fueled by the production capacity of the batteries. As in the past several months, we've been working closely with our battery partners to ramp up the production capacity.

总的来说,四季度我们是希望把乐道的全供应链产能提升到每个月2.5万辆。 那么在未来品牌方面的话,现在主要的挑战也是全新ES8 102度的电池。 The demand for the new ES8 is indeed better than our original plan. So in the beginning, our battery supply was indeed a bit conservative, but we cooperated with our battery partners to make full use of this property. So in terms of the whole production capacity in the fourth quarter, in terms of the future production capacity of this brand, we are currently aiming to achieve 25,000 a month.

With that in Q4, for the Anvo brand, we expect the full supply chain production capacity to be around 25,000 units a month. And regarding the new brand, for the launch of the all-new ES8, we also have challenges regarding the supply of the brand-new 102-kilowatt-hour battery. As the demand of the ES8 is actually stronger than we expected, then at the beginning we underestimated the demand for the ES8 and also the volume assumption for the battery packs. We've been working closely also with the battery suppliers and partners to secure the supply of this new battery pack. With that in Q4, we expect the full supply chain capacity for the new brand can also achieve a 25,000 units monthly capacity.

Now, in terms of FyFly, its productivity is relatively stable. In the fourth quarter, we hope that its high-end productivity can reach about 6,000 units per month. In this way, the peak productivity of the three brands is about 50,000 units per month, supporting a turnover of 50,000 units per month.

And regarding Firefly, we are also steadily increase its production and supply capacity. And in Q4, we expect the production capacity to ramp up to up to 6,000 units a month at its peak. So it means that in Q4, the combined production capacity of all three brands will be as high as 56,000 units a month to be able to support our demand.

. . . . . We still have to look at it according to the market situation. As for the subsequent product plan, in addition to L806 and L80, we still have two large SUVs in the future that will be launched next year. One is the ES9 that everyone knows, and there is a large 5-speed SUV ES7. So next year, we still have three large models to deliver.

As we have already dedicated our full capacity to the production of the existing models in the market, so for this year we will not have any new models launched or delivered to the market. Previously we've mentioned that we plan to also launch the L80 of the Anwo brand, but as now we have run out of all the capacities available, we actually have to decide to delay the deliveries of this new model. But in terms of the launch or the go-to-market cadence for the L80, that's to be decided. In addition to the Envo L80, next year, in the coming quarters, we also have another two new models coming under the new brand, also two large SUVs. One is the ES9, as many of the users and the public already know about it.

and also yes seven a larger five-seater suv model as for the new day this year as it is happening in september

the protagonist of this event will be definitely the all-new ES8.

Thank you, Violet. My second question is about the pricing strategy and also just a quick follow-up on the margin side. Because we noticed that both the L90 and the new ES8 have launched with aggressive pricing strategies. So just want to know that, will this pricing strategy be extended to all the upcoming models under both brands? And if that's the case, how should we think about NIO's gross profit margin trajectory into next year? What would be a more sustainable and ideal equal margin level once all the new models are upgraded next year?

That's my second question. Thank you.

Hi, Tim. As a future company, our long-term goal is to achieve 20% of our profit. According to the profit goal we talked about before, in the future, we still need to achieve 20% or even 25% of our profit. And then, our joy is to maintain 15% of our profit and achieve 10% of our profit. So this is the long-term goal of the entire company. As you mentioned, in the company we have listed, ES8 and L90, as well as the new models of next year, we still hope to be able to... When we define the product, we are already fully prepared. We hope to be able to provide a relatively strong cost support for the price of the machine. So I don't think we need to worry too much about this. Compared to the previous generation of products, our generation of products still have sufficient cost competitiveness. Thank you for the question.

For the entire company, as we've also previously mentioned, for the long term, our group level product margin is actually 20%. That's our target. More specifically on the growth margin by brand. For the new brand, our target is to achieve 20% vehicle growth margin and even target a higher margin of 25%. And for Envo, no lower than 15% for the long-term, and for Firefly, around 10%. For the ES8 and the L90 newly launched this year, as well as the new models coming up next year, we also contribute to this target. At the product definition and design stage, we have already prepared for an aggressive pricing strategy, and our cost structure can also support such strategy to be able to achieve more competitive pricings of our products without compromising on the product competitiveness itself. This is actually driven and enabled by our decade-long tech innovation, technology accumulation, in-house developed parts and systems, and also stringent cost control.

Thank you, Kim.

Thank you. Thanks a lot.

Thank you. Your next question comes from Jing Cheng from CICC. Please go ahead.

Thank you for taking my question. My first question is still about our L90 and also ES8. So we have already seen that these two new models have already demonstrated our enhanced product capability and also very competitive pricing. still with a very solid loss profit margin. So besides, previously, Stanley has already told us of the technology and also the platform upgrades. Could you share more about the underlying successful experience about these two new models, such as our changes on maybe supply chain, maybe the dealer's networks?

This is my first question.

Thank you.

Indeed, the competitiveness of our new generation of products is very strong and comprehensive. I think from the perspective of product capability and cost competitiveness, it comes first from our technological innovation. If you look at it, The 900-foot high-pressure platform allows us to make high-pressure components from the power supply and high-pressure components. It is very advanced. It is very important in terms of weight reduction, performance, and other aspects. In fact, in many aspects, this lightweight technology can also bring cost advantages. So in this aspect, the extreme design and some of these technical innovations can bring very good competitiveness, cost competitiveness, and experience competitiveness. As you can see, whether it's the L90 or the new S8, whether it's the front or the back, the entire storage space is very large. This also comes from our extreme development capabilities. Then in terms of intelligentization, We actually have a whole new digital structure, which is actually very advanced. The central computing unit plus the regional control system is actually a structure that supports this rich smart function and can also have many advantages in terms of cost and weight. For example, like our smart insurance company, in fact, uh, uh,

Thank you for the question. Regarding the overall product competitiveness on the third generation, it is actually getting stronger and better. And this also allows for more competitive product competitiveness as well as the cost of structure. And as we've mentioned, this is enabled by our continuous tech innovation. Let's say the 900-volt high-voltage architecture. This platform actually allows for more integrated and lightweight design of not only the powertrain system as well as the high voltage architecture throughout the vehicle to be able to achieve high performance and the lightweight design. Such lightweight design also allows for improved cost structure and also experience competitiveness. For example, on the ES8 and also L90, we've achieved a huge frunk and also trunk space. Such huge storage space is also enabled by the high integration level of our architecture and systems. And another example is regarding the smart technologies, the digital architecture. On the third generation, we adopted the innovative digital architecture with the central computing cluster plus the zonal controllers. This can help achieve a better cost as well as the mass performance and the management. Let me take E-fields as an example. Previously, on other older models, there are physical fuse boxes, which is as heavy as 10 kilos per car, and it can take up 8 liters of space. But with eFuse, we are able to integrate them into the master board that can actually manage the power supplies throughout the vehicle at a very detailed and precise level, but still contributing to the mass reduction and cost improvement.

So from these simple examples, we can see that technology innovation can bring about an improvement in user experience, and also bring about an increase in cost. Of course, it also includes our chips, but the investment in chips is very large. However, our flagship chip, the 9031, can be compared to other flagship chips in the industry of the four. There is no doubt that the cost has also decreased a lot. Although we invested a lot in the development cost, but we responded to the boom, and its cost has also decreased a lot.

So this improvement in both cost structure as well as user experiences are enabled by the tech innovation. Another example is regarding our proprietary smart driving chip. Of course, we've made a major upfront investment in the chip development, but the performance of our in-house developed smart driving chip NX1931 can achieve the performance that is on par with four flagship chips in the industry. So R&D-wise, we made investment upfront, yet BOM cost-wise,

this smart driving chip can also achieve savings. very large, using 0.3T to make a very large battery pack. For example, some even use 0.3T to make 90 degrees of electricity, 100 degrees of electricity. Because 0.3T, if you want to take care of the cost, you can only use 0.3T. But it brings a problem, that is, its weight is very heavy. So if you look at our, for example, 102T battery pack or 85T battery pack, in fact, compared with other batteries that can do 600km, 700km of battery life, Our latest battery packs are about 200 kg lighter than others. For example, Le Dao's 85 kg battery pack is only 400 kg. In the future, the new S8's 102 kg battery pack is only 500 kg. If you take a look at it, in the industry, if someone makes a battery pack of 90°C or 100°C, the battery pack is basically 600 to 700 kg. I just gave you an example. Of course, behind this, it reflects

And another thing is regarding the technology roadmap, mainly the chargeable, swappable, and upgradable technologies for our products. With this, we are able to select the most suitable and optimal battery pack, including its capacity and the size for our users. For example, For some of our peers and competitors, they actually need to strike a balance between the battery cost and also the battery range. Then they choose the LFP as the chemical system, and they make a battery pack of around 90 or 100 kilowatt-hour capacity. But with that, the battery pack is actually very big and heavy. If you look at our battery packs, for the Anwo L90, we put a 85-kilowatt-hour battery inside, and for the ES8, 102-kilowatt-hour battery inside. They can achieve the driving range and performance on par with those peers, but in terms of the mass, the 85 one is only around 400 kilos, and the 102-kilowatt-hour battery pack is only around 500 kilos. So it is actually around 200 kilos lighter than many of our peers' solutions. This is also another mass and cost optimizations enabled by our chargeable, swappable, and upgradable tech solution.

From the perspective of product competitiveness in the automotive industry, of course, it includes experience and cost. Basically, it is based on three levels of such an ability. First is the technical route. I just mentioned the advantages of many technical routes. The second one is product planning. Which target market should we provide? Which products should we provide to our users? The third one is product definition. From our own summary and reflection point of view, we believe that in terms of our product, our technical route and product planning, For example, we serve different users from different brands. For example, we adhere to the original 8th generation of the 12th generation of the upgrade. We think that what we have been doing in the past is still very good in terms of direction. In terms of product definition, we have definitely learned a lot of experience in the past. Then we are on such a generation of products, such as the L90 ES8, we also go. And in terms of a competitive product,

in both cost as well as the user experience, I think three things will define the competitiveness of a product. The first is regarding the technology roadmap, the second is regarding the product planning, and the third is regarding the product definition itself. And our past practice and experiences prove that our technology roadmap including our multi-brand strategy, our chargeable, swappable, upgradable solutions, our 12 full-stack tech capabilities developed in-house, as well as our product planning, are in general in the right direction. Yet when it comes to the product definition, we did have some lessons learned from the previous generations and platforms. With that, on the third generation with our all-new ES8 and L90, we not only draw the best practices from the industry and peers, but also make corrections from within to be able to achieve a better product performance and success with the ES8 and L90, as it is actually enjoying the effort of our competitive technology roadmap, reasonable product planning, as well as more precise product definition and the market insights that can fit for the users' needs in the Chinese market.

Of course, in terms of supply chain, there is no doubt This long-term cooperation relationship with the supply chain is also very important for increasing the competitiveness of cost. In the past year or two, we have also made a lot of adjustments in terms of supply chain strategy. We will be more focused on the long-term development of technology routes and our long-term development. to establish a closer relationship with such partners. In this regard, we are also promoting a strategy based on the concept and supply chain of partners. In the future, we will be more determined to implement such a concept in the setting of some new platforms to set the cost goals with our partners.

And in terms of the supply chain, this is also playing a very important role in achieving the long-term competitiveness of our product cost structure by establishing a win-win cooperation with our partners. And in the past one or two years, we've also made adjustments to our supply chain and the partner strategy. In general, we look for the partners who believe in the roadmap technology decisions of the company, as well as believe in the long-term potentials of the company. And we work closely with these partners to jointly define the cost of targets and all types of targets. So for the existing products and also the coming platforms, we will also adopt this principle in our nomination and the sourcing strategy to be able to work with our partners closely.

Thank you.

Thank you.

Thank you.

Your next question comes from from Bank of America. Please go ahead.

Thank you, and congrats for the good results. I also have two questions. So my first question is, could you confirm your new model pipeline for 2026? Can I confirm there will be at least five new cars, which include ES6, ES7, ES9? L80 and also the second model under the Firefly brand.

谢谢,那个26年的产品其实前面也讲过了, 我们主要还有三款大车会推向这个市场。 其他的产品在ET5, ET5T, ES6, EC6这四款今年 The four new products that have just been replaced do not have a new plan for next year. Because these four products this year, in fact, their entire smart system, we have already upgraded to C to S. For example, the new line and our operating system, this has been completely changed to a snow-coated platform. Then a few days ago, we also just announced the standard of 100 degrees of electricity, so we can further improve their competitiveness in terms of battery life. We think that their competitiveness is still very strong in the foreseeable future. We have also made a lot of improvements in terms of internal and external appearance, so next year we will not have This is an upgraded plan. Of course, there are some monthly benefits. We now call it some small versions like this. We will have this regularly, just like we just pushed the championship memorial plate. This kind of product update will still be used.

Regarding our product strategy for 2026, as we've mentioned, we will focus on three large SUV models for the Envoy and also the new brand. Regarding the ET5, ET5T, ES6, and EC6, as this year we have just upgraded these four models to the model year 2025. For next year, we don't have major plans to upgrade or phase shift these four models. As on the model year 2025, we've already upgraded Interior, exterior, the smart system is also upgraded to the latest CDRS platform with those upgrade in the smart driving chip as well as the operating system. And recently we have also announced to make the 100 kWh battery as a standard configuration on these four models. We believe that with all these changes, the competitiveness of these four models will continue to be strong in the coming quarters. Of course, it doesn't mean that we will make zero changes to these models. We will still roll out some product calendars. Earlier this year, we have released the Champion Edition for the 5 and the 6 series. And in the coming year, we will also have such special versions and editions for these models.

Thank you.

And also for the Firefly brand, we don't have a plan for the second model next year.

Thank you, William. And my second question is regarding to the operating expense control. So in 2026, what level do we expect for your R&D expense per quarter? Do you think you can maintain around 2 billion non-GAAP R&D expense per quarter? And also, could you guide your latest CAPEX plan for 2025 and 2026? Thank you.

In general, from this year, we have done a lot of efficient work. Based on the CBO mechanism, the efficiency of our current research has improved a lot. The output of the entire ROI has improved a lot. So from next year, we will basically maintain a research output of 2 billion to 2.5 billion per month. Regarding the R&D expenses, starting this year, we've made major efforts

based on the CBO mechanism improving our R&D efficiencies and the overall ROI of our R&D activities and investment. For the next year, our quarterly R&D expense non-gap will be around 2 to 2.5 billion RMB per quarter. That is a reasonable range for us to also maintain our long-term competitiveness from the technology perspective. the major viability comes from the new model development, as we believe that the investment for the foundational level R&D activities and technologies are mostly finished.

About next year's CAPEX, because we haven't done the economic plan for next year, so we don't have a specific scale yet. But I think there are two things that can be provided. One is that we hope that next year's Huanian Station construction rely on this social resources to help us to build more of this fast station. And the second one is, of course, the whole KF-X still depends on, especially our new model, a trend of listing and development. But for the whole gasoline, it may be next year. We hope to maintain a level that is not too different from this year. Of course, let's see if there is a chance to be able to

And also regarding the CapEx, as we haven't started the operational target discussion and the setting for the next year, I may not have a very clear or precise outlook regarding the CapEx for 2026. But I can share with you two principles we have. The first is regarding the PowerSwap network. In general, we still hope to leverage as much as possible the hotness resources for the PowerSwap network construction. And regarding the R&D CapEx on the product, it's mainly dependent on the overall R&D cadence and also go-to-market strategies of the new models. Overall speaking, for next year, we hope the CapEx can be similar to the level of this year, or if possible, achieve even better results next year. But as I've emphasized, it's highly dependent on the overall launch cadence and also R&D cadence of the new models.

Thank you, Willie. Thank you, Stanley. That's all my questions.

Thank you. Your next question comes from Paul Gong from UBS.

Please go ahead.

Thanks, William, for taking my question. My first question is regarding the impact of the 100 kilowatt hours of the battery that you are going to adopt across a new brand. Can you share with us the financial impacts of this strategy? Definitely, we can see that the competitiveness of the vehicles are getting enhanced because of this 100 kilowatt hours of the battery. But what would be the incremental costs on your front? Thank you. This is my first question.

Hi, Paul. The impact of 100-degree standard electricity is actually mentioned in the previous policy announcement and communication with users. In 5566, when we launched in 2025, we actually offered a lot of discounts to users. The price adjustment this time will actually take back the corresponding discount. For example, take back the 380,000 discount, and then we turn it into a standard price. Thank you for the question. When we announced the

policy changes on the 100-kilowatt-hour battery pack, we've already introduced the potential impact or implications on the financials of the product. As when we launched the model year 5 and model year 2025 product, we offered a series of special offers and discounts to our users together with the products. And this time, when we make the 100 kilowatt-hour battery a standard configuration of the 5 and the 6 series, we actually withdraw many of these offers we provided at the launch of the product. And in exchange, we offer the 100 kilowatt-hour battery as a standard configuration. So from the transactional perspective, there is no major change. From the user's perspective, as well as from the vehicle margin perspective, there is also no major impact.

OK. And another impact is more on the sales.

and the upper funnel of our south leads for the five and the six series after announcing the change on the 100 kilowatt-hour battery, we actually observed increase in the upper funnel incoming leads. Of course, this is a newly launched policy. In terms of the long-term implication, we will still need some time to observe, but overall impact is more positive than negative.

Okay, so my second question is regarding the impact of switching to your self-developed chips. Just now, I think William mentioned that it is saving cost, and it is also depending on the volume because of the fixed cost versus the volume. So can you give us some color that, for example, if you are delivering 20,000 per month with a new self-developed chip, what would be the cost saving on the per car basis? If this volume is coming to 50,000 per month, what would be the positive impacts from the cost saving angle due to the switching of the self-developed chips? Just want to have a better estimate and sensitivity on that.

Thank you.

Actually, from the point of view of the chip, we know that our research and development costs are all included in the current cost. So, in fact, the current amount has nothing to do with the price of our single chip. We bought the chip from the chip manufacturing and manufacturing enterprises. Thank you for the question.

Regarding the chip R&D expenses and investment, as we actually recognize that in our immediate financials and the P&Ls, so its actual cost of savings per unit is not really closely tied in the actual volume we sell. or actual number of pieces we sell. In terms of the production of these chips, we purchase the wafers directly from our chip manufacturing partners. So in that case, the cost saving per unit through the in-house developed chip is not tied into the delivery volumes we achieve.

Of course, if you compare the same computing power with our second generation, of course, it will be much lower. But in comparison to the chip solution we used on the second generation products,

Achieving the same level of computing performance, the cost is actually more advantageous and competitive with our own solution. And even on the third generation, in comparison to the industry flagship smart driving chips, we still have a cost advantage and competitiveness with our in-house solution. But here I will not elaborate on the specific savings achieved per piece.

I totally understood. That is very helpful. Thank you.

Thank you. Your next question comes from from HSBC. Please go ahead.

Thank you, Tim. The first question would be more exploration on the pricing side. So ES8, L90 attractive pricing, good volume traction. So how does management would evaluate the potential internal categorization to the existing portfolios, such as the ES6 or L60, and the potential splash impact into next year's new model pipeline?

首先我觉得这个从定价的来讲, 当然是要基于市场和成本, Uh, uh, uh, uh, This is the order of this OTD. So from this point of view, it is a positive impact. The launch of the new ES8, plus our recent standard of 100 degrees in 5566, we think that such a combination, we have organized the entire price system more clearly. We think that the improvement of the market capacity of future brands will also have a positive impact on the current 5566 sales. In fact, we also saw some positive market signals in the past few days. In the first few days, it may have a little impact because of the experience of the first-line failure. But in general, the long term is definitely a very positive impact.

As we've mentioned, the pricing strategy for a product is highly dependent on the market competition, the cost structure of the product, as well as the volume and the pricing sensitivity of the product in the segment. For the L90, as we've mentioned, with its launch, actually it has helped boost the sales volume of L60. Right now, even for the L60 users, they will have to wait for the new cars deliveries and the pickups. Actually, in August, we even achieved a new high for the order intake of L60 for this year. So the overall impact from L90 on L60 is positive. And regarding the all-new ES8, as we've also mentioned, we have now made the 100-kilowatt-hour battery a standard configuration on the 5 and the 6 series. So the attractive pricing of ES8 is helping boosted the brand awareness of the new brand, which can also introduce more attention to the 5 and the 6 series. So with this logical and clear pricing system set up for the brand, we believe that the overall impact will also be positive on the new brand. Maybe at the beginning, our fellow will struggle with how to allocate their focuses and time across different products. But for the long term, we believe that the impact of these two models and the new models will be positive across the brands and the products.

I would like to emphasize that recently, the hot sales of the L90 and the new ES8, and there are also a lot of very good pure electric large-scale SUVs in the market. There are a lot of car manufacturers that come from different cities. The impact on the market users is still very big. If we look at the numbers, Recently, I think this number will definitely increase further. If you just look at the number in the last half of the year, the growth of BEV is 39% year-on-year growth, and the growth of RIF is 14%. I believe that if we consider the numbers in July and August, the gap will become larger. So I think this trend is actually very clear. We see this pure electricity This SUV, especially in this kind of big SUV, medium-sized and large-sized SUVs, such a competitiveness of pure electricity has begun to manifest. So this is why we often talk about this era of pure electricity big three SUVs. This is actually a change in the market. This will also

And also, as we see strong demand for the ONU-S8 and the L90, we have also observed the successful product or great product, great large-circle battery electric SUV models launched not only by NIO, but also by our competitors who used to have only RIV products in the market. So with all this large three-row SUVs coming to the market, we also observed a market trend. In the first half of this year, the growth rate of the BAV segment increased by 39% year-over-year, and for RIV, that's only 14%. If we consider about the sales volume in July and August for the BAV and the RIV respectively, I believe that the growth rate of the BAV will be even faster than that of RIV. In that case, we are observing growing competitiveness of the products in the mid- and mid-large battery electric SUV segment, as this is more well-received and also evident to the public. This is why we say that the golden era of the large, third-row battery electric SUV is arriving, as with more mature user mindset and also stronger competitiveness of the products the market is shifting towards that direction. This will also help the long-term competitiveness and the popularity of our existing SUV models, including ES6 and L60.

Thank you, Yitian.

Got it. Thank you. The second question is a little bit more exploration on the OPEC side. You touched upon the innovation, redesign, and R&D commitment. So could you give us a little bit more quantification and a breakdown in terms of the OPEC's cut target, if there is any, or just break down the cost optimization initiatives in a little bit more detail. Thank you.

关于这个OPEX,刚刚我们也提到, 就是我们对于今年四季度 non-GAF应该平衡的这样的一个背景上面, 我们对于R&D的这个目标是在不影响主线产出, 就是我们长远的竞争力的情况下, We hope to control the development cost at about 200 billion. SG&A hopes to be able to control it within 10% of the entire sales revenue. This is our goal as a four-level non-profit profit. For the long term, in the 26th year of the future media, we hope to control the development cost um thank you for the question as we've introduced towards the q4 non-gap break-even target our

Our overall principle is that for the R&D expenses, without compromising on the major R&D activities and also long-term competitiveness, we would like to control the quarterly R&D expenses to be within 2 billion RMB for this year, and for SG&A ratio to the sales revenue, around 10% this year. That's our target for this year towards the quarterly break even. And for the long term, as we've also mentioned, For the year of 2026, our R&D expenses will be around 2 to 2.5 billion RMB per quarter, depending on the product go-to market and also development cadence. And for the SG&A expenses, we would like to continue to achieve higher efficiency and utilization of expenses. That's the overall principle.

Thank you, Yuchen.

Thank you. Thank you. Your next question comes from Tina Hao from Goldman Sachs. Please go ahead.

Thanks, management, for taking my question. Just a very quick one. So in the longer term, how should we think about the stabilized sales volume of L90 as well as ES8 on an average monthly basis? Thank you.

Thank you, Tina. China's market competition is indeed very intense. In addition, we also see that the trend of the entire sales of smart electric vehicles is that the effect of new cars is relatively strong, and then it will enter a stable sales period. In fact, in the market, it is really difficult for us to see a car that can be on a relatively large volume for a long time. In fact, this is still quite challenging. It's hard for us to give a long-term stability, but we have to work towards a higher goal. Since this year, we have been building a new marketing style for Neil's team and Envoy's team. This new marketing style allows us to This kind of new effect can be extended and can ensure that it can be at a relatively high level of such a stable sales. But in real life, this challenge is still very big. So we still need to take a while to see clearly whether our salesperson can help such a very competitive product like L90 and ESA. Its stable sales level can be at a level that satisfies the market and the investors, and satisfies the users.

Thank you for the question. Thank you for the question. As the automotive industry here in China is highly competitive, and if you look at the self-trend of the smart electric vehicles, you seldom see any new model that can capture a very stable market share and a very major trend or popularity in the market for a very long time. In that case, it is also difficult for us to really share with you a clear outlook regarding what the stabilized sales volume of the ES8 and L90 will be for the long term. But definitely, we set ourselves a higher target and we will also try the best. Starting this year for the new and onward brand, we also started to build up the team capabilities by implementing a completely new sales and marketing paradigm. We hope that through this new sales and marketing paradigm it can actually help us to maintain and capture the market share of our new models as long as possible to prolong their impact and influence in the market and also to stabilize their reasonable and satisfying sales volume in the market against the fierce competition as long as possible. But as we have just implemented this paradigm and it will also take time for us to understand if it is truly helping us with the stabilization of these two great models, ES8 and the L90. But overall, we hope that this can achieve a good result that is satisfying to the market, investors, and also our users.

Thank you. Thank you, William.

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

Thank you again for joining us today. If you have any further questions, please feel free to contact Neil's investor relations team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you.