NIO Inc.

Hello, ladies and gentlemen. Thank you for standing by for NEO Incorporated's fourth quarter and full year 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. Ray Chen, head of investor relations and corporate finance of the company. Please go ahead, Ray.

Good morning and good evening, everyone. Welcome to new first quarter and full year 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 the chief executive officer, and Ms. Danny Chu, chief financial officer. 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 our sentences is included in certain filings of the company with the US 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 Niel's earnings pressure release and this conference call include discussion 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.

Hello, everyone. Thank you for joining NIO Inc.'

's 2025 Q4 and Full Year Earnings Call. In the fourth quarter of 2025, NIO Inc.

will deliver 124,807 smart electric vehicles, with a growth of 71.7% in total. The delivery of three brands will be high. In Q4 2025, we delivered 124,807 smart EVs, achieving a year-over-year increase of 71.7%.

Quarterly deliveries for all three brands reached record highs. For the full year 2025, the NIO, Envoy, and Firefly brands worked in close synergy and delivered a total of 326,028 vehicles, up 46.9% year-over-year. This marks our return to a strong growth trajectory.

From January to February of 2026, the company delivered 27,182 vehicles, In January and February of 2026, we delivered 27,182 and 20,797 vehicles respectively. For the first quarter, we expected total deliveries to be between 80,000 and 83,000 vehicles, representing a year-over-year increase of 90.1% to 97.2%. At the same time, the other sales profitability reached 11.9%. Based on the scale and profit performance of all businesses in the service and community, it was a complete improvement.

Turning to the financial performance, in Q4 2025, our vehicle margin reached 18.1%. The continuous improvement in margins was mainly driven by strong sales growth, a higher mix of high margin models, and also continued vehicle cost optimization. Meanwhile, the margin of other cells reached 11.9%, supported by the expanding scale and improving profitability of our services and community-related businesses as our user base continues to grow.

In the fourth quarter of 2025, non-GAAP operating profits reached 12.5 billion yuan. GAAP operating profits reached 8.1 billion yuan. At the cash flow level, the company achieved positive free cash flow for two consecutive quarters. In Q4, non-GAAP operating profit reached RMB1.25 billion.

while gap operating profit reached 810 million RMB. On the cash flow side, we delivered positive free cash flow for two consecutive quarters and achieved positive operating cash flow for the full year of 2025. This quarterly profitability also further validates the competitiveness of our technology roadmap, products, and business models. It also demonstrates the continued strengthening of our operational capabilities and efficiency. providing a solid foundation for long-term sustainable development.

Since 2025, we've been serving a broader group of users through the Neo, Anwo, and Firefly brands.

The three brands have been well-recognized by users in their respective segments.

In terms of future brands, since the launch of the new ES8 at the end of September 2025, it has reached the 70,000th new car delivery milestone in only 160 days. We have updated the delivery record of more than 400,000 cars per month. In the second quarter, we will launch the technology administrative SUV flagship, the future ES9. As an extremely large-scale production of future C1 technology and experience, the ES9 will be equipped with core technology leading in multiple industries, For the new brand, the all-new ES8 has shown strong market momentum since deliveries began at the end of September 2025.

In just 160 days, it reached the milestone of 70,000 deliveries, setting a monthly delivery record among vehicles priced above 400,000 RMB. In Q2 this year, we will introduce the NIO ES9, an executive flagship SUV. As a combination of NIO's 11 years of technological innovation and user experience development, the NIO ES9 is equipped with multiple industry-leading technologies delivering a luxurious executive mobility experience for users. In addition, the E-T5, E-T5T, E-S6, and E-C6 will introduce the 2026 version in Q2. Overall, the new brand will continue strengthening the product lineup and its position in the premium fab market.

In terms of the brand, since its launch in 2019, With innovative product experience, superior safety and excellent space performance, and high recognition of large family users, it has become the sales champion of heavy-duty SUVs in the year 2025. The world's first two-seater super five-seater SUV, the L80, will be officially launched in the second quarter. At the same time, the L90 and L60 will also receive product upgrades and changes. As the product layout continues to be rich and the product quality continues to match, Le Dao brand will bring high-quality car experience to more family users, and continue to promote stable sales growth.

For the AMO brand, its L90 has been very well received by large family users since its launch. Thanks to its innovative experience, outstanding safety performance, and exceptional space design, the Envo L90 became the best-selling large battery electric SUV in 2025. Next, the Envo L80, a large five-seat SUV with front and rear trunks, will be introduced in Q2. At the same time, L90 and L60 will also receive product upgrades and refreshes. With an expanding product lineup and continuous product upgrades, the Envo brand will deliver the finest mobility experiences to more family users.

driving steady sales growth.

The Firefly brand officially launched in 2025 has quickly established itself thanks to its clear market positioning, class-leading product competitiveness, and innovative user co-creation model. In 2025, the Firefly ranked number one in the high-end small car market for seven consecutive months. User interest in the Firefly continues to grow across more regions.

未来在核心技术领域的持续研发投入进入全面收获期, Our long-term investments in core technologies are beginning to bear fruit.

key technologies such as the world's first automotive-grade 5-nanometer chip for smart driving, the full-domain vehicle operating system, and the SkyRide Intelligent Chassis have all achieved mass production. These innovations not only elevate product performance and user experience, but also deliver significant cost advantages. Together, they form a strong foundation for the company's long-term competitiveness.

We have promoted the new version of the future world model to the users. In this version, we first used a complete training method of closed loop reinforcement learning in China. Through the leading technology architecture of the future world model and closed loop reinforcement learning, we realized the significant improvement in the experience of full-space navigation support. In February, as the first full-month after the promotion of the new version of the future world model, our smart support driver uses a real-time comparison. Compared to January, it has grown by more than 80%. In late January this year, we released a new version of New World Model, known as NWM.

In this version, we adopted a training paradigm with complete closed-loop reinforcement learning. one of the first implementations of its kind in China. With the advanced architecture of word model and closed-loop reinforcement learning, NWM has significantly enhanced the performance of Navigate on Pilot, or NLP, across all domains. February marks the first full month following the rollout of the new version. During the month, the share of driving time using smart driving increased by more than 80% compared with January. With this update, Over 2,000 PowerSwap stations in urban areas now support PowerSwap pilots, seamlessly integrating with urban NOP and offering users the industry's only fully automated recharging experience.

At present, Le Dao's smart driving has been upgraded to an end-to-end experience in the field of sub-district support, smart car support, and smart safety support. This year, we will also upgrade the smart hardware and software systems of Le Dao products. to allow more users to share the technical achievements of Quan Zhan Ziyuan.

Onward Smart Driving has also achieved end-to-end upgrades across Navigate on Autopilot for urban roads, Parking Assist, and Smart Safety. This year, Onward will further upgrade the Smart Driving hardware and software systems across its lineup, allowing more users to benefit from our full-stack proprietary technologies.

As of now, We have opened 171 future centers and 395 future spaces, with a capacity of up to 420 in Le Dao stores. In terms of service network, we have opened 406 service centers and 75 delivery centers. In the future, Le Dao, FiveLine, and Yingwuqiong in the same time as deepening the key market, will jointly set up a lower market, and through the three-brand joint Sky stores, to cover more local markets for efficient sales and service networks.

On the south side, we currently operate 171 new houses and 395 new spaces, while Anwo has 420 stores. For the service network, we have 406 service centers and 75 delivery centers. In 2026, the three brands will continue to strengthen their presence in key markets, while expanding into more lower-tier markets through sky stores, which serve as a shared sales and service stores for all three brands.

In terms of charging network, so far, we have set up 3,815 charging stations all over the world, and built more than 28,000 supercharging stations and wooden charging stations. On February 6, this year, we realized that we have provided more than 100,000 times of charging services. This is a standard charging model for Li Chengbei to get a full-scale verification of users and the market. During the Spring Festival of this year, the number of recharges was high, breaking the record of 177,000 times on a single day. The recharging network is a system-based innovation program that solves the different beast of car electricity. At the same time, it is becoming an important component of the new power system as an energy storage facility. In the long term, the continuous layout of the recharging network will improve the user experience of electric vehicles,

As of now, we have 3,815 power swap stations and more than 28,000 power chargers and destination chargers worldwide. On February 6, 2026, the company reached the milestone of 100 million cumulative swaps, which demonstrates that battery swapping has been widely validated. by both users and the market. During the Chinese New Year holiday, our swap volume reached new highs, surpassing 177,000 swaps in a single day. PowerSwap is a systematic and innovative solution to addressing the mismatched life cycles of vehicles and batteries. Serving also as a form of energy storage, it is increasingly becoming an integral part of the new power system Over time, the continued expansion of the PowerSwap network will enhance the EV user experience and provide a unique, defensible competitive advantage for the company's long-term success.

In terms of the global layout, while we are focusing on deepening the Chinese market, we will also steadily advance the global layout. Currently, Yonghu Chong and its right-hand version have entered 10 countries. In 2026, we will continue to use the national general management model

While continuing to deepen our presence in the Chinese market, we are also steadily advancing our global strategy. So far, the Firefly, including its right-hand drive version, is available in 10 countries. In 2026, we will continue to expand overseas through the country distributor model, with Firefly serving as a leading brand.

Our subsidiary chip company, Shenji, has completed the first-hand shareholding financing agreement. The financing amount is 22.57 billion RMB, and the capital is over 80 billion yuan. Shenji's chip technology, development capabilities, and commercialization prospects have been recognized by many industrial capital and industry market-oriented investment institutions. This financing will be beneficial to Shenji's continued development and promotion of high-end and competitive chip products. This is a long-term plan that supports the future in the field of autonomous driving and smart technology.

Last month, our smart driving chip subsidiary Genitech, or Shenji, signed an agreement for its first round of equity financing. The round raised 2.257 billion RMB, giving Shenji a post-money valuation of more than 8 billion RMB. Shenzhen's chip technology, R&D capabilities, and commercialization outlook have been widely recognized by multiple leading industry investors and top market institutions. This financing will support Shenzhen's continued development of high-performance chip products and strengthen our long-term positioning in autonomous driving and embodied AI.

Currently, the company has officially entered the third stage of development, which is to start a new high-performance growth cycle.

The company has now entered the third stage of its development, embarking on a new cycle of high-speed growth.

We will continue to engage in continuous investment in the 12th generation of smart electric vehicles to ensure that products and technologies remain at the forefront. In 2026, we will launch three new models to further improve product quality and continue to increase our share in the high-end car market. We will also continue to invest in the construction of charging power infrastructure, We will continue to make determined and sustained investments in the 12 full-stack technology domains for smart EVs, ensuring our leadership in both products and technology.

In 2026, we will launch three new models further strengthening our product portfolio and expanding our share in the premium large vehicle segment. We will also continue investing in charging and swapping infrastructure, while improving the commercial operations of our infrastructure network. In addition, we will further strengthen our sales and service network, ensuring that our overall system remains resilient in an increasingly competitive market.

In the year 2026, we will continue to enhance organizational changes In 2026, we will continue to deepen organizational transformation

We find the CBU mechanism centered on user value creation and strengthen our company-wide business system with heightened ROI awareness and improved cost control. We remain committed to our original aspiration as a user enterprise, delivering more competitive products and technology, better services, and stronger business performance to honor the trust and support of our users, shareholders, and investors.

Thank you, William. Let's now review our key financial results for the post quarter of 2025. Our total revenues reached 34.7 billion RMB, up 75.9% year-over-year and 59% quarter-over-quarter. Vehicle sales were 31.6 billion RMB, representing a strong increase of 80.9% year-over-year and 64.6% quarter-over-quarter. The year-over-year and quarter-over-quarter growth were mainly due to increased deliveries and higher average selling price driven by positive product makes effect. Other sales were 3 billion RMB up 36.6% year-over-year and 17.5% quarter-over-quarter. The year-over-year growth was driven by increased sales of used cars, technical R&D services, and sales of parts, accessories, and after-sales vehicle services, while the quarter-over-quarter increase was mainly due to the increase in revenues from technical R&D services and sales of parts, accessories, and after-sales vehicle services. Looking at margins, vehicle margin was 18.1% compared with 13.1% in Q4 last year and 14.7% last quarter. The year-over-year and quarter-over-quarter improvement were driven by positive product mix effect with the wrap-up of higher margin products. Moreover, gross margin from other sales reached a record high of 11.9% during the quarter, reflecting the continuing enhancement in the profitability of our user-based driven service and community-related businesses. With the improvement, in both vehicle margin and other sales margin, overall gross margin increased to 17.5% compared with 11.7% in Q4 last year and 13.9% last quarter. With the implementation of sales business unit mechanisms and the progress of organizational optimization, we are seeing a sustained improvement in operational efficiency. R&D expenses were 2 billion RMB decreased 44.3% year-over-year and 15.3% quarter-over-quarter. The year-over-year decrease mainly driven by lower personnel costs in R&D functions due to organizational optimization and the decreased design and development costs from different development stages. The quarter-over-quarter decrease was primarily driven by lower personnel costs in R&D functions due to organizational optimization. SGN expenses were 3.5 billion RMB, decreased 27.5% year-over-year, and 15.5% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly driven by a decrease in personnel and related costs in marketing and other supporting functions. As a result of organizational optimization, as well as the decrease in sales and marketing activities. In the first quarter, we achieved an important milestone, our first ever quarterly profit. Profit from operations was 0.8 billion RMB compared with loss from operations of 6 billion RMB in Q4 last year and 3.5 billion RMB last quarter. Excluding share-based compensation expenses, Adjusted profit from operations was 1.25 billion RMB. Net profit was 0.3 billion RMB compared with net loss of 7.1 billion RMB in Q4 last year and the 3.5 billion RMB last quarter. Excluding share-based payment compensation expenses, adjusted net profit was 0.7 billion RMB. Furthermore, We delivered positive operating cash flow and positive free cash flow this quarter. We ended this quarter with a stronger balance sheet with total cash at cash equivalent, restricted cash, short-term investment, and long-term time deposits amounting to 45.9 billion RMB. That wraps up our prepared remarks. For more information and the details of our unaudited fourth quarter and full year 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. Operator?

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. 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 Tim Sal with Morgan Stanley.

Hi, I'm Tim.

This is Tim from Morgan Stanley. Thanks for taking my questions and congratulations for achieving the first ever quarterly profitability. I have two questions. The first question is about the product and volume sales growth target. Because during the call, I think William just mentioned he is going to launch ESA 5 Series and 6 Series facelift in L80 in second quarter. So what's our plan for second half? We have a quick update on the model pipeline for second half. And separately, given the challenge auto industry backdrop, Is New Steel maintaining annual volume growth target of 40% to 50% this year? That's my first question.

Thank you. Thank you, Tim.

Indeed, the overall market of the first quarter of this year is very challenging. We have seen the numbers of this industry. We generally believe that this year's China's overall used car market, compared to last year, is going to drop a little bit. But if you look at new cars, of course, this rate of growth will continue to increase. Especially in this case, the growth of the EV is this pure electricity. We think it will be very strong, because in fact, last year, the um thank you for the question it's true that the entire industry has encountered challenges in the first quarter of this year as

A lot of industry numbers and data have already shown the market and the environment. For this year, we also believe that the size of the Chinese passenger vehicle market will also see a slight decline from last year. But within China's passenger vehicle market, we believe that the penetration rate of the new energy vehicles will continue to grow. And among the new energy vehicles, battery electric vehicle will see a stronger growing momentum. Actually, last year, the increase of the new energy vehicle market as a whole is largely driven by the increase of the BAV models. The penetration rate of BAV increased by 26% to 33%. This is largely driven by the BAV models. And as technology and infrastructure network continue to mature, we believe that the BAV market or segment will maintain the strong momentum also this year.

What is particularly important is that in the high-end market, the new generation of pure electricity has begun to be established. In the high-end market, the penetration rate of pure electricity should be said to have reached three times that of last year. In the high-end market with a sales price of more than 300,000 yuan in 2025, the growth rate of pure electricity is 58% and the growth rate is 4% at the same time. The penetration rate of high-end market B1B increased from 14% in Q4 of 2024 to 27% in Q4 of 2025.

And also more specifically for the above segment, we also see a good potential within the premium segment as the perception and the awareness on the premium battery electric vehicle model has already established in that segment. The penetration will also be growing driven by that. For all the vehicles priced above 300,000 RMB, we actually see an increase of a bath penetration of 58% year over year. Well, for the risk model, the penetration within that price segment actually decreased by 4%. And the overall bath penetration in the premium segment also increased from only 14% in Q4 2024 to 27% in Q4 2025.

the big three and the big five SUVs are indeed the golden age of pure electricity. Since September of 2025, the sales of the big three in pure electricity have been at the top for five consecutive months. In the second half of 2025, the sales of the big three SUVs in pure electricity have increased by more than 350%, and the growth rate has dropped by 6%. In fact, from this trend point of view, our current product rhythm

And more specifically on the large zero battery electric SUVs as well as the large five-seater battery electric SUVs, we also see a strong momentum last year. In September last year, well, since September last year, the large three-row battery electric SUV model has been leading the segment across all power train and energy types for five consecutive months. And in the second half of last year, the BAV cells actually increased by 350%. Well, for RIV, it actually decreased by 6%. So we believe that with this trend where BAV is actually growing, Within the segment, our product launch cadence is also in a perfect match with the micro-trend in the industry. This is also where we have the confidence for the continuous growth this year.

This year, our three new products, ES9, which is an executive flagship SUV, our technology executive SUV flagship, will be launched in the second quarter of this year. On April 9, we will hold a product technology conference. Then, based on the ES8 platform, such a large 5-seat SUV will be released in the third quarter. Our Le Dao's L80 will be released in the second quarter. In this way, we have completed the new ES8, which has been released in the original L90 and is now on sale in the L90. These five large SUVs, medium-sized and large SUVs, we have completed such a

and also as mentioned uh in q2 this uh in actually on april 9th we are going to host the technological launch event for the new es9 which is our flagship executive suv also a technological flagship, and the official launch of the new ES9 will be in Q2 this year. And in the meantime, in Q3, we are going to introduce the large five-seater SUV developed on the same platform as the all-new ES8. And in Q2 this year, for the Envo brand, we are going to introduce the L80, which is a large five-seater SUV, together with the L90, as well as the all-new ES8 that are already in the market and also popular among the users. we will be having five mid-size and mid-to-large SUV models to complete our product lineup in the large SUV premium model.

And this is also where we believe that it will be the key drivers for our full-year growth. its demand is still very stable. The market of L60 is also in the top 30 of the market. This year, we also have a refund for it. We believe that the performance after this refund is worth looking forward to. What is particularly worth mentioning is that the share of the market in the high-end small car market This is a very high market share Then we also saw his demand After coming back from the Spring Festival, he recovered very, very quickly We are also very confident about the sales expectations for the whole year So in general, we are this year For a growth of 40 to 50 this year We are still very confident that January to February is a half of the industry But we And also for the E25, E25P, ES6, and EC6, they are also leading in their respective segments, also with steady demand.

For the AMO L60, it is also the top three among the peers in its segment. Very soon, we are also going to introduce upgrades on the L60, and we can really look forward to the refreshes of this product. And worth noting is that for Firefly, it is actually performing pretty well among the high-end small car segment. with a very significant market share. And for the full year, we also are having confidence with the soft volume of Firefly, as since after the spring festival holiday, we are seeing the rebounding demand for the Firefly models. So for the full year, we do have confidence of achieving a year-over-year volume growth of 40 to 50 percent. The first two months of this year is normally a typical seasonal low for the entire industry, Even against this backdrop, we still achieved a year-over-year growth in our sales volume. And for the Q1 guidance, we also target for a over 90% year-over-year growth. So for the full year, we do have confidence to achieve our volume target.

Thank you. My second question is about the autonomous driving. Because I think during the opening remark, we mentioned after the rollout of the world model, the time of AD usage grew 80% month-to-month in February. So we know that's what key feedback has been received regarding user experience. Additionally, we noticed several EV peers have or would introduce a more meaningful system model upgrade this year. What would be NIO's key technological highlights and differentiators, especially in the tight level 3, level 4 rates? That's my second question. Thank you.

Thank you, Tim.

I would like to evaluate the best indicator of the support value, the best indicator of the support value, . . . . . . In terms of training data, we have not yet invested so much budget to do it. This year, we will invest more budget in the subsequent data training. So this year's second quarter and this year's fourth quarter, we still have two major versions this year. We have now proven that the world model plus the technical route of strengthening learning, Thank you for the question.

Actually for us, we believe that there are two key parameters to showcase if the smart driving experience and functionality is the best for our users. The first is the share of the smart driving time among the total driving time for users in the real-life driving scenarios. And the second is the number of accidents that are mitigated or avoided under the smart driving functionality. As you've mentioned, from January to February this year, after the rollout of the version, the usage of the smart driving functionality actually increased by more than 80% month over month. And this is based on the new word model version with limited computing investments we made last year. And this year we are going to actually increase our investments into the computing power resources and also be able to roll out more training sessions for our new word model technology. And we are targeting two major releases in Q2 and Q4 this year. Overall speaking with this new version, we have already verified that our architecture featuring work model and the reinforcement learning is actually capable of achieving good experience. And it also has a lot greater potential for the continuous capability and functionality upgrades. We also see that the huge amount of data is also helping us with the experience improvement. So overall speaking, we will be having these two major releases.

Thank you, Tim. Thank you.

Your next question comes from Min Wang with Deutsche Bank.

Thank you for the email question. I come from two. Number one is about the first quarter margin guidance. Based on your volume assumption, what should we be looking at? Because you're actually facing the rising memory cost, maybe some of the low material. And recently we may actually launch some of the stuff before ESA, about 10,000 MMB. So can you provide a first quarter margin guidance? And the second question is more about the receivable from related parties, because investors see this number keep increasing every single quarter. Can you provide a forecast? What's the trend for this receivable from related parties? In fact, it came from your battery swap partners. Thank you.

Okay, thank you, Wang Bin. The first question is about the QE interest rate. Regarding the net profit of the whole car, we expect to be able to maintain this level in the fourth quarter. On the one hand, although the sales of the first quarter have been affected by the season and some government policies, but because of the storage order of ES8 and the order recovery after the Spring Festival mentioned by William just now, the overall delivery of ES8 in the first quarter is still good. It can also be guaranteed. So, from the product's product mix, the entire profit margin, because ES8 is relatively high, is still good. Of course, like you mentioned, the increase in price factors such as general materials, memory, carbon monoxide, etc. on the supply side also began to appear in the first quarter. But because it has just begun, the impact on the first quarter Thank you for the question.

Overall speaking, for the vehicle growth margin in Q1, it will be maintained at a similar level as in Q4 last year. In Q1, there were seasonality factors as well as the policy impacts. But overall speaking, we still have ES8 order backlogs. And also since the spring festival holidays, we see a pretty good recovery on the order momentum of the YES-8 model. So overall speaking, the YES-8 model will still be playing a major part in our total deliveries in Q1. So that part is guaranteed. With the product mix largely decided by the high margin product like the YES-8, we will also be able to maintain a relatively flat vehicle growth margin in Q1 this year. But as you've also mentioned, there are other external factors, including the rising raw material costs, rising costs for the memory chips, as well as the lithium carbonate for the battery packs. Those impacts are also going to take effect starting Q1. But as we have just got started, the current impact on our Q1 vehicle margin is also limited.

Okay. The second question is about our 관련 funds. The main reason is that we are targeting the revenue of the battery of Weineng. Of course, with the increase in the penetration rate of BUS and the increase in the sales volume of the entire company, we have increased the revenue of Weineng's battery company. However, within the past period of time, Weineng has achieved positive progress in terms of equity financing, debt financing, and sales analysis.

And regarding your questions on the account payable by the affiliated party, it's mainly the account payable by our battery asset management company, Wayno. As in the recent months, we are seeing growth in both sales volume of our products as well as the take rate of the battery as a service, we also see increasing account payable by the battery assets management company. But for them, they've been keeping a smooth and also diversified financing channels through debt financing, equity financing, or the bank back to consumer installment financing. So overall speaking, they've been having a diversified and a smooth financing channels Financing China, this is also, we believe that we will have a good control and organized control over the account payable by the battery asset management company as well as the payment terms.

Thank you, Wang Bin.

Thank you.

Your next question comes from Paul Gong with UBS.

Thanks for taking my question. My first question is continuing with the raw material cost inflation. Just now I think Stanley has mentioned that the pressure is just beginning to be felt in Q1 and I think probably in Q2 that some more pressure could be felt. Given new is a position that's relatively high-end and still have a relatively strong demand on new orders compared to the peers, do you think you can pass at least part of the cost inflation to the downstream to the customers? That is my first question regarding the raw material cost inflation pass-through.

Hi, Paul.

Yes, we just talked about the pressure of increasing costs. Indeed, this year, because of the needs of AI, including the influence of geopolitics, we can see that in chips, general materials, such as copper and carbon dioxide, there are some trends of rising prices, some fixed and some volatility. So for us, to reduce the cost and the labor pressure. However, the current situation is not as clear as it used to be. Therefore, we will continue to work with the supply chain to improve the efficiency of our supply chain and reduce the negative impact on our labor.

I will follow up on my previous answer. For this year, we do face pressures coming from the vehicle cost structure. And also because of the trend on the AI and computing power, as well as the tensions on the geopolitical side, we do see the rising material costs or the volatilities in the prices regarding memory chips, copper or lithium carbonate, and all kinds of raw materials. So we do have pressure regarding our cost structure as well as the vehicle margin. But for the full year, so far we don't have a clear picture regarding the implication of all these volatilities and uncertainties. But in the meantime, we will keep working with our supply chain partners to improve the supply chain efficiency and to mitigate the negative impact of such uncertainties as much as possible.

Of course, as William just introduced, we still have three new big cars will be launched. In general, we will have five large SUVs this year. Overall, the overall sales of big cars will be relatively high. The horsepower of big cars will also be relatively higher than that of low-priced cars, and the risk-resistant ability will be stronger. So from our strategy, we are still confident that we can absorb or control the It also has introduced by William, this year we are going to launch three new large models.

So together we will be having five large SUV models in our lineup and they will be making major contributions to our sales and delivery volume. As larger vehicle models normally have higher margin and they are more resilient towards this raw material volatilities and uncertainties. In that case, we do have confidence to try to mitigate or offset the impact brought by the rising raw material costs and try to maintain our vehicle growth margin within a reasonable range for this year.

Thank you, Paul. Yes, sorry. If I may have my second question, that is regarding the expense. we have seen that the cost control has taken quite some effects, especially from the R&D that has reduced from $3 billion in Q2 into $2 billion in Q4. Given Q4 is traditionally the strong season with the expense, so moving to Q1 and Q2, do you foresee further optimization on the expense side, or do you think that $2 billion per quarter is going to be the new low?

Okay.

In 2026, we will still maintain a development investment of 20 to 25 billion yuan. From the current perspective, we will maintain the same level as in 2025. Of course, we will continue to improve our research and development efficiency based on CPU's leading mechanism to avoid ineffective investment and expenditure, and to improve the development output under the same investment situation.

Thank you for the question. In 2026, on a quarterly basis, we will be maintaining our R&D investment at the level of around 2 to 2.5 billion RMB per quarter. So for the full year, the R&D expenses will be at the similar level as we spent in 2025. But in the meantime, as now we have the cell business unit mechanism in place, we will use that mechanism to keep improving the R&D efficiency to eradicate the low efficiency items among our R&D activities and also to keep improving the return of all the R&D activities.

On the other hand, we will also adjust the rhythm of our development and increase the relevant investment based on the R&D situation of 2026 and the mechanism of ROI to ensure the strength of our investment in key products and core technologies and promote the long-term competitiveness of the company.

And in the meantime, in this year, based on our business performance as well as the overall return on investment analysis, we will keep a dynamic tracking and also management of our R&D expenses to make sure that we can adapt the pace and intensity of our R&D activities based on all these changing factors so that we don't compromise on the investments into key products and also technologies or the long-term competitiveness of the company.

Thank you, Paul. Thank you very much.

Your next question comes from Nick Lang, J.P. Morgan.

Yeah, thank you for taking my question. I'd like to follow up previous question on profit and also cost. Given, William, you talk about very strong volume outlook. Yeah, for 26 also, we have a lot of new model coming, higher pricing, higher margin products. from second quarter and onward. But at the same time, there's cost inflation pressure taking in from second quarter as well. So, I mean, putting all this together, can you help us understand how should we think about the ability maybe for second half or second quarter? Or should we expect NIO can be potentially reach a non-GAAP profit? or break even sometime in second half or maybe in second half. And what does that mean for our free cash flow position for the full year? Thanks.

Hi, Nick. Yes, indeed. Of course, for sales, we still maintain a goal of 40 to 50% growth throughout the year. Based on the three big cars this year, we are still very confident. As I mentioned earlier, we will also encounter pressure from the cost side. However, we also see a performance of big cars in terms of net profit, such as ES8. Our net profit in the fourth quarter is also close to 25%, so the net profit of the whole car is still relatively strong in terms of risk resistance. Therefore, in the whole year of 2026, we still maintain a non-gap operating profit

Thank you for the question. Regarding the sales volume, we still keep on track of the target of achieving 40% to 50% year-over-year growth in our sales volume. As we've introduced this year, we're going to launch three large models that give us a confidence in the volume target. And in the meantime, regarding the vehicle growth margin, we do have pressure on the margin and also the vehicle cost structure. But as mentioned, we will be having more large models introduced this year as they will be contributing more significant margin. Like for the ES8 in Q4 last year, its vehicle gross margin was close to 25%. So overall speaking, large models are more resilient towards the price volatilities in the market. With the volume and also the vehicle margin outlook combined, we still have the target of achieving full year a non-GAAP operating profit break-even in 2026.

Yeah, thank you, William. Certainly very exciting to hear that. My second question, if it's okay, my second question is really about the Senji self-designed chip. And after recent successful fundraising, $300 million, can you share with us our AIDA chip strategy in the medium term? aside from supporting internal internal ourselves uh is it fair to say that uh senji will also try to explore external customers like other oen or other suppliers uh

Thank you for the question.

For Shenji, it has just completed the first round of equity financing, where during the fundraising, it has also received the wide recognition by the professional institutions as well as the industry.

um institutions and they all speak highly of the capabilities and r&d of the shenzhen company um to be used by more customers like this. Then we will also look at Robtex, such market opportunities in the field of giant intelligence. Our products can completely expand customers in such industries. We have already seen a lot of external customers, including some car companies, who are very interested in our chips. We also have, currently in the field of external business expansion,

And for the ongoing R&D activities of the Shenji Company, it will be developing our next-generation high-performance chips for our products. In the meantime, they are also planning and exploring mid-end chips that are more approachable by more clients in the industry, including potential partners and clients in RoboTaxi or embodied AI applications as we do see a good fit of our products in such areas and industries. Actually, in the meantime, we are already exploring possibilities with some external clients, including some automotive companies who have also shown interest into our chip products.

Our second one, face-to-face,

Actually, the second chip product from Shenji, which is actually a chip still made of a high-end and advanced processing, but can be used by a broader client base, has already achieved a successful tape-out and is also preparing for the mass production.

And this is a very competitive chip product. Your next question comes from Jing Chang with CICC. OK, thank you for taking my question.

My first question is about our upcoming new model. which is ES9. So compared with ET9 released last year, so could you elaborate on its new capability enhancements and also how is our pricing position for this new vehicle?

Our ET9 is an electric vehicle. From the point of view of our entire product range, it is also one of our most high-end products. Of course, we have continuously launched our low-frequency special version, which is also very popular with users. Compared to ET9, of course, there are a lot of advanced technologies on ET9 that can be applied to ES9. But ES9 also has its own Thank you for the question.

New ET9 is our executive flagship. It is also the most premium and advanced product in our lineup. Recently, we have also released the Horizon Edition for the new ET9, and it's well received by the users. And for the ES9, definitely it carries over advanced technologies and also features from the new ET9, but it also comes with its unique tech innovation. Positioning and the product type-wise, these two products are quite different. ET9 is an executive sedan, where ES9 is actually a tech flagship as well as a flagship SUV model.

Thank you. My second question is about the energy replacement method. There has been more market discussion recently. So again, on the background of the rapid development of fast charging, so could we elaborate on the advantages and also necessity of battery swapping, especially infrastructure construction, and also as long as our mid and long-term charging and battery swapping construction plans.

We are very happy to see more companies participating in the construction of charging power networks. The automotive company is also participating in Thank you for the question.

Actually, we are happy to see that more automotive companies are participating into the construction of the charging and swapping network. As more players coming into the joint development of the infrastructure network, it can help accelerate the adoption of a battery electric vehicle, as well as the acceleration of the conversion from the ICE cars, RIVs, and P-Hypes to the BAF models. So we are happy to see such trends.

The charging and charging is not contradictory. In fact, in the future, we have already established more than 28,000 superchargers and目的地充电桩 We are also one of the most active汽车公司中国布局充电桩最积极的汽车公司那么换电加充和超充它是满足不同的用户在不同场景下不同目的的这样一个需要我们本来就是一个可充可换可升级的这么一个体系

But charging and swapping, they are not contradictory. We also have developed more than 28,000 power chargers and the destination chargers. We are also one of the most active Chinese car companies in terms of the charging network development. For swapping, home charging, and the supercharging, they come at different benefits and they serve different purposes for users in different use cases and scenarios. And for us, we always offer this holistic solution featuring charging, swapping, and upgradability.

Of course, we have seen some progress in the charging speed of some companies in the industry recently. This is of course a very good development of some technologies. Of course, the faster the charging is visible in the future, we think its speed and experience are incomparable. This should be said to be a point that everyone in the industry recognizes. But there are still some functions that the charger cannot take on. Because the charger can systematically solve the problem of the difference between the life of the car and the battery. Because China's battery safety standard for electric vehicles in this industry is 70% health in 8 years and 600,000 km. In the past, because of the operation of the vehicle, its use time is relatively short. But for private vehicles, in fact, the vehicle is 15 years old. Some even have a longer life span. So if the vehicle and the battery coincide, then this will be a relatively big problem in 8 years, 9 years, and 10 years. So we always think that changing the battery is to solve the difference between the vehicle and the battery.

and also we see some industry peers they have announced advanced technologies in terms of the charging and the charging speed we are also happy to see such technological innovation and development but in the foreseeable future no matter how fast the charging becomes it will never outperform the speed or the experience of a power swapping and also there are additional benefits to buy the swapping that charging will never offer. We believe that swapping is also a systematic solution to solve the problems regarding the mismatched life cycles between the vehicles and the batteries. In the Chinese automotive industry, the warranty period for the battery pack is normally eight years, 160,000 kilometers, or at 70% state of health after use. For the vehicles, for the business and commercial purposes, normally their duration is shorter. But for the private sectors, the vehicle can be used for up to 15 years. In that case, the battery life cycle is significantly shorter than that of the vehicles. But if the battery and the vehicles are tightly coupled with each other after nine or 10 years, this mismatched life cycle will become a major problem for the users and industries. And for that, we believe that PowerSwap enables a flexible solution or an innovative solution to solve the mismatched life cycles between vehicles and batteries.

In the future, we will combine the long-life battery design, the charging strategy, and the monitoring and maintenance of the battery status. We call it the operation of the battery, which can significantly improve the safety of the battery and maximize the life of the battery. and also under our power swap system together with our long life battery

our charging and the discharging strategy, as well as our life cycle monitoring and also inspections on the battery health. All these measures come as a very systematic and holistic operational approach for us to keep monitoring the safety of the battery and also maximize the longevity of our battery products. And this requires systematic thinking and systematic design. So it's more than a matter of the charging or swapping speed. provide the industry as a magic solution.

In addition, I would like to emphasize that switching power is a distributed energy-saving facility. We all know that in China, the power generation of new energy is a very big problem. China is also building a new power system. Switching power station as a new energy facility, its participation the storage of electricity, and the interaction with the network. In this regard, it has a very big commercial opportunity and commercial value. Because compared to the general storage capacity, we can only reduce one battery. This actually has at least about 6% of such an advantage, an advantage of efficiency. So its operating economy is actually higher than the general storage capacity. So in general, we have to look at it in a more long-term perspective. We now have nearly 3,800 power stations in China. If we have 10,000 power stations, and each power station is filled with batteries, then basically our existing power stations have a storage capacity of 6 to 7 gigawatts. In fact, it is already a very large storage facility and a system.

And also for the power swap system, it is also a distributed energy storage system. As with renewable energy and the green electricity generation, the storage and consumption of such renewable energy is a big challenge. This is also why the Chinese government is now building up the new power system to be able to digest all this green energy. And the power swap station is also a type of the new power system as it can help with energy storage, energy consumption, as well as the interaction with the power grid. In that case, we do see opportunities as well as the value on the business side brought by our power swap system. And also different from the supercharging requiring energy storage. we actually only needed to charge and discharge the battery once, which can help to reduce the secondary energy loss that can contribute to a efficiency improvement or benefit of around 6%. So economic-wise, power swap is also more efficient and viable. And for the charging, for the swapping network, now so far in China, we already have installed more than 3,800 power swap stations. If every station comes with a full battery pack, It will be a total energy storage volume of around 6 to 7 gigawatt hour, which is already pretty sizable from the energy storage perspective.

In general, the continuous deployment of the exchange network is giving our users a better experience, and it is also a very core and important business for our long-term business success.

So overall speaking, PowerSwap not only provides better charging or recharging experience for our users, for the long term it is also helping with our business development and also success. So this is also bringing us a long term business success and it's highly defensive.

Thank you.

Your next question comes from Ming Sun Lee with Bank of America.

Hello, William. I have two questions. So my first question is related to the chip business. So I think previously you already mentioned that the second chip will be more powerful, more competitive compared to your first chip. So could you give a little bit of guidance on this chip? So in the future, will you only focus on autonomous driving and humanoid robot for the chips in the future, or you will also develop the smart cabing-used chip? And also, I think you save a lot of cost because you start to adapt your chip. So could you give some guidance about the vehicle model coverage for your chip? then how much percent the cost can be saved?

Thank you. Our second chip uses a 5nm hardware.

Its performance is very high. It should be equivalent to the performance of three Argon X chips. The cost is much lower than our current 9031X. So, of course, in the field of AD, in the field of giant robots, there is a very wide use case. So, of course, it is actually from the perspective of the design of our chip, of course, now the whole AI is for this. In addition, of course, we will not do training chips, but our chip itself is a very good end-to-end, such a reasoning chip. Its application range is actually very, very wide. Uh, so, uh, of course, which models are being used now? This we still have other customers, we are not very convenient to disclose information, but it is true that we have a lot of customers in this industry who are very interested in this industry, and have been conducting some of these tests and contacts in the early stages.

Thank you for the question. So the second chip product from Shenji will also be a 5 nanometer automotive grid chip, but it comes with a more competitive and efficient cost structure. Performance-wise, it will be on par with 3 or Ring X. Cost-wise, it will also be more approachable and efficient than our first generation Shenji 9031 chip. So in terms of the utilization, it can be used for autonomous driving, smart driving, as well as all the AI applications and embodied AI. In terms of the average chip product, we will not do the training chip, but focusing more on the on-device inference chip. And our chip product will be also qualified to be as a on-device inference chip. And also, it has a lot more potentials to be applied across different scenarios and products. In terms of which vehicle models will be equipped with our second chip product, so far we cannot disclose such information, especially if it's related to our external clients. But we do have some industry peers and also clients showing strong interest into this chip product.

And my second question is related to your service business. In 4Q, your service revenue gross margin reached 11.9%. Is this mainly because the utilization of your swap station continued to increase? And looking into 2026, do you expect the gross margin of the service business will continue to improve based on your projection? Thank you.

Hi, Mei. Regarding the second question, other businesses represent a service and community-related income of our company. In 2025, with the improvement of our maintenance users and the continuous improvement of our efficiency, the overall annual income is actually more than RMB 10 billion, which also accounts for a considerable proportion of our overall income. In 2026, with the continuous improvement of our maintenance, We believe that the overall revenue will continue to increase and will continue to contribute to the company. Of course, what you mentioned here is the charging power business, because we will continue to set up our charging power network in the future, especially our charging stations. Basically, it will be around 1,000 stations a year. This kind of relatively advanced layout will indeed bring some losses to our operations. But in general, now the profits of our other businesses can also cover these losses. So in general, it is a trend that is controllable and favorable.

Thank you for the question. Regarding the revenues from other cells, it's mainly our service revenues as well as the revenues from community-related businesses. And in 2025, as our user base grow and the operational efficiency grow, we have also achieved the growth in our other cells' revenue, more than 10 billion RMB last year, which is also a growing part in our total revenue. And for this year, as we continue to grow our user base, We also are expecting the growth in our other sales revenue, and also it will continue to make positive contribution to the group level of gross margin. And regarding the charging and the swapping business, as we will continue to develop and deploy our infrastructure network, especially our power swap network, at the pace of around the 1,000 new stations every year, with all this upfront investment in the infrastructure, for the near term, we will still see operational losses on the charging and swapping network side. But the profit from other cells can basically cover the losses on the power side. So the overall business development will be actually conducted in a controlled pace.

I would like to add that in 2025, the service and community business will be successful. We expect that in 2026, in the service and community business, will continue to improve. Even if we invest more than $1,000, we should be able to achieve this goal.

And also, I would like to add a comment here. In 2025, we have achieved the profitability on our other selves, mainly our services and community-related businesses. And in 2026, we also believe that we will continue to enhance the profitability of this part, even against the precondition that we are going to install 1,000 new power substations this year, we will still target to achieve improved profitability for this part of the business.

Thank you, Ming. Thank you, William. Thank you, Stanley. That's all my questions.

Your next question comes from with HSBC.

Thank you, Tim. I have two questions. The first is to follow up on the OPEX optimization. We talked about R&D guidance before. Could we share more color in terms of SG&A? So fourth quarter, we hit SG&A absolute value at $3.5 billion. So can we extrapolate to understand that's the baseline? If we multiply it by four, that's the baseline or range we can understand 2026. Hi, Yuqian.

In the fourth quarter of 2025, with the increase in sales and sales revenue, the entire SG&A has entered a relatively reasonable period. Of course, in addition to the increase in revenue just mentioned, it is inseparable from the increase in the efficiency of the organization based on CPU mechanism and IOI that we started in 2025. On the other hand, Q4, because no new product is listed, so there will be relatively fewer market activities. Thank you for your time.

Thank you for the questions. In Q4 2025, as we have seen growth both in sales volume as well as sales revenue, the percentage of SG&A to the sales revenue has also fall into a reasonable range. That is also driven by our CBU mechanism as well as the continuous efforts in the organizational efficiency improvement. And also, it's partially because that in Q4 we didn't introduce or launch any new models, so we didn't have much expenses on the marketing and the relevant activities and events. And for 2026, we will also continue our CBU efforts to make sure that our SG&A expenses are of the highest efficiency and good return. The absolute amount of the SG&A expenses this year will be growing, but proportionally to our sales revenue increase, we would like to control that to be within 10% of our sales revenue.

Okay, you can.

Got it. Thank you, Stanley. The second question is to ask about the volume and margin breakdown by brand. We talked about our volume target, and we also talked about a reasonable margin. So could you help us to understand between like three portfolio brands, or between the core five big SUV portfolio versus rest. It does give us a bit of a sense to understand the dynamics between the brand or how do we cluster our volume mix so that that can support sustainable margin expansion.

关于这个销量和毛利的明细呢, As we said, the whole market situation in the year of 2026 is very dynamic. Currently, the growth is very difficult to break down to a certain type of vehicle. In general, these five large SUVs are very, very high in terms of sales. Secondly, the current sales of fireflies After the Spring Festival, it has returned to the same status as last year, and it seems to be very fast. This is from a sales perspective. Secondly, from a profit point of view, there is a lot of pressure from different brands. As I mentioned earlier, there is a lot of pressure in terms of cost this year. Of course, we will continue to improve the strength of each brand to work hard. But it is difficult to say exactly how much the strength of each brand is. But from a long-term point of view, we have been talking about future brands. We still hope to achieve 20% to 25%. Then the joy is 15% or more. Thank you for the question.

Regarding the south volume and the vehicle growth margin breakdown, as we've mentioned, the market will be still highly dynamic in 2026. So at the moment, it will be very difficult for us to give a specific or precise breakdown on the volume or margin contribution by model. To give you some high-level information, for the five large SUV models that we've mentioned, they will be playing a major role in our sales volume. That's one. And secondly, for the Firefly, since after the spring festival holidays, we also see a quick rebound of its volume and order momentum back to the stable level as it has. last year, so this will also be another indicator regarding the volume driver. And regarding the vehicle gross margin, as we've mentioned, for all three brands, they will be under cost pressure due to the external volatility reasons. But in the meantime, we will still keep improving the vehicle gross margin across all three brands. At the moment, we cannot give you a specific margin outlook or assumption for each brand, put that against a longer time spectrum, we always target to achieve 20% to 25% vehicle gross margin for the new brand, above 15% vehicle gross margin for the AMO brand, and above 10% vehicle gross margin for the Firefly brand. So that is our margin target for all three brands against a longer time spectrum, and it has also been our internal target.

I would like to add one more point. we started to change our internal management from a single pursuit of sales to a quality growth. In fact, it is the balance between a total profit or net profit and sales. Currently, we have relevant teams responsible for each type of vehicle. These teams will help each type of vehicle in sales, Maoli and the final result to find the best balance. So this is also a very important change in the market after we launched CBU last year. And from the results of our fourth quarter and this year's first quarter, we have also seen this improvement brought by our business.

In addition to that, our management mindset has also made a switch since last year, where before it was purely south volume driven. But now we are trying to find the optimal balance between south volume, vehicle gross margin, and the overall business performance. This is also driven by our CBU mechanism. As for each vehicle model, we have established a dedicated vehicle strategy team that will be taking the overarching responsibilities for the vehicle's business performance, finding balance between the margin and also the volume of the product. That is a major change we have made since last year when we had the CPU in place. This is also reflected in our business performance improvement from Q4 to Q1 this year.

Thank you, Yuzhe.

Thank you, Guan Yuzhen.

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 further questions, please feel free to contact Neil's IR team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you.