Operator: Hello, ladies and gentlemen. Thank you for standing by for NIO Inc. second quarter 2026 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, AVP and Head of IR, Corporate Finance and Strategic Investment of the company. Please go ahead, Rui.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Good morning and good evening, everyone. Welcome to NIO’s second quarter 2026 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 Li, Founder, Chairman of the Board, and Chief Executive Officer, and Mr. Stanley Qu, 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company’s actual results may be materially different from views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, The Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited.
The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that NIO’s earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to NIO’s press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Hello, everyone, and thank you for joining NIO Inc.’s 2026 Q2 earnings call.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: In Q2, the company delivered a total of 107,658 smart EVs, achieving year-over-year growth of 49.4%.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In Q2, the NIO, ONVO, and Firefly brands all achieved year-over-year and quarter-over-quarter growth in both sales volume and average transaction price. More specifically, the NIO brand delivered 60,945 vehicles, leading China’s passenger vehicle market with transaction prices above 350,000 RMB across all powertrain types. The ONVO brand delivered 29,124 vehicles, demonstrating strong growth momentum. The Firefly brand delivered 17,589 vehicles, maintaining its leadership in the high-end compact car market.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: In July and August, the company delivered 35,534 and 35,836 vehicles respectively. In Q3, the total deliveries are expected to range between 108,000 and 111,000 units.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: On the financial side, in Q2, the company’s gross margin stood at 18.4%, driven by continued strong performance from the higher-margin products and ongoing cost optimization. Despite pressure from sharply rising raw material and chip costs, the vehicle gross margin remained solid at 18.5%. The gross margin of other sales was 17%, with services and community-related businesses continuing to contribute to profitability.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: On the financial side, in Q2, the company’s gross margin stood at 18.4%, driven by continued strong performance from the higher-margin products and ongoing cost optimization. Despite pressure from sharply rising raw material and chip costs, the vehicle gross margin remained solid at 18.5%. The gross margin of other sales was 17%, with services and community-related businesses continuing to contribute to profitability.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In Q2, the company continued to generate non-GAAP operating profit, as well as positive operating cash flow and free cash flow, further increasing its cash reserves to RMB 56.7 billion. This helped strengthen the company’s business fundamentals while laying solid groundwork for its long-term sustainable development.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 接下来我跟大家交流一下公司产品研发和运营方面的进展。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Now turning to our product R&D and operations.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 蔚来品牌方面，7月9日全场景科技旗舰SUV ES8大五座版正式上市，并随后开启交付，以大五座空间优势更好地满足用户多元化全场景的出行需求。全新ES8上市以来，市场表现持续强劲，上市335天即实现第14万辆新车交付，在40万级乘用车市场以及大型SUV市场均保持领先。在捷兰路用户净推荐值研究中，蔚来ES8位列纯电车型第一，实现销量与用户口碑的双冠军。与此同时，科技行政旗舰SUV ES9 5月底开始交付，在逐步转化传统豪华燃油SUV的用户群体。6月及7月在中国成交价50万以上的乘用车市场销量位居第一。旗舰车型的持续放量，进一步巩固蔚来品牌在高端纯电市场的领先优势。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: For the NIO brand, on July 9th, the flagship SUV ES9 launched and began deliveries of the five-seat version, catering to more diverse user needs and scenarios with its five-seat layout and spacious interior. The ES8 has maintained strong momentum since launch and achieved the 140,000 units delivery milestone in just 335 days, leading China’s passenger vehicle segment in the RMB 400,000 price range and the large SUV segment. In the Net Promoter Score survey by J.L.Ro, the new ES8 achieved the highest NPS among BEVs, ranking first in both sales volume and product reputation. In the meantime, the flagship executive SUV ES9, which began deliveries in late May, has started winning over users from traditional luxury fuel-powered SUVs, leading in sales volume among passenger vehicles with transactional prices above RMB 500,000 in June and July.
The continued strong performance of NIO brand’s flagship models has further strengthened its leading position in the premium BEV market.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 乐道品牌方面，L90交付满一周年，累计销量突破6万台，在30万级纯电大型SUV市场位列第一。乐道L80持续稳定交付，依托出色的装载空间与场景化的产品力，获得用户的广泛认可。二季度依托L90和L80突出的产品优势，乐道品牌在成交价30万以内的大型SUV中位居第一。同时，更新迭代后的L60实现了全面的升级，精准匹配目标用户需求，对乐道整体销量形成了有力的支撑。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: For the ONVO brand, the L90 surpassed 60,000 deliveries within its first year since launch, ranking number one among large battery electric SUVs priced around RMB 300,000. The L80 continued to see steady deliveries, winning broad recommendations with its exceptional cargo space and scenario-based functionality. in Q2, leveraging the outstanding product strengths of the L90 and L80, the ONVO brand became the sales leader among large SUVs priced below RMB 300,000. In addition, the upgraded L60 better meets the needs of its target users, further strengthening ONVO’s sales momentum.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 萤火虫品牌方面，萤火虫已经连续15个月位居中国高端小车市场占有率第一，稳固细分市场的龙头地位，凭借精准的产品定位与独特的品牌调性，持续获得目标用户的认可。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The Firefly brand has been number one in market share among high-end compact cars for 15 consecutive months, maintaining its leadership in the segment. Its precise product positioning and unique brand identity continue to win the hearts of target users.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 智能驾驶方面，6月18日，我们向超过70万的蔚来及乐道用户推送了蔚来世界模型全新版本。此次升级继续深挖蔚来世界模型加闭环强化学习技术架构的潜力，功能体验大幅迭代。今年经过两次大版本更新后，整体用户使用率不断提高。升级后至今，蔚来品牌用户的城区领航辅助的行驶里程环比提升了92.8%。乐道的全量用户也迎来全面体验升级。升级后，乐道用户城区领航辅助的行驶里程环比提升了127.8%。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In terms of smart driving, on June 18th, the latest version of NIO World Model was rolled out to over 700,000 NIO and ONVO users. As the second major release this year, the new version further leveraged the World Model architecture and closed-loop reinforcement learning, delivering significant enhancements in functionality and user experience. User adoption has continued to grow. Since the upgrade, NIO users’ mileage with Urban NOP+ has increased by 92.8%. The upgrade also covered all ONVO users whose mileage with Urban NOP+ increased by 127.8% following the upgrade.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 依托顶尖的模型算法、系统架构与工程落地能力，蔚来是行业首家实现通用芯片平台与自研芯片平台系统共建开发同步发版的车企。我们实现了跨平台、跨品牌用户都能获得全生命周期持续领先的自驾体验，为用户带来常新常新的智能出行体验。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Powered by leading model algorithms, systematic architecture, and strong engineering capabilities, NIO is the industry’s first car company to develop and roll out smart driving systems in parallel across general purpose and proprietary chip platforms, with a common software branch and synchronized releases. Users across different technology platforms and brands can enjoy a continuously evolving, industry-leading smart driving experience throughout the vehicle lifecycle.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 销售服务网络方面，截至目前，我们开设了165家蔚来中心，376家蔚来空间，乐道门店441家，服务中心420家，交付中心93家。在2026年的J.D. Power售后服务满意度研究中，蔚来同时获得豪华品牌、中国品牌售后服务满意度第一。自榜单设立以来，蔚来品牌持续保持这一成绩，我们的高品质服务得到了用户和行业的认可。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: On the sales and service front, so far, the company has 165 NIO Houses, 376 NIO Spaces, 441 NIO Power Network stores, as well as 420 service centers and 93 delivery centers. In J.D. Power’s 2026 Customer Service Index study for NEVs, the NIO brand ranked number 1 among both premium brands and Chinese brands, maintaining its top position since the rankings were first introduced. Our high-quality services have earned widespread recognition from both the industry and users.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 充换电网络方面，截至目前，我们在全球已累计布局4123座换电站，建成超过30294根超充桩和目的地充电桩。8月7日，蔚来第4000座，同时也是首座第五代换电站正式落成。第五代换电站可以实现蔚来、乐道、萤火虫三品牌全车型兼容，覆盖从小型车到大型SUV全尺寸车型。五代站运营和服务效率显著升级，进一步强化对外服务与开放运营能力。同时，依托标准化、规模化的能源运营体系，我们也在积极布局电力交易等增值服务，持续拓宽并释放换电模式的商业化价值。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In terms of the power network, at present, the company has 4,123 Power Swap Stations and 30,294 Power Chargers and Destination Charging worldwide. On August 7th, NIO’s 4,000th Power Swap Station went live, marking the launch of its first fifth-generation station. The fifth generation can support battery swaps for all models of NIO, ONVO, and Firefly, covering a wide range of vehicle sizes from compact cars to full-size SUVs. With significantly enhanced operational and service efficiency, the fifth-generation station is able to provide enhanced external services and support open operations. Leveraging standardized power operations at scale, the company is also exploring value-added businesses such as electricity trading, further unlocking the commercial value of battery swapping.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 7月23日，蔚来入选《时代周刊》全球最具可持续发展力企业榜单，也是本次唯一上榜的中国车企。我们将继续坚持纯电发展路线，与用户一起共创可持续和更美好的未来。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: On July 23rd, NIO was named by Time Magazine as one of the world’s most sustainable companies of 2026, becoming the only Chinese automaker on the list. We will continue to advance our BEV roadmap, shaping a more sustainable and brighter future with our users.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 当前，中国汽车市场竞争进入了新的阶段，竞争格局迎来几大核心的变化：纯电渗透力持续快速提升，纯电已经成为市场主流的动力形式；行业从品牌混沌期进入品牌澄清期，品牌成为用户选择产品的重要考量因素；竞争也从单点的产品比拼转向企业综合体系化能力竞争的决赛阶段。长期以来，我们始终专注纯电，专注高端，专注体系能力建设的努力，契合了行业的最新发展趋势，蔚来正进入新的高质量增长周期，我们对实现既定的经营目标充满信心。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: As China’s automotive market enters a new phase of competition, the landscape is undergoing several important changes. First, with the rapid growth of BEV penetration, BEVs have become a mainstream powertrain in the market. Second, the industry is moving from a period of brand ambiguity toward greater brand clarity, with brand becoming an increasingly important factor in consumers’ purchasing decisions. Third, the final round of competition is shifting from product-level competition to competition in comprehensive system capabilities. For years, we have remained committed to the premium BEV strategy and have been building our system capabilities. This puts us well aligned with the industry’s evolution and positions us for a new phase of high-quality growth. We are confident in achieving our operating targets.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Stanley.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 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.
Stanley Qu, Chief Financial Officer, NIO Inc.: Thank you, William. Let’s now review our key financial results for the second quarter of 2026. Our total revenues reached RMB 32.1 billion, up 69.1% year-over-year, and 25.9% quarter-over-quarter. Vehicle sales were RMB 29.1 billion, up 80.1% year-over-year and 27.5% quarter-over-quarter. The year-over-year growth was mainly due to the increased deliveries and a higher average selling price, driven by a more favorable product mix. The quarter-over-quarter increase was driven by higher deliveries. Other sales were RMB 3.1 billion, up 7.2% year-over-year, and 12% quarter-over-quarter.
The year-over-year growth was driven by increased sales of parts, accessories, and after-sales vehicle services, partially offset by decreased sales of used cars and technical research and development services. The quarter-over-quarter increase was due to increase in revenues from used car sales and parts, accessories, and after-sales vehicle services sales. Looking at margins, vehicle margin was 18.5%, compared with 10.3% in Q2 last year, and 18.8% last quarter. The year-over-year improvement was driven by a more favorable product mix, while quarter-over-quarter vehicle margin remained stable. Overall gross margin was 18.4% versus 10% in Q2 last year and 19% last quarter.
The year-over-year increase was mainly due to the increased vehicle margin. The quarter-over-quarter slight decrease was mainly due to gross margins from vehicle sales, provision of power solutions, and sales of parts, accessories, and after-sales vehicle services. Turning to OPEX, R&D expenses were RMB 2.1 billion, decreased 28.7% year-over-year, and increased 13.8% quarter-over-quarter. The year-over-year decrease was mainly driven by lower personnel costs in R&D functions due to organizational optimization, reduced design and development costs from different development stages, and improved operational efficiency. The quarter-over-quarter increase was mainly due to the incremental design and development costs for new products and technologies, as well as the increased personnel cost in research and development functions.
SG&A expenses were RMB 4.4 billion, increased 11.6% year-over-year and 22.5% quarter-over-quarter. The year-over-year increase was mainly driven by increase in sales and marketing activities associated with new product launches, while the quarter-over-quarter increase also reflected increased sales and marketing activities associated with new product launches as well as higher personnel and related costs for marketing functions and share-based compensation for general corporate functions. Loss from operations was RMB 0.3 billion, down 92.9% year-over-year, and up 12.4% quarter-over-quarter. Excluding share-based compensation expenses, adjusted profit from operations was RMB 0.2 billion. Net loss was RMB 0.5 billion, showing a decrease of 89.4% year-over-year and an increase 59% quarter-over-quarter.
Excluding share-based compensation expenses, adjusted net profit was RMB 26.1 million. Furthermore, our positive operating cash flow grew substantially, and we achieved positive free cash flow. Our cash position strengthened further with RMB 56.7 billion in total cash as cash equivalents, restricted cash, short-term investments, and long-term time deposits. That wraps up our prepared remarks. For more information and the details of our unaudited second quarter 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.
Operator: 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. For the benefit of all participants on today’s call, please limit yourself to two questions, and if you have additional questions, you can reenter the queue. Your first question comes from Bin Wang with Deutsche Bank.
Bin Wang, Analyst, Deutsche Bank: Thank you. My question is about the order flow sustainability about your ES8 and ES6 SUV. We noticed that in the premium SUV markets, some of your peers competitor, although show knife only a few several months. Can you explain why is that? How NIO differentiate to facing the competition in the high-end premium SUV market? Thank you.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 谢谢王斌。我们的主力旗舰产品ES9、ES8的需求还是非常强劲的。如果要去看的话，我们ES8在8月份交付了10,999台，接近11,000台。那我们在11个月的时间，交付了140,000台。那么在接下来这个9月，我们肯定会迎来第150,000台的交付。那么在一年的时间里，我们相信会交付超过150,000台。所以它的需求还是非常strong的。我以前也讲过，中国的汽车产业，因为新产品迭代太快，就很少有车能持续热销。那么我们全新ES8就打破了这个行业的这样一个现状，成为了一个持续热销的这么一个车。现在来看，需求仍然是非常强劲的。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. Regarding NIO’s flagship models, including the ES8 and ES9, they will continue to see strong demand. For the ES8, in August, we delivered around 10,099 units. In 11 months, we have delivered more than 140,000 ES8. In September, it is going to witness its next milestone of 150,000 deliveries, which means that in less than one year since its launch, it has already surpassed 150,000 unit delivery. The demand for the models are pretty strong. As previously we have talked about how the products are quickly iterated and introduced in the Chinese automotive market, where for a new model in the market, it is normally difficult or having difficulty to lost its popularity and attention by the market. But for the ES8, it may be the first model that is breaking away from this market trend.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 我们的科技旗舰SUV ES9，上市以后交付到现在，需求仍然是非常强劲的。我们的Horizon Special Edition和我们的Signature Edition，目前的等待周期还是要超过三个月，接近四个月，三个多月。需求还是非常强劲。从目前来看，我们如果去看8月份和7月份相比，因为7月份我们有一些以前的预订金的订单，那如果我们看8月份，我们都没有预订金订单了，我们新增的订单和7月份相比，其实增长得还是比较多的。所以我们对于ES9的持续的热销还是非常有信心的。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Regarding our flagship executive SUV ES9, it also sees strong demand since its launch, especially for the Horizon Edition and the Signature Edition. Right now, for users placing an order, they will need to wait for 3 months or nearly 4 months to pick up a new car. If we look at the sales number of the ES9 in August and July, as in July we were still consuming some preorders. But if we are making a comparison between the incremental orders in July and August, we actually have seen a growth from July to August. So we are also confident in the continuous popularity and also demand for the ES9.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 特别想强调的是，我们的ES9，四分之三以上的用户都是来自于蔚来社群以外的新增的用户，也就是说它的破圈的效应还是非常明显。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Also, one thing worth noting is that, around three quarters of the ES9 users are actually from non-existing NIO users, from users outside of the NIO user community. This also shows that the ES9 has successfully reached out to a broader user base.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 那这个原因，我觉得是有几个方面，首先还是我们的技术领先。从技术创新的角度来讲，像我们ES9有几十项行业首发的技术和领先同级的技术。那这个技术创新，还是我们非常坚持的一个产品的竞争力的基础。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: There are several reasons for the popularity and the demand for the ES9. The first is the technology innovation. On the ES9, we have introduced or debuted several thousands of industry first or industry leading technologies. Tech innovation is still so far a very important competitiveness and also differentiation of our products.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 那第二个就是我们产品的定义是精准满足了在高端市场的商务兼顾家庭的用户，或者这种商务需求的用户，这样的一些情感和功能的体验的需求。这方面的话，用户的满意度是非常高的。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Secondly, the product definition has precisely catered to the needs of the users in the premium segment, especially users buying the car for their business needs and also for their family occasions, where our cars have catered to both their emotional as well as functional needs. Our users also speak highly of the product experience.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 第三个的话，还是我们的充换电网络，还有我们售后服务的体系，带来了非常难以复制的一个体系化的优势。那么我们根据《节能与新能源汽车推广应用监测报告》，我们的售后服务在新能源汽车品牌中是连续三期夺冠。那么我们也在J.D.
J.D. Power 的 2026 年 的 售 后 满 意 度 的 研 究 中 ， 是 豪 华 品 牌 和 中 国 品 牌 的 双 料 第 一 ， 这 个 也 持 续 好 几 年 了 。 所 以 这 个 也 是 对 高 端 市 场 来 说 ， 服 务 的 体 系 、 服 务 的 体 验 也 是 非 常 重 要 。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The third is the holistic and one of a kind experience enabled by our charging and swapping network, as well as our after sales services, which are actually a systematic capability difficult to replicate by the competitors. According to the J.L.Ro recent study on the aftermarket satisfaction on the new energy vehicles, we have been topping the list for three times consecutively. Also in J.D. Power’s recent research in terms of the post market satisfaction on the new energy vehicles, we are also ranking the first for several years in a row. For the premium segment, such experience centering on the services and post market services are also very important.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 那最后一点也是非常重要的一点，我也多次讲到，中国汽车市场，在新能源汽车的市场，从品牌的混沌期进入到了品牌的沉浸期，那么用户的购车决策从过去几年比参数，现在已经转向了选品牌，先选品牌。那我们在高端的沉淀的市场已经建立了一个品牌的信字，那用户其实也广泛地形成了一个BBA的下一辆选蔚来，高端的沉淀选蔚来，这样的一个市场的共识。如果去看我们蔚来的用户，在购车的决策的原因里面，品牌的原因占比已经超过了30%，那也是印证了我们的蔚来在高端市场已经建立了一个深入人心的一个品牌的形象。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The fourth one as also previously talked about, the entire automotive market is now shifting from a period of brand ambiguity to a period of brand clarity, where users purchasing decisions was previously largely based on the specifications of a product. Now their decision is mostly driven by the brand. In that case, NIO has also established a pretty solid foothold and a clear brand awareness in the premium battery electric vehicle market. Among many users, they naturally believe that if they are going to choose a car to replace their existing Mercedes-Benz, BMW and Audi, NIO will be their natural choice. If they are looking for a premium BEV model, then NIO is also their go-to car.
Among our existing NIO users, we have also studied their purchasing decision, where we find that the brand reputation and awareness is already accounted for more than 30% of their purchasing decision. This has further proven our solid foothold in the premium BEV market.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 从终端的上险数据去看的话，二季度NIO brand在中国市场的平均成交价是406,000元，全面超越了传统豪华品牌BBA，在主流高端品牌中排名第一；7月份，蔚来品牌的平均成交价也进一步来到了43万以上。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: If we further look at the numbers by the Insurance Association, in Q2, the average selling price of the NIO brand was RMB 406,000, far higher than the prices of Mercedes-Benz, BMW, and Audi. It is ranking the first among all the mainstream premium brands. In July, the average selling price of the NIO brand was over RMB 430,000.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 我们相信品牌的稀缺性和它的这样一个竞争力，会成为我们未来这三个品牌在长期参与市场竞争非常重要的一个基础。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: We believe that the scarcity of such a preeminence of our brands, as well as the competitiveness of our brands across all three brands, will also become a long-term foundation for our competitiveness going into the future.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you Wang Bin. Thank you.
Operator: Your next question comes from Tim Hsiao with Morgan Stanley.
Tim Hsiao, Analyst, Morgan Stanley: Hi, this is Tim from Morgan Stanley. Thanks for taking my questions during the Congress on the third consecutive profitable quarter. I have two questions. The first one is about ONVO, because compared to the robust growth of the NIO and the Firefly brands, we noticed ONVO’s customer conversion and order momentum have been relatively moderate to ramp since launch. Just want to know how is the progress in regards to adjustment to customer incentive and the selling strategies, and looking for what further changes with management plan to effectively improve ONVO’s order momentum? That’s my first question. Thank you.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 谢谢Tim。ONVO所在的市场的竞争确实要激烈很多。和NIO还有Firefly相比的话，它参与的是一个非常激烈的市场的竞争，不管是从品牌的数量还是从车型的数量都要多很多。那如果我们去看的话，ONVO从品牌发布到现在取得的成绩，其实从一个细分市场去看的话，还是非常的不错的。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. It’s true that ONVO is actually in a more competitive market than NIO and Firefly, where the intensity level of competition in terms of the number of brands and also the number of models are also much more intense than that of NIO and Firefly. But if we look at the ONVO’s overarching performance since its launch, especially from its specific segment and market, it has actually done some good progress and achievements.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 首先我们还是看它的成交均价，就是今年上半年大家都知道，中国的乘用车这个大盘挑战很大，但乐道品牌的平均成交单价是超过了24万，和去年同比是增长的，还是比较多的。其实中国今年上半年只有八个品牌实现了量价齐升，那么乐道就是其中之一。所以从这个角度来讲，它的平均单价、成交均价超越了部分的传统的豪华品牌。所以我觉得作为一个高品质的家庭用车的品牌，从品牌的打造的方面，应该说是设立了一个比较好的基础。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: If we look at the average selling price of the ONVO products, as we all know that the passenger vehicle market in the first half of this year was a bit challenging. Even amid these challenges, ONVO still achieved an average selling price of RMB 240,000, achieving also significant growth year-over-year. In the first half of this year in the China’s automotive market, only eight brands managed to achieve increase both in their sales volume as well as the average selling price, where ONVO is one of these eight brands. So in terms of the average selling price, ONVO is even outperforming some traditional luxury brands. If we perceive ONVO as a premium family-oriented brand, it is actually achieving a pretty good baseline from this brand definition perspective.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 第二个就是乐道的产品的综合竞争力还是非常强的。我们如果去看它从销售线索到订单的转化率，在行业里面是非常领先的。也就是说，用户一旦接触到了乐道的产品，其实最后买我们车的成功率是比较高的。也能够看出来，我们现在主要的一个挑战还是品牌的知名度。现在乐道的品牌知名度确实要比上五六年前的蔚来的品牌。所以接下来，我们希望能够通过更多更积极更主动的方式，通过跨界合作、线下活动、深挖社群这样的一些方式，让更多的人能够接触到乐道的品牌。这个就是我们目前主要的一个工作目标。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In terms of the overall product competitiveness, we also see some good progress and also foundation, especially a good conversion rate from sales leads and opportunities all the way to orders. This means that when users get to know about the brand and products, it is also more possible and likely for them to place an order on the ONVO product. Right now, for the ONVO brand, the challenge is more about its overall brand awareness, where its current brand awareness is maybe comparable with NIO’s awareness around 5 to 6 years ago. Right now our focus is also to enlarge the brand awareness and also the popularity through different collaborations, offline activities, and also engagements with more targeted communities.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 第二个举措就是我们会加快未来乐道、萤火虫从三个品牌共用的Sky门店的布局，持续加强销售网络的建设，能够让乐道的品牌更多地触达三四线城市的家庭用户群体。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The second actions we are taking is to keep rolling out our Sky stores, where we can host the NIO, ONVO, and the Firefly brands under the same roof. With that, we are able to further expand our sales network and also to really introduce our ONVO brand to more users in the lower tier cities.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 第三个的话，接下来我们还是会持续地推出新的产品，去服务更广泛的家庭用户群体。当然方向上来讲，我们还是会保持乐道作为一个高品质家庭用车品牌的这样一个定位，我们不会进到太低的一个市场，还会平衡量和毛利的关系。总的来说，我们认为中国市场现在是缺乐道这样一个定位，在传统的像丰田、大众他们的高线的产品的这样一个品牌的。我觉得这对乐道来说是非常好的一个机会。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The third action is to also introducing new ONVO products so that we can also reach out to broader family user base. But in the meantime, we will still maintain ONVO positioning as a premium high quality family-oriented brand. We will not be very aggressive in entering into the entry level of segment. We will still strike a balance between the sales volume and also the vehicle gross margin. Right now in the Chinese automotive market, we actually see a vacancy where there is no such brand that is comparable with the upscale product lines of Toyota or Volkswagen that can serve the needs of the family users. This is where we see the opportunity for ONVO to develop its awareness in that specific segment.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Tim, thank you.
Tim Hsiao, Analyst, Morgan Stanley: Thank you, Willie, for sharing the details. My second question is a quick one. Just want to know if management can share next year’s new model refresh and the key launch milestones for the NIO, ONVO, and the Firefly, the three brands on the group. Yeah, that’s it. Thank you.
Stanley Qu, Chief Financial Officer, NIO Inc.: 谢谢Tim。从蔚来品牌的角度来讲，当然我们五系、六系的产品，会有一些新的产品的计划。这个其实市场也应该大概也能够了解得到。那乐道和ONVO的话，我们明年还会有战略级的新的产品上市，会进一步地去丰富我们的产品线。从Firefly的角度来讲，Firefly brand就是这一款车型，我们当然包括特别版，包括后续的一些技术的迭代，我们都会持续地去进行。总的来说，Firefly有点像iPhone这样，会持续地推出一些新的特别版。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you for the question. For the NIO brand, for next year, we will be introducing new products coming from the 5 and 6 series product lines. I believe that the market is also aware of some of our latest plans. For the ONVO brand, next year, we are going to introduce a major strategic new product that will also help to enrich our existing product lineup. For the Firefly brand, we will keep this single model strategy, but keep rolling out special editions and also technology upgrades. For Firefly, it’s a bit like taking the iPhone approach, where it will stay in this same product but with new additions.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you, Tim.
Tim Hsiao, Analyst, Morgan Stanley: Thank you, Willie.
Operator: Your next question comes from Paul Gong with UBS.
Paul Gong, Analyst, UBS: Hi, William. Thanks for taking my question. My first question is regarding your vehicle gross margin outlook for the next two quarters, albeit the ongoing cost inflation. We are aware that the memory costs continue to go up. I just want to listen to your thoughts. How does that impact the vehicle gross margin? Thank you.
Stanley Qu, Chief Financial Officer, NIO Inc.: 你好，Paul。确实，今年整个的成本端的压力趋势比较大。按照我们之前所讲，对于蔚来来说，今年3月份开始，从内存到大宗材料到电池的成本，其实都有所上升。整个二季度跟去年年底相比，整个单车成本平均来看的上涨大概在单车1.4万左右。所以这个其实给我们的毛利带来的压力还是比较大的。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you for the question. It’s true that since this year, the cost structure of the automotive industry has been under pressure. For the company, we’ve been facing pressure coming from the rising material costs, including memory chips, batteries, and also other bulk materials. If we look at the cost in Q2 as well as the cost in late Q4 last year, the average cost impact or cost increase is around RMB 14,000 per car.
Stanley Qu, Chief Financial Officer, NIO Inc.: 所以当然，在二季度公司也是做了大量的工作来稳住我们的毛利，来对冲成本上涨的压力。这里面就包括，一个是我们维持了三个品牌的价格的稳定，我们没有通过单纯的降价来换取销量。另外，我们的成本端也通过我们的供应链的优化、商务的谈判、VA/VE等措施。总体来讲，我们基本上实现了一个整车18.5%，一个相对稳定的毛利率。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Also in Q2, we’ve taken a series of efforts to stabilize our vehicle margin under the rising cost of pressure. As previously mentioned, we’ve been taking a very stable pricing strategies for our products. We didn’t really lower the price in exchange for the sales volume. Secondly, on the supply side, we’ve been working with the supply chain to take a series of optimization measures, VA/VE efforts as well as commercial negotiations. With all these efforts combined, we managed to stabilize our vehicle margin at 18.5% in Q2.
Stanley Qu, Chief Financial Officer, NIO Inc.: 当然在下半年，我们也看到材料成本有继续上涨的风险，我们预计可能会在2000到3000元，平均下来每辆车。那公司当然也会继续采取相应的措施。总的目标是希望Q3和Q4整个的vehicle margin能够维持跟Q2差不多的水平。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Going to the second quarter, we expect the material cost to continue to increase by another RMB 2,000-RMB 3,000. But we will also take a series of countermeasures to mitigate this risk. In Q3 and Q4, we hope to still stabilize our vehicle growth margin at the same level as in Q2.
Paul Gong, Analyst, UBS: 好，谢谢Paul。我的第二个问题是，尽管有这些成本压力，你在过去一年中在盈利能力方面取得了显著的改善。我的问题是，什么给了你信心，认为这些改善是可持续的，而不是周期性的？
Stanley Qu, Chief Financial Officer, NIO Inc.: 对，确实。这里面当然是一个综合的措施。一方面，其实刚刚William也提到，整个的汽车市场也进入到一个品牌的竞争。那刚刚我们也提到我们蔚来的品牌，我们ES8和ES9的销量还是非常稳定的。在整个的高端市场里面的占有率也非常高。那这两款车型在我们整个portfolio里面的占比还是非常可观的。这两款车型的毛利也是超过20%，所以它是我们整个毛利的基石。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you for the question. True that we need to take a comprehensive measure towards that. The first is that, as also mentioned by William Li, the automotive competition in China is now shifting to more brand driven. For the NIO brand, our ES9 and ES8 are still seeing pretty stable demand, and also with significant market share in their respective segment. These two models, they are also making major contribution in our product mix as well as vehicle margin, as both of them have over 20% vehicle margin. This will be our foundation for the overall performance.
Stanley Qu, Chief Financial Officer, NIO Inc.: 当然第二点，我们还是会持续地去优化我们的成本结构，把我们的产品定义做得更精准，跟我们的合作伙伴一起去寻找降本的措施。所以这个其实从过去几个季度开始，都已经在深入地进行，也结合我们内部原子化的研发和供应链的这样一个能力，我们其实在这方面也已经找到了非常多的机会，那我们在接下来也会持续地去进行这样的工作。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: The second is to keep rolling out optimizations towards our cost structure by making more accurate product definition and also by working on the cost reduction opportunities together with our supply chain partners. These are the efforts that we have been working on in the past several quarters. Internally, we have been doing all this decoupling and analysis of our R&D and also supply chain capabilities, putting them into the atomic granularity, identifying also opportunities for continuous cost reduction. We will also keep up this good work.
Stanley Qu, Chief Financial Officer, NIO Inc.: 那我想补充一下，今年确实中国的汽车市场的压力是非常大的。但如果你去看蔚来整个公司的增长的质量还是非常的高。刚才Stanley讲到了我们一些长期盈利能力的持续性。今年上半年我们的销量是涨了67%，但是我们的营收是高于这个销量的增长，我们的营收是同比增长了86%。如果我们就看到毛利额，就毛利的总额，我们同比增长了是282%，这个增速是比营收的增长还要更快。那么这个成绩是在今年的原材料和存储芯片这样的一些成本大幅上涨的情况下实现。那因为我们二季度，刚才Stanley也讲了，我们二季度的成本平均到每辆车上去，和去年年底是涨了14,000。那么今年下半年呢，还要再增加两三千，也就是说要涨到16,000到17,000之间，和去年年底相比。但是我们仍然是有信心实现这个毛利额的总额的这样一个高速的增长。所以这一点也是充分证明了我们整个公司从技术到产品，到供应链的管理，到销售，还有各方面的管理，还有品牌的定位，一个体系的竞争能力。
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: As mentioned, the Chinese automotive industry has been under cost pressure. But even amid all these challenges, the company has still managed to achieve high quality growth as shared by Stanley Qu. Some of the efforts we have been taking to secure the long term and sustainable growth of our business. I would like to also share some numbers. In the first half of this year, our sales volume increased by 67% year-over-year, where our total revenue increased by 86% year-over-year. That is faster than our volume increase. In terms of our gross profit, it increased by 282% year-over-year, much faster than the growth of our revenue. This is amid all the challenges coming from the supply side, the rising raw material costs on the chips and on everything.
As mentioned also in Q2, the impact on the vehicle is around RMB 14,000 on average, where compared from late last year, in the second half of this year, such impact will continue to enlarge by another RMB 2,000 to RMB 3,000. Which means that in the second half of this year, compared with Q4 last year, our cost structure will be burdened by another RMB 16,000 to RMB 17,000. But even against this backdrop, we still aim to achieve a steady growth in our gross profit. This is also a demonstration of our system capabilities and also competitiveness in terms of our technology, product, supply chain, sales and also brand management.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you, Paul.
Paul Gong, Analyst, UBS: Thank you very much, William, Stanley, and congratulations for the achievement.
Stanley Qu, Chief Financial Officer, NIO Inc.: Thank you.
Operator: Your next question comes from Nick Lai with J.P. Morgan.
Nick Lai, Analyst, J.P. Morgan: Thank you for taking my question. My first question is financial related. With very strong operating cash flow and free cash flow generation by first half, can you make a reminder of our cash burn, including CapEx and R&D, and what level of free cash flow can we anticipate by year-end? With very strong cash position right now, can you remind us where do we plan to invest or spend our cash in terms of CapEx and R&D? That is my first question. Thank you.
Stanley Qu, Chief Financial Officer, NIO Inc.: 谢谢Nick。我分几块来讲，一个呢，是我们的CapEx。我们今年的资本性开支呢，基本上我们会维持跟去年差不多的水平。按照之前也跟大家沟通过，基本上是在全年60到70亿这样的一个水平，sorry，不是季度啊，全年60到70亿这样的一个水平。主要的用途也基本上是我们的车型的研发投入，然后我们的销售服务网络的建设这方面。因为基本上工厂相关的应该相对没有那么多了，在今年。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the questions. I will answer to your question through several major aspects. The first is regarding CapEx. For this year, we expect our full year CapEx to be relatively flat from last year, roughly RMB 6 billion to 7 billion per year. Such investment is mainly used for basically CapEx, research and development, as well as the rollout of our sales and the service network, not much investment going into the capacity and also factory side.
Stanley Qu, Chief Financial Officer, NIO Inc.: 第二个方面呢，就是我们将持续高强度地去建设我们的充换电网络，那今年的目标也依然是1000个换电站。当然这个跟我们之前不一样的地方就是从24年，我们开始我们的换电合伙人的这样的一个计划以来，今年我们应该取得了一个长足的进步。我们也在全国25个省市，与超过40家的地方国资和基金机构展开合作。那从目前来看呢，我们全年的这个充换电网络的建设计划，整个的目标是都来自于我们合作伙伴的资金。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The second is that we will continue to roll out and expand our charging and also swapping network. For this year, we still plan to build 1,000 new Power Swap Station. But different from previous years, where in 2024 we have introduced the power up partner plan, where through the plan we would like to collaborate with different partners for the construction of our charging and swapping infrastructure. This year, we have made major progress in this plan, where we have been partnered with over 40 state-owned enterprises, platforms, and also financial institutions across 25 provinces and cities in China, in constructing our charging and swapping infrastructure. For this year, we expect all the newly built infrastructure will be sponsored or funded by our power up partners.
Stanley Qu, Chief Financial Officer, NIO Inc.: 第三点呢，就是我们的BaaS模式越来越被用户认可。那与BaaS模式相关的这个电池资产，其实也是取得我们金融机构，还有各种合作伙伴的认可和支持。所以从蔚能的融资角度来讲，今年上半年各方面的融资渠道也基本上完全打通，所以大家也看到蔚能对于未来的欠款，从年初的160亿，其实下降到二季度末的150亿不到，所以整个是在投放增加的情况下，其实整个的绝对金额还是出现了下降。这个对于蔚能的回款，对于未来现金流的改善和支撑也是非常重要。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The third is that our Battery as a Service business model is also earning more recognition from more users. This is also helping our battery asset management and the battery asset management company getting stronger support from the financial institutions and also different partners. In the first half of this year, for the battery asset management company, we know as we also see some good progress regarding the fundraising across different channels. In terms of the amount due from the battery asset management company, it is also reduced from over RMB 16 billion earlier this year to less than RMB 15 billion in end of Q2. Considering that we are also enlarging the user base and also the business side of the battery asset management, the increase in the absolute term is also relatively proportionally. This is also a good sign.
Stanley Qu, Chief Financial Officer, NIO Inc.: 对，所以总的来说呢，随着销量的持续增长，以及包括我们经营的逐步地改善，我们整个三、四季度的目标对于现金流来说，依然是我们希望能够实现经营现金流和自由现金流的这样一个正向的这个目标。总的来说呢，整个的现金储备的余额在这样的一个背景下面，在三季度和四季度应该还可以持续提升。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: With increase in sales volume as well as ongoing efforts in improving our operating performance, we expect that in Q3 and Q4, we can maintain the positive free cash flow as well as operating cash flow. With that, we also believe that in the second half of this year, our cash position will continue to enhance.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you, Nick.
Nick Lai, Analyst, J.P. Morgan: Thank you. My second question is ADAS related. The market is indeed very competitive. Every peer offers the autopilot function or features. I am wondering, from a user standpoint, how do we differentiate ourselves from peers across our product offering from higher-end to entry-level? At the same time, given high adoption or penetration right now, will we consider different payment options such as pay-as-you-go or subscription option in the future? Thank you.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 谢谢Nick。那么我们AD的话，我们的自动驾驶在今年让大家看到了世界模型加闭环强化学习，再加上群体智能的这样一个技术路线的优势。那么从我们的云端的训练的算力投入远低于我们同行的情况下呢，我们其实取得了一个非常不错的、用户的体验的这样一个结果，充分证明了我们这个技术路线的一个优势。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. This year, people actually start to see the benefits and also the advantage of our overall architecture featuring the NIO World Model plus the closed loop reinforcement learning, and also collective intelligence, especially considering that the actual computing investment and the computing power we used for the co-op training for the autonomous driving and smart driving functionalities, relatively small, achieving such good experience with our latest release, this has also proven the advantages of our technology roadmap.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 前面我讲到了，我们的新版本在今年6月18号，几个品牌、几个平台，新版本同步推送给70万用户。那么这个也是证明了我们技术架构的一个先进性。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: As mentioned earlier today, on June 18, we actually have pushed our latest NIO World Model version to over 700,000 users across different brands and also technology platform simultaneously. This has also proven the advances of our technology and architecture.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 那么有一个数据也可以分享一下，像我们发展了我们自己芯片的P1X、我们的NX9031的芯片的、我们的Cedar雪松的这样一些用户的话，65%的用户，接近六成的用户，他日常使用智能辅助驾驶的里程是超过一半以上。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: I would like to share some numbers with you. For the Cedar user, that is our third generation platform equipped with Shenji NX9031 smart driving chip, where among this group of users, around 58% of them have been engaging smart driving functionalities for more than half of their trips.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 那在收费模式方面，我们现在对于新的新车的用户，蔚来和乐道，这些新车的用户，我们都是在上市的时候给他五年的免费的订阅。但对于二手车的用户，或者说超过了五年的这样的用户呢，当然现在他们还没有到五年吧。对于二手车的用户，比如说这个用户如果首轮车主把车出售了，我们是会对这些二手车的用户提供这种订阅服务。那我们现在能够收，我们现在是380一个月，我们能够收到的订阅费，订阅的比例就是接近20%，这个还是非常正向的一个，说明我们的产品竞争力和我们体验的竞争力。当然现在用户收费的基数还比较少。今年我们也有几千万人民币的订阅收入。我想随着用户基数的增加，那我们相信长期来说，订阅收入会成为我们公司非常重要的服务收入。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Regarding the business model for the smart driving service, right now for the NIO users and ONVO users, we offer them a five-year complimentary subscription to our smart driving capabilities and systems. For the used car users, or when they expire on this five-year complimentary service, they will have to definitely pay for the subscription. For the used car users, they are paying 380 RMB per month for the smart driving subscription, where we now see a penetration rate of around 20% among these used car users. This is also a pretty sizable amount, showing also the competitiveness of our product and experiences. Of course, right now this is just a small user base, but for the longer term, we believe that this will also be a quite sizable source of revenue for our business.
Right now, every year, the revenue from that part of the business is around several thousands of millions of RMB.
Stanley Qu, Chief Financial Officer, NIO Inc.: Thank you. Stay clear. Thank you.
Operator: Your next question comes from Ming Lee with Bank of America.
Ming Lee, Analyst, Bank of America: Hi William Li, this is Ming Lee. I also have two questions. First question is related to your fifth-generation Power Swap Station. With small expansion of your new Power Swap Station, this can accommodate all of your three brands. Could you give us more [Foreign language] regarding the CapEx per station and also maintenance cost compared to your previous generation Power Swap Station? Besides that, right now you also open to some other auto OEM for your battery service. Could you elaborate your pricing strategy and also your unique economy model? Thank you. That is my first question.
Stanley Qu, Chief Financial Officer, NIO Inc.: OK。Ming，关于第五代换电站呢，从兼容度上，我们用了一个柔性的解决方案，所以未来乐道、萤火虫三个品牌不同尺寸的车型都可以在一个换电站里面来进行换电。那从成本上来讲呢，第五代站在第四代站的基础上，其实还是有进一步的下降。所以从一个单体的换电站的材料成本上来讲，其实是有进一步的优化的。那从总的来讲呢，目前如果不含电池的和一个高压包装的建设成本，五代站大概在140万，其实比四代站大概有降低了10万左右。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. Regarding the fifth generation Power Swap Station, we have adopted a flexible design where the station can accommodate all models from NIO, ONVO, and Firefly, basically compatible with cars of different dimensions and sizes. In terms of the cost, we have also achieved continuous improvements on top of the Gen4, where in terms of the material costs, we have achieved also optimization and reduction in cost. For per station cost, if we excluding batteries in the station as well as all the costs related to the high voltage power supply and the energy preparation, if you only look at the station itself, it is around 1.4 million RMB per station. That is around 100,000 RMB cheaper than the fourth generation.
Stanley Qu, Chief Financial Officer, NIO Inc.: 对，从运营上来讲呢，分两个层次吧。一个呢，我们所有的换电站其实都在做持续的运营优化。那尤其是这里面的值守的人效，随着我们换电站的故障率的提升，随着我们软件能力的提升，整体的人效，我记得跟去年年初相比呢，其实已经提升了有50%。然后呢，从五代站上来讲，我们是有机会，当然五代站现在的故障率还在一个爬坡的过程，从目前的表现来看呢，其实是比同期的前面几代站要优化的，而且从技术上来讲，它能够比前面几代站应该能够做得更好。所以我们相信五代站它的运营效率会比前面几代站还要再进一步提升。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In terms of the operations of the swap stations, we have been also making continuous improvements in terms of the actual people efficiency of supporting the operations of all stations. We have also made improvements in terms of the first time through of the power swaps as well as the software features. Between current performance as well as the performance earlier last year, it is already improved by 50%. Of course, for the fifth generation as they are new to the field, we are still ramping up its first time through. Comparing with the previous generations around the same time frame, we already see quite significant improvement in terms of the success rate of our power swaps among the fifth generation station. Overall speaking, we also believe that the efficiency of fifth generation will be much better than the previous ones.
Stanley Qu, Chief Financial Officer, NIO Inc.: 对，关于第三个，我们的对外合作。其实我们跟多家主机厂在前两年也签署了换电联盟的协议。当然这段时间，一些落地的一些项目，或者是沟通和谈判也在持续的进行过程当中。也随着这两年Robotaxi的发展，其实Robotaxi和换电也是非常匹配的一个基础设施的支撑。所以这些工作都还在进行当中。从目前刚刚你提到的一个合作和收费的框架上来讲，我们基本上会是用一个接入费的这样一个形式，当然这个还有待于后面的具体落地。等实际落地之后，我们再跟大家具体去披露这样的一些细节。当然这些对外合作呢，其实大家也是随着这两年新能源的发展进入到一个新的阶段，大家也逐步认识到换电的这样一个优势，所以越来越多的主机厂其实也是希望加入到这样的一个队伍当中来。那单纯从对未来能源来讲，我觉得对于我们摊薄我们的运营成本，对于我们去通过统一电池包来提升我们在电池上的效率、降本，其实都是非常有帮助的。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: The third is regarding the partnership and also alliance with other OEMs regarding power swap.
Several years ago, we signed up with several OEMs regarding this power swap alliance, and we still have this ongoing communications and also collaborations on some projects. In the meantime, as Robotaxis becoming a very popular area where we see Power Swap Station and power swap service in general can be a good infrastructure support for the Robotaxi business. We are also exploring opportunities with our partners from that perspective. In terms of the cooperation framework and also how we charge them on such services, we basically will charge them for an admission fee for the use and access to our power swap network. More details are still being discussed and are to be closed when we have the actual projects in the implementation. Also for the entire new energy vehicle industry, it has been entering into this new stage where more and more people start to realize the benefits of power swap, and more OEMs are also embracing the idea of swappable vehicles, where for the new power, the advantage is with more partners joining this effort, it can help us to optimize and amortize our operating costs.
By standardizing the battery packs, we can also improve the efficiency as well as optimize the cost structure.
Stanley Qu, Chief Financial Officer, NIO Inc.: Thank you, Ming.
Ming Lee, Analyst, Bank of America: Thank you, Stanley. My second question is related to your operating expense. Especially we noticed that your sales and marketing expense in Q2 is higher. Is it because you launched more new models during the quarter? Could you give more guidance for your 2026 operating expense? Thank you.
Stanley Qu, Chief Financial Officer, NIO Inc.: OK，Ming。我们也分两块来讲，一个是我们研发费用。研发费用我们跟之前几个季度跟大家讲的基本也一样，我们会维持在non-GAAP季度在25亿的这个水平，根据我们的研发项目和业务的进展来动态调整这样的一个支出水平和节奏。所以从2026年每一个季度来说，基本上是在这样的一个水平上下来浮动。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. I will still share the information according to two types of overall expenses. The first is regarding the R&D expenses. As mentioned, we will basically be staying flat with our R&D expenses non-GAAP around RMB 2.5 billion, and we will also make dynamic adjustments according to the actual cadence and the pace of our projects and the business. But for this year, it will be roughly RMB 2.5 billion per quarter in terms of the R&D investment.
Stanley Qu, Chief Financial Officer, NIO Inc.: 当然大家也看到，研发费用跟我们未来公司历史上的投入相比，以及可能跟我们的一些友商相比，出现了一定程度的减少。但是我觉得我们的研发效率其实是更高的。这里面我们分两方面，一方面我们还是专注在纯电路线，没有去在纯电，包括混动、增程多条路线上去发力，所以这样的话，我们的研发会更加聚焦，核心技术可以在不同品牌、不同车型上复用，所以效率会更高。第二个部分，也随着从去年开始的我们整个CBU的这样的一个经营机制，我们内部的研发的体系和组织的效率也不断地优化。所以总的来说，在这样的一个投入强度下面，依然能够保证我们在核心技术和关键产品上的这样的一个竞争力。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: In terms of the R&D expenses, maybe some will compare our current expenses with our previous levels or with our competitors, where definitely our expenses are relatively low. We also need to really pay attention to the utilization of such expenses and also the efficiency of our R&D activities. First of all, NIO has been staying committed to the battery electric vehicle roadmap. With that, we can be more focused on the technologies and the products related to the BEV roadmap without spreading our efforts across BEV, PHEV or EREV. Secondly, as we’ve been rolling out this CBU mechanism internally, with the CBU mechanism, we can also better measure and improve the efficiency of our R&D systems as well as our R&D organizations. So even with a relatively moderate investment into the R&D activities, we can still maintain our leadership and advancements in the technologies and also products.
Stanley Qu, Chief Financial Officer, NIO Inc.: 第二个方面，从SG&A角度来讲，首先我们来看它这个SG&A占销售收入的一个比例。从non-GAAP的角度来说，我们一季度和二季度这个比例基本上都是在13%上下，这个整个的比例上来讲是符合我们的预期的。其次，我们二季度，尤其在销售费用上，有很多在二季度一次性的投入。因为我们二季度的所有的新的产品，今年所有的新的产品基本上都集中在二季度发布。包括我们的ES9，包括我们乐道的今年的一些换代，大部分都集中在二季度里面。这样的一次性的影响，给二季度的这个SG&A带来大概5个亿的增长。
所以这个在后面的两个季度应该不会有这么多的这样的一次性的影响发生。那最后从三四季度的一个展望来讲呢，SG&A我们整个的控制目标还是希望能够实现non-GAAP的SG&A占整个收入的比例在10%到11%，这个目前来看应该也是一个可控，也能够通过努力实现的这个目标。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Regarding the SG&A expenses, if we look at the SG&A as percentage to the sales revenue in the first and the second quarter under the non-GAAP standard, it’s around 13% in the first half. Also in the second half, as we see a slight increase in terms of the sales expenses, it’s mainly driven by some one off expenses as we have most of our new products for this year were launched in second quarter, including our ES9 and also some facelift models for ONVO. So that one off impact is roughly RMB 500 million, majorly happened in Q2, where in the second half we don’t expect to have such one off impact in terms of the sales expenses.
In terms of the second half outlook, in terms of the SG&A expenses as percentage to the sales revenue under the non-GAAP standard, we expect it to be around 10%-11%. This is also a controllable as well as an achievable target for us.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you, Ming.
Ming Lee, Analyst, Bank of America: 谢谢 Stanley。谢谢。
Operator: Your next question comes from Jing Chang with CICC.
Jing Chang, Analyst, CICC: Thank you for taking my question. As time is limited, I have only one question. We know that our Senior Vice President, Mr. Ren Shaoqing, has founded an embodied AI startup company in which we have made a strategic investment. What are the long term cooperation potentials between this new company and NIO? What long term value can it bring to our company?
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 对，大家也看到这个消息，我们智驾的负责人绍清，他会开始在这个物理非AI领域的创业，但未来会作为一个战略股东去支持他的创业。当然同时绍清仍然也会作为未来智能驾驶部门的负责人，他还是会有这样一个负责智能驾驶的技术方向和长期的战略，当然也会参与这个智驾方面的工作。那我们相信这样的一个安排对于未来来说的话，在我们现在聚焦我们自己的核心业务的基础上，仍然能够保持对具身智能和物理AI领域的战略的投入，又不会影响我们的P&L，也能把我们的一些资源用的用好，同时也能够吸收到更多的外部的战略性的股东和战略性的投资人。我们认为这个是一个比较好的安排。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Thank you for the question. Yes, Mr. Ren Shaoqing, the head of our smart driving department, is now also starting up a new business regarding physical AI and embodied intelligence. NIO is supporting his business as a strategic shareholder. In the meantime, he will still be the head of our smart driving department, responsible for the overarching technology as well as the long term tech roadmap for our products.
We also think that such arrangement is necessary and meaningful, as right now NIO is staying focused on our core business. In the meantime, through this startup by Mr. Ren, we can also keep tracking of the latest developments in the physical AI and embodied intelligence without diluting our focus affecting our P&L. In the meantime, such startup can also help to make full use of our resources as well as attracting external strategic shareholders and investors. We think this is a good arrangement.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: 对，另外还有一点也想补充一下，大家知道这个非AI领域的人才竞争是非常激烈的。那么我们认为用一个创业公司的这样一个架构的角度来讲，去吸引行业里面最优秀的这样的一些人才，是能够更能保证这样一个创业方向的一个成功。当然长期来说，我们相信这两个公司之间，我们和这个具身智能的这个创业公司之间会有非常多的这样的一个战略性的合作、业务的合作、战略业务的合作。
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: Also, as we all know that the competition for the AI talent within the arena of physical AI is also quite intense. So through such startup, we can also better capture the top-notch talents in the industry, and that will also be beneficial to the long term development of both this startup as well as for our AI related business. For the long term, we believe that we will have a lot of strategic collaborations and projects between NIO and also this AI startup.
Jing Chang, Analyst, CICC: Yes, thank you.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you.
Operator: Your next question comes from Yuqian Ding with HSBC.
Yuqian Ding, Analyst, HSBC: Thank you, team. Hi, Sally. My question is, what is your volume outlook for the rest of this year and maybe some seasonality into fourth quarter? Also our new model, EC7?
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: I think your voice is breaking. Yuqian, can you repeat your question? Thanks.
Yuqian Ding, Analyst, HSBC: Yeah, sure.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Yuqian, we still cannot hear you.
Yuqian Ding, Analyst, HSBC: Yeah. Can you hear me now?
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Yes, much better.
Yuqian Ding, Analyst, HSBC: Hello. Okay. Yeah. So I’ll just repeat. My question is about volume outlook in fourth quarter and 2027, given maybe strong seasonality and the backdrop of new model cycle next year.
William Li, Founder, Chairman of the Board, and Chief Executive Officer, NIO Inc.: We expect that the passenger vehicle market to be able to recover in Q4 this year. With that, our target for Q4 is achieving an average volume of over 40,000 units per month. And for the mid and the long term, with our product lineup as well as our sales and service network coverage, we expect our annual volume growth to be around 40%-50%. And we will maintain that for the mid and the long term.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you, Yuqian.
Operator: As there are no further questions now, I would like to turn the call back over to the company for closing remarks.
Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment, NIO Inc.: Thank you again for joining us today. If you have further questions, please feel free to contact our IR team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you.