NIO Inc. (“NIO” or the “Company”) (NYSE: NIO), a pioneer in China’s premium smart electric vehicle market, announced on Nov. 17 its unaudited financial results for the quarter ended September 30, 2020.

Photo credit: NIO

Operating Highlights for the Third Quarter of 2020

Deliveries of vehicles were 12,206 in the third quarter of 2020, including 8,660 ES6s, 3,530 ES8s and 16 EC6s, compared with 4,799 vehicles delivered in the third quarter of 2019 and 10,331 vehicles delivered in the second quarter of 2020.

Key Operating Results

Financial Highlights for the Third Quarter of 2020

Vehicle sales were RMB4,266.8 million (US$628.4 million) in the third quarter of 2020, representing an increase of 146.1% from the third quarter of 2019 and an increase of 22.4% from the second quarter of 2020.

Vehicle margin was 14.5% in the third quarter of 2020, compared with negative 6.8% in the third quarter of 2019 and 9.7% in the second quarter of 2020.

Total revenues were RMB4,526.0 million (US$666.6 million) in the third quarter of 2020, representing an increase of 146.4% from the third quarter of 2019 and an increase of 21.7% from the second quarter of 2020.

Gross profit was RMB585.8 million (US$86.3 million) in the third quarter of 2020, representing an increase of RMB807.4 million from a gross loss of RMB221.6 million in the third quarter of 2019 and an increase of RMB272.7 million from the second quarter of 2020.

Gross margin was 12.9% in the third quarter of 2020, compared with negative 12.1% in the third quarter of 2019 and 8.4% in the second quarter of 2020.

Loss from operations was RMB946.0 million (US$139.3 million) in the third quarter of 2020, representing a decrease of 60.7% from the third quarter of 2019 and a decrease of 18.4% from the second quarter of 2020. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB896.7 million (US$132.1 million) in the third quarter of 2020, representing a decrease of 61.7 % from the third quarter of 2019 and a decrease of 19.6% from the second quarter of 2020.

Net loss was RMB1,047.0 million (US$154.2 million) in the third quarter of 2020, representing a decrease of 58.5% from the third quarter of 2019 and a decrease of 11.0% from the second quarter of 2020. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB997.8 million (US$147.0 million) in the third quarter of 2020, representing a decrease of 59.3% from the third quarter of 2019 and a decrease of 11.8% from the second quarter of 2020.

Net loss attributable to NIO’s ordinary shareholders was RMB1,187.9 million (US$175.0 million) in the third quarter of 2020, representing a decrease of 53.5% from the third quarter of 2019 and a decrease of 1.6% from the second quarter of 2020. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB996.0 million (US$146.7 million).

Basic and diluted net loss per American Depositary Share (ADS) were both RMB0.98 (US$0.14) in the third quarter of 2020. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB0.82 (US$0.12).

Cash and cash equivalents, restricted cash and short-term investment were RMB22.2 billion (US$3.3 billion) as of September 30, 2020.

Key Financial Results
(in RMB million, except for per ordinary share data and percentage)

Recent Developments

Deliveries in October 2020

Deliveries of the ES8, ES6 and EC6 were 5,055 vehicles in October 2020, representing a strong 100.1% year-over-year growth. As of October 31, 2020, cumulative deliveries of the ES8, ES6 and EC6 reached 63,343 vehicles, of which 31,430 were delivered in 2020. 

Launch of 100kWh Battery Pack

On November 6, 2020, NIO launched the 100kWh battery pack with battery upgrade plans. The 100kWh cell-to-pack battery pack has realized 37% higher energy density than the 70kWh battery. Powered by the 100kWh battery, the NEDC range of NIO EC6 can reach up to 615 kilometers. The outstanding performance of the 100kWh battery is underpinned by technological advancements including thermal propagation prevention design, highly-integrated architecture, all-climate thermal management and bi-directional cloud battery management system.
If users opt to purchase an ES8, ES6 or EC6 and subscribe for the 100kWh battery pack under the innovative Battery as a Service (the “BaaS”) model, they can purchase the vehicle without the battery pack while paying a monthly subscription fee of RMB1,480. Users of the 70kWh battery pack can choose to either purchase a 100kWh battery pack for permanent upgrades or pay a monthly subscription fee of RMB880 for a flexible upgrade package.

Completion of Registered Follow-on Offering of American Depositary Shares

In September 2020, NIO completed the offering of 101,775,000 American depositary shares, each representing one Class A ordinary share of the Company, at a price of US$17.00 per ADS, which included 13,275,000 American depositary shares issued in connection with the underwriters’ full exercise of their overallotment option. 

Completion of Increase of Controlling Equity Interests in NIO China

In September 2020, NIO completed the increase of its controlling equity interests in NIO China through the partial redemption of certain investor’s equity interests and the subscription for newly increased registered capital. The Company currently holds 86.5% controlling equity interests in NIO Holding Co., Ltd. (formerly named NIO (Anhui) Holding Co., Ltd.) (“NIO Holding”), the legal entity of NIO China.

Completion of Redemption of Equity Interests in XPT from Minority Shareholders

In November, NIO, through its wholly owned subsidiary, completed the full redemption of equity interests in XPT (Jiangsu) Automotive Technology Co., Ltd., or XPT, held by each of its minority shareholders. As a result, NIO redeemed a total of 21.09% equity interests in XPT and now indirectly wholly owns XPT. Established in May 2018, XPT mainly designs, develops and manufactures electric motors, battery packs and other smart electric vehicle components.

CEO and CFO Comments

“We achieved a new record-high quarterly deliveries of 12,206 ES8s, ES6s and EC6s in total in the third quarter of 2020, followed by the best-ever monthly deliveries of 5,055 vehicles in October,” said William Bin Li, founder, chairman and chief executive officer of NIO. “In view of the growing market demand for our competitive products, we are motivated to continuously elevate the production capacity to the next level. We expect to deliver 16,500 to 17,000 vehicles in the coming fourth quarter.”

“In the past months, we are pleased to have launched the BaaS and the 100kWh battery pack with proprietary thermal management and significant performance enhancement. Enabled by our unique battery swap technologies, innovative BaaS model and comprehensive power solutions, our users can benefit from lower initial purchase prices of vehicles, flexible battery upgrade options as well as enhanced assurance of battery performance. Additionally, following the release of the NIO OS 2.7.0 via firmware-over-the-air (FOTA) upgrade in October 2020, our users have been able to enjoy the Navigate on Pilot (NoP) feature of NIO Pilot on highways and urban expressways in China. Going forward, we remain committed to deploying more resources into the core technology innovations and delivering the best holistic product and service experiences to our user community in the pursuit of fortifying our long-term competitiveness in the market,” concluded Mr. Li.

“With another quarter of record high deliveries in the third quarter of 2020, plus further improvements in average selling price, material cost and manufacturing efficiency, our vehicle margin increased to 14.5%. Additionally, we achieved positive cash flow from operating activities for the second sequential quarter,” added Steven Wei Feng, NIO’s chief financial officer. “Our order growth momentum continued steadfastly, driven by the expanded brand awareness, growing user base, extended sales network and most importantly, the compelling products and technologies. Meanwhile, our continuous improvement of operational efficiency, cash flow and balance sheet has laid a solid foundation for our future sustainable growth and decisive investments in technologies."

Financial Results for the Third Quarter of 2020

Revenues

Total revenues were RMB4,526.0 million (US$666.6 million) in the third quarter of 2020, representing an increase of 146.4% from the third quarter of 2019 and an increase of 21.7% from the second quarter of 2020.        
Vehicle sales were RMB4,266.8 million (US$628.4 million) in the third quarter of 2020, representing an increase of 146.1% from the third quarter of 2019 and an increase of 22.4% from the second quarter of 2020. The increase in vehicle sales of the third quarter of 2020, compared to the third quarter of 2019 and the second quarter of 2020, was mainly contributed by the increase in sales of the ES6 and ES8.
Other sales were RMB259.2 million (US$38.2 million) in the third quarter of 2020, representing an increase of 150.7% from the third quarter of 2019 and an increase of 11.3% from the second quarter of 2020. The increase in other sales of the third quarter of 2020, compared to the third quarter of 2019, was mainly attributed to increased revenues derived from the home chargers installed, service package and energy package subscribed, and accessories sold, which were in line with the increased vehicle sales in the third quarter of 2020. 

Cost of Sales and Gross Margin

Cost of sales was RMB3,940.1 million (US$580.3 million) in the third quarter of 2020, representing an increase of 91.4% from the third quarter of 2019 and an increase of 15.7% from the second quarter of 2020. The increase in cost of sales, compared to the third quarter of 2019, was mainly driven by the increase of delivery volume of the ES6 and ES8 in the third quarter of 2020.
Gross profit was RMB585.8 million (US$86.3 million) in the third quarter of 2020, representing an increase of RMB807.4 million from a gross loss of RMB221.6 million in the third quarter of 2019 and an increase of RMB272.7 million from the second quarter of 2020. The increase of gross profit, compared to the third quarter of 2019, was mainly contributed by increased vehicle sales and increased vehicle margin.
Gross margin in the third quarter of 2020 was 12.9%, compared with negative 12.1% in the third quarter of 2019 and 8.4% in the second quarter of 2020. The increase of gross margin, compared to the third quarter of 2019, was mainly driven by the increase of vehicle margin in the third quarter of 2020. 
Vehicle margin in the third quarter of 2020 was 14.5%, compared with negative 6.8% in the third quarter of 2019 and 9.7% in the second quarter of 2020. The increase of vehicle margin, compared to the third quarter of 2019 and the second quarter of 2020, was mainly driven by the decrease in purchase price of certain materials and lower unit manufacturing cost attributed from increased production volume of the ES6 and ES8 in the third quarter of 2020. 

Operating Expenses

Research and development expenses were RMB590.8 million (US$87.0 million) in the third quarter of 2020, representing a decrease of 42.3% from the third quarter of 2019 and an increase of 8.4% from the second quarter of 2020. Excluding share-based compensation expenses (non-GAAP), research and development expenses were RMB577.8 million (US$85.1 million) in the third quarter of 2020, representing a decrease of 42.4% from the third quarter of 2019 and an increase of 8.3% from the second quarter of 2020. The decrease in research and development expenses over the third quarter of 2019 was primarily attributed to the higher design and development costs incurred in the third quarter of 2019 for EC6 and all-new ES8 launched in the fourth quarter of 2019, and the Company’s overall cost-saving efforts and the improved operational efficiency in research and development functions since the fourth quarter of 2019. Research and development expenses remained relatively stable compared with the second quarter of 2020, which mainly consisted of costs incurred for recurring projects.

Selling, general and administrative expenses were RMB940.3 million (US$138.5 million) in the third quarter of 2020, representing a decrease of 19.2% from the third quarter of 2019 and an increase of 0.4% from the second quarter of 2020. Excluding share-based compensation expenses (non-GAAP), selling, general and administrative expenses were RMB905.5 million (US$133.4 million) in the third quarter of 2020, representing a decrease of 18.9% from the third quarter of 2019 and an increase of 0.1% from the second quarter of 2020. The decrease in selling, general and administrative expenses over the third quarter of 2019 was primarily driven by the Company’s overall cost-saving efforts and the improved operational efficiency in marketing and other supporting functions. Selling, general and administrative expenses remained relatively stable compared with the second quarter of 2020. 

Loss from Operations

Loss from operations was RMB946.0 million (US$139.3 million) in the third quarter of 2020, representing a decrease of 60.7% from the third quarter of 2019 and a decrease of 18.4% from the second quarter of 2020. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB896.7 million (US$132.1 million) in the third quarter of 2020, representing a decrease of 61.7% from the third quarter of 2019 and a decrease of 19.6% from the second quarter of 2020.

Share-based Compensation Expenses

Share-based compensation expenses were RMB49.2 million (US$7.3 million) in the third quarter of 2020, representing a decrease of 30.1% from the third quarter of 2019 and an increase of 8.6% from the second quarter of 2020. The decrease in share-based compensation expenses over the third quarter of 2019 was primarily due to less options granted driven by the decline in the number of employees, and the impact of part of the share-based compensation expenses being recognized by using the accelerated method, under which the expenses decrease gradually over the vesting period. The increase in share-based compensation expenses over the second quarter of 2020 was primarily attributed to the incremental options granted in the third quarter of 2020 with relatively higher grant date fair values due to the increased share price. 

Net Loss and Earnings Per Share

Net loss was RMB1,047.0 million (US$154.2 million) in the third quarter of 2020, representing a decrease of 58.5% from the third quarter of 2019 and a decrease of 11.0% from the second quarter of 2020. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB997.8 million (US$147.0 million) in the third quarter of 2020, representing a decrease of 59.3% from the third quarter of 2019 and a decrease of 11.8% from the second quarter of 2020.

Net loss attributable to NIO’s ordinary shareholders was RMB1,187.9 million (US$175.0 million) in the third quarter of 2020, representing a decrease of 53.5% from the third quarter of 2019 and a decrease of 1.6% from the second quarter of 2020. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB996.0 million (US$146.7 million).
Basic and diluted net loss per ADS were both RMB0.98 (US$0.14) in the third quarter of 2020. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB0.82 (US$0.12). 

Balance Sheets

Balance of cash and cash equivalents, restricted cash and short-term investment was RMB22.2 billion (US$3.3 billion) as of September 30, 2020. 
In the third quarter of 2020, certain convertible notes were exercised by their holders with the aggregate amount of RMB3.1 billion (US$460.9 million).

Business Outlook

For the fourth quarter of 2020, the Company expects:

Deliveries of the vehicles to be between 16,500 and 17,000 vehicles, representing an increase of approximately 100.6% to 106.7% from the same quarter of 2019, and an increase of approximately 35.2% to 39.3% from the third quarter of 2020.
Total revenues to be between RMB6,258.7 million (US$921.8 million) and RMB6,435.8 million (US$947.9 million), representing an increase of approximately 119.7% to 126.0% from the same quarter of 2019, and an increase of approximately 38.3% to 42.2% from the third quarter of 2020.

This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.