NIO Q2 2024: Vehicle Margins Rise to 12.2%, 15% Year-End Target
- Robust L60 Demand & Ramp-Up: Strong pre-order numbers and confidence in high conversion rates support a bullish view as production ramps up in Q4, potentially driving significant volume growth.
- Improving Vehicle Margins: Enhanced cost optimization has pushed the vehicle margin to 12.2% in Q2, with expectations to reach 15% by year-end and a long-term target of 25% in the premium segment, favoring profitability.
- Technological Leadership & Global Expansion: Advancements in full-domain operating systems (SkyOS) and smart driving features, along with aggressive international expansion (e.g., in UAE and Europe), strengthen NIO’s competitive positioning and growth prospects.
- Delivery and Production Ramp-Up Concerns: The ONVO L60’s deliveries are expected to begin slowly—with most volume deferred to Q4 and production ramp-up taking time—raising concerns over consistently meeting sales targets and supply chain disruptions.
- Rising SG&A Expenses Pressure Profitability: Significant increases in SG&A expenses, driven by expanded sales teams and marketing campaigns, may continue to put pressure on overall margins.
- Delayed Profitability in Power Swap Services: Despite progress in narrowing losses, the power swap network is still operating below breakeven due to early free services and anticipatory deployment, posing a risk to sustaining profitability.
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Margin Outlook
Q: Will NIO vehicle margins improve further?
A: Management expects the vehicle margin to rise from 12.2% to about 15% by year-end, with a long-term target of 25% on a 40,000-unit monthly basis, reflecting strong cost control and operational improvements. -
ONVO Production
Q: What is the delivery outlook for ONVO L60?
A: Deliveries for ONVO L60 will begin in late September at modest volumes, ramping up to roughly 10,000 units per month by December as production scales up. -
L60 Conversion
Q: How will L60 preorder conversion be sustained?
A: Preorder numbers for L60 have exceeded expectations with robust social media engagement, and pricing will be adjusted carefully to balance margins and competitive positioning. -
Expense Guidance
Q: What are the plans for SG&A and CapEx?
A: R&D spending is set at around RMB 3 billion quarterly; while SG&A expenses will rise with increased sales, CapEx will be prudently managed so that expenditure in 2025 is expected to be similar to 2024 levels. -
SkyOS Impact
Q: What benefits does SkyOS deliver?
A: The SkyOS offers a full-domain vehicle operating system that enhances safety, stability, and efficiency by resolving data throughput and latency issues, forming a key cornerstone for future product innovation. -
ET9 & Overseas
Q: How are ET9 and global expansion progressing?
A: The ET9 remains on track for a Q1 launch with innovative features, while international efforts—especially in the UAE and select European markets—continue, balancing strategic investment with market needs. -
EV Market Growth
Q: What is the near-term EV market projection?
A: With NIO energy vehicles already above 50% penetration, management anticipates that this figure could exceed 80% in new vehicle sales within 2–3 years, supported by pipelines like Firefly launching in 2025. -
Store Efficiency
Q: How do ONVO store costs compare to NIO’s?
A: ONVO stores incur significantly lower rental and renovation costs compared to NIO stores, allowing for more efficient and scalable expansion despite location-specific variations. -
NOP Advancement
Q: How is smart driving evolving at NIO?
A: The NOP+ system, now standard on NT 2.0, serves over 300,000 users and has accumulated more than 1.1 billion km of driving data, demonstrating robust progress in autonomous safety features.
Research analysts covering NIO.