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19 November 2020

NIO Earnings Power Ahead

NIO, the Chinese electrical vehicle manufacturer, released its third quarter 2020 results on 17th November. The company is often referred to as the ‘Tesla of China’, not only because of the sector in which both companies operate but also because of its impressive share price growth of 3,200% since November 2019.

Over the past quarter, NIO has displayed some very positive results. During Q3 2020, NIO delivered 12,206 vehicles, comprising the models ES8, ES6 and EC6. This represents a significant growth of 154.3% year-on-year, with 18.1% growth quarter-on-quarter. The company delivered 5,055 vehicles in October 2020 alone, again setting a new monthly delivery record.

Looking deeper into the specific models of cars, the ES6 has remained the fastest selling electric SUV in China consecutively over the past 13 months. The ES8 reached number one in sales for the year in the premium SUV segment. With the company gaining a strong reputation for its brand and customer service, the newer model, the EC6, which was introduced to the public in September, may be as popular as the other two models.
The company does not expect delivery growth to slow down, expecting unit sales to reach 16,500 to 17,000 in the final quarter of 2020.

The company has managed to continually make improvements to material costs and manufacturing efficiency, all affecting gross margins positively. In the third quarter, vehicle margin and the company’s gross margin reached 14.5% and 12.9% respectively, which exceeded the company’s expectations. NIO’s ability to generate efficiency gains is becoming increasingly apparent, with the operating loss decreasing by 60.7% year-on-year and 18.4% month-on-month. Furthermore, for the second consecutive quarter, the company has achieved positive cash flow from operating activities and is confident that this will be maintained for the full year 2020.

The company’s ambitions are not slowing down; it has increased the development speed of the second-generation technology platform the NP 2.0, an industry leading mass production autonomous driving system. On November 6th, NIO launched the 100kWh battery pack, which will materially expand the driving range of its electrical vehicles across all models.

Moving onto revenues, during the third quarter the company generated US$666.6m, a 146.4% increase year-on-year. Company revenue is made up of two components, vehicle sales and other sales. Vehicle sales alone increased by 146.1% year-on-year, accounting for 94% of total sales. The other sales component represents home charger installations, service packaging, energy package subscriptions and accessories sold, and recorded 157% growth year-on-year, rising in line with car sales volumes.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
NIO Earnings Power Ahead
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