This post was originally published on this site
Deliveries for the first quarter were already reported at 31,041 units, leading to revenue of RMB 10.7bn, missing the consensus estimate of RMB 11.7bn, hurt by lower ASP. Gross margin of 1.5% also missed consensus, driven by downside in vehicle margin, but partially offset by “other” margin.
Deutsche analysts wrote in a note, “Our main takeaway following 1Q earnings and hosting NIO management (CFO inperson in NYC this week) is that the urgency to capture volume and cut back spending is finally here. Underlying demand for premium BEVs has been disappointing this year with customers opting for BBA gasoline models and Li Auto EREVs. With NIO’s broad-based price cut and rapid roll out of new NT2.0 models, we think 2H sales can rebound considerably, paving the way for 20k monthly volume. Furthermore, opex and capex should be much more controlled going forward as NIO dials back spending on non-core initiatives. Our unit sales forecasts go up for 2023/24E given incremental demand from the price adjustments while gross margin naturally comes down. Positioning-wise, we believe investors are shifting to a less negative view given volume and cash burn trajectory appear to be reversing. Depending on how the 2H plays out, the stock will likely remain volatile until sales show clear upward trajectory.”
Management provided its outlook for 2Q23, calling for 23,000-25,000 deliveries, implying that June will be up materially QoQ (~11,000 at mid-point vs. just 6,155 in May). Beyond that, NIO is targeting +20,000 deliveries per month in the 2H. To help achieve this, the company initiated a RMB 30,000 price reduction across its entire line-up on Monday, bringing the starting price of its cheapest model (ET5) to just under 300,000.
To offset margin difficulties, NIO also removed their free lifetime e-battery swap perk (4 per month) and reduced its warranty/service coverage terms.
On vehicle margin, NIO anticipates 2Q will still be under pressure (roughly flat QoQ) with 3Q recovering back to double digits and 4Q >15%. R&D is officially expected to still trend around 3-3.5bn per quarter but management is clearly exploring ways to reduce spend on non-core initiatives such as the Firefly brand, battery cell insourcing, and European expansion.
Following the price cut, Deutsche Bank raised 2023 volume forecasts by 15k to 170k (+39% YoY), translating into RMB 60bn in revenue. However, they took gross margin estimates down 220bps to 7.0% (vehicle margin of 10%), reflecting lower OH absorption, price cuts, and less benefit from lithium carbonate price savings.
Shares of NIO are up 3.98% in pre-market trading on Friday.
