NIO Inc. (NIO), whose name in Chinese translates to "Blue Sky Coming," is a premium smart electric vehicle (EV) producer based in China. The company designs and manufactures premium EVs with a focus on connectivity, autonomous driving, and artificial intelligence (AI). It also offers EV charging solutions and other services, including insurance, maintenance, roadside assistance, and an enhanced data package.

EV makers' use of the terms "smart" and "connected" is based on "Internet of Things" (IoT) concepts. They are generally used to refer to technology that provides users with applications that automate certain tasks and rely on connectivity to other devices or a network.

NIO vies for sales in the highly-competitive Chinese automotive market, which includes companies like SAIC Motor Corp. (600104) and Dongfeng Motor Corp. (DNFGF). Some traditional Chinese automakers, like BYD Co. (1211) and Geely Automobile Holdings Ltd. (GELYF), have also entered the EV market. NIO also competes with new startups, such as Li Auto Inc. (LI) and XPeng Inc. (XPEV), as well as international rivals like Tesla Inc. (TSLA). The company expects competition in EVs to increase as additional players enter the market.

Key Takeaways

  • NIO makes premium smart electric vehicles and provides charging solutions and other services.
  • Vehicle sales generate the majority of the company's revenue.
  • NIO has lowered its vehicle delivery outlook for Q1 2021 due to production disruptions related to the global semiconductor shortage. It recently announced a five-day shutdown at one plant.
  • The company recently launched its ET7 model, its first smart electric sedan.

NIO's Financials

NIO issues shares that are publicly traded on U.S. stock markets and thus the company is required to report its financial results to the U.S. Securities and Exchange Commission (SEC). The company files its financial results in accordance with U.S. generally accepted accounting principles (GAAP). NIO primarily uses the Renminbi (RMB) as its reporting currency, but has provided U.S. dollar conversions based on the exchange rate of RMB6.5250 to $1.00 that was in effect on Dec. 31, 2020 for its most recent quarterly data. All figures below are converted from RMB to dollars using this exchange rate.

NIO announced in early March results for Q4 of its 2020 fiscal year (FY), which ended Dec. 31, 2020. The company's net loss narrowed to $212.8 million from $439.0 million in the year-ago quarter. Quarterly revenue rose 133.2% to $1.0 billion. Gross profit for Q4 2020 was $175.0 million, a significant improvement from the gross loss of $38.9 million in the same three-month period a year ago.

The company said that it delivered a record 17,353 vehicles in Q4 2020. NIO attributed the increase in vehicle sales compared to the year-ago quarter to an increase in its product offerings and the expansion of its sales network throughout 2020. The company also increased its vehicle margin (calculated by dividing the difference between vehicle sales and cost of vehicles sales by vehicle sales) to 17.2% in the fourth quarter from -6.0% in Q4 2019, mainly due to an increase in delivery volume and a decrease in the cost of certain production materials.

NIO's Business Segments

NIO operates as one reportable segment. However, it provides a breakdown of financial results on the basis of two main sales categories: Vehicle sales and Other sales. The company provides breakdowns for revenue for both of these categories. NIO doesn't break out gross profit figures for these categories, but Investopedia calculated gross profits by subtracting the costs from revenue for both Vehicle sales and Other sales. Hence, we outline both revenue and gross profits below.

Vehicle Sales

NIO primarily generates revenue through the sale of electric vehicles, including its ES8, ES6, and EC6 models. The flagship ES8 is a smart electric SUV with a range of up to 580 kilometers. The ES6 is a smart electric SUV with an extra-long range of 610 kilometers. The EC6 SUV provides an extra-long range of 615 kilometers. NIO delivered 4,873 ES8 models, 7,574 ES6 models, and 4,906 EC6 models in Q4 2020.

Vehicles sales rose 130.0% to $946.2 million in Q4 2020, comprising about 93% of total revenue. NIO's quarterly gross profit on vehicles sales was $163.2 million, a significant improvement from the gross loss of $24.7 million in the same three-month period a year ago. Gross profit comprised more than 93% of the company's total.

Other Sales

NIO also generates revenue through other sources besides vehicles, such as a number of embedded products and services offered with sales of the vehicles. Embedded products and services include charging piles (i.e. stations), vehicle internet connection service, and extended lifetime warranties. Other sales also includes revenue generated from sales of NIO's energy and services packages. The energy package provides customers with a comprehensive range of charging solutions, including charging and battery swapping. The service package provides repair service, routine maintenance service, an enhanced data package, and more.

Other sales rose 184.1% to $71.6 million in Q4 2020, comprising about 7% of total revenue. NIO's quarterly gross profit on other sales was $11.8 million, improving on the gross loss of $14.2 million in the year-ago quarter. Gross profit comprises nearly 7% of the company's total.

NIO's Recent Developments

On March 26, 2021, NIO announced that it was shutting down production for five working days at its plant in Hefei due to a shortage of semiconductors. The shutdown was scheduled to start on March 29. NIO has revised its vehicle delivery outlook for Q1 2021, now expecting to deliver approximately 19,500 vehicles instead of the previously forecasted 20,000 to 20,500 vehicles. NIO is not the only automaker affected by the semiconductor shortage. Both General Motors Co. (GM) and Ford Motor Co. (F) have closed some of their North American factories for several weeks, and Honda Motor Co. (HMC) and Toyota Motor Corp. (TM) are two of the latest to be affected.

On Jan. 9, 2021, NIO announced the launch of the ET7, the company's flagship smart electric sedan. It is NIO's first autonomous driving model, offering features such as perception algorithm, localization, and control strategy. The ET7 is now available for pre-order and deliveries are estimated to begin in Q1 2022. The luxury sedan will cost between $69,185 and $81,230 depending on the specific configuration.