As 2024 reaches its halfway point, NIO recently released its financial report for the first quarter of 2024 and delivery data for May. From the current perspective, NIO’s overall market performance can't be considered terrible, but it’s certainly not particularly good either.
First, NIO's revenue has slightly declined. The financial report shows that first-quarter revenue was 9.91 billion yuan, a 7.2% decrease compared to 10.676 billion yuan in the same period of 2023. and a 42.1% decrease quarter-on-quarter. Meanwhile, NIO’s vehicle gross margin dropped from 11.9% in the fourth quarter of last year to 9.2%, and losses further expanded to 5.185 billion yuan, a year-on-year increase of 9.4%, indicating an unfavorable situation.
It's often said that NIO has been burning money, and in terms of R&D expenditure, NIO invested 2.86 billion yuan in the first quarter, which is a significant reduction from 3.97 billion yuan in the fourth quarter of last year. As 2024 progresses, some new car manufacturers have already turned profitable, but NIO has still not achieved profitability. Continuing on this path is clearly detrimental to its development. Even though NIO still has 45.3 billion yuan in cash reserves, continuing to burn through money like this is not a sustainable solution.
NIO's sales performance so far seems to be lukewarm. In the first quarter, it delivered a total of 30.053 vehicles, a year-on-year decrease of 3.2% and a quarter-on-quarter decrease of 39.9%, falling just short of the previously estimated target of 31.000 to 33.000 vehicles. However, in late March, NIO made a slight adjustment to its first-quarter delivery forecast, lowering it to around 30.000 vehicles, which allowed it to "cleverly" meet the target.
In fact, NIO’s recent sales performance has shown some improvement. In May, deliveries amounted to 20.544 vehicles, and in April, 15.620 new cars were delivered, both achieving year-on-year growth. According to NIO’s second-quarter delivery guidance, the company expects to deliver 54.000 to 56.000 vehicles. As long as it can deliver 17.000 to 19.000 vehicles in June, it should be able to achieve this goal.
However, NIO had previously set an ambitious target of delivering 230.000 vehicles in 2024. but reality doesn’t seem to be cooperating. From January to May, the cumulative delivery of new cars was 66.217. completing only 28.79% of the overall target. With just over half a year remaining, catching up to the remaining progress will not be an easy task.
Moving forward, NIO may have to pin its hopes on its second brand, ALPS, whose existence is meant to drive volume and help alleviate some of NIO’s operational pressure. William Li has revealed that ALPS aims to maintain a gross margin level of over 15%, and from a break-even perspective, achieving monthly sales of 20.000 to 30.000 vehicles would be sufficient to reach breakeven.
However, it is still quite difficult for NIO to turn a profit in the short term. After all, achieving monthly sales of 20.000 to 30.000 vehicles with ALPS is easier said than done. Given the current intensity of market competition, breaking even 10.000 would already be quite impressive.
Auto Review: NIO, which primarily targets the mid-to-high-end market, has been constrained by its brand positioning from the start. It cannot be denied that NIO has indeed made a name for itself through its premium image, but more down-to-earth products often have a larger market. Now, NIO is starting to lower its stance to make money, a step that was inevitable. Whether or not this step will be successful is what the entire industry and NIO’s shareholders, large and small, are most concerned about.
