On August 29, NIO Group ("NIO") disclosed its second quarter 2023 results on the HKEx.。

Weilai Q2 delivered 23,520 vehicles, achieving revenue of 87.7.2 billion yuan (RMB, the same below), down 14.8%; net loss recorded 60.5.6 billion yuan, up 119.6%; net loss attributable to shareholders 61.2.2 billion yuan, up 123% year-on-year。Auto Sales Revenue 71.8.5 billion yuan, down 24.9%; automotive gross margin of 6.2%, compared to 16.7%。

The report shows that cost of sales during the period 86.$8.5 billion, down from the same period last year, mainly due to lower bicycle battery costs and lower deliveries, partially offset by increased sales costs of used vehicles, provision of energy solutions and accessories.。

In addition, Weilai said the delivery performance of Q2 sales, which fell year-on-year, was a direct drag on current results, but deliveries surged 103 year-on-year in July..6%, so Q3 delivery guidelines are 5.5-5.70,000, up 74% YoY - 80.3%; revenue guidance of 189.0-195.200 million yuan, an increase of 45.3% -50.1%, both record highs。

It is worth noting that in July 2023, Weilai completed the CYVN entity 7..The $38.5 billion strategic equity investment further strengthens the company's balance sheet and provides financial support for its business, technological innovation and industry competitiveness.。Meanwhile, NIO CFO Feng Wei revealed that the company will continue to focus on operational efficiency in addition to pursuing stable business growth。

                  

Sales side pressure: pay rise, heavy sinking, high research and development

                        

Recently, market rumors from Mercedes-Benz, BMW and other luxury brands to hire high-paying sales staff, some of the first-line sales staff monthly salary exceeded 100,000 yuan.。In the second quarter earnings conference call, Li Bin revealed the company's sales side of the next step.。

"In June of this year, we realized that NIO's sales staff was lagging behind competitors in the entire market in terms of numbers and capabilities, and could not meet the demand for simultaneous sales of 7-8 vehicles.。From July, we will comprehensively improve our sales capacity, expand our sales staff and outlets, with a target of selling 30,000 units a month, and plan to complete this sales capacity building by the end of September and begin to develop efficiency in October.。"

Channel sinking imminent, says Weilai。It is reported that Jiangsu, Zhejiang and Shanghai accounted for more than half of the company's sales, in some central and western provinces such as Anhui, provincial capitals accounted for about 80% -90% of sales, while Mercedes-Benz BMW and other brands only about 50%。As a result, the company expects more experienced salespeople to join the sinking market。

In addition to expanding sales investment, Weilai still maintains high R & D investment。Research and development expenses during the period 33.4.7 billion, an increase from the same period last year, mainly due to the increase in the cost of personnel in the confirmed research and development function, the increase in equity incentive expenses, and the increase in the design and development costs of new products and technologies during the period.。

Qu Yu, vice president of finance at NIO, noted that sales and production at NIO Q2 are at a low level, resulting in a high proportion of manufacturing and other costs, but with NT2.0 platform product switching, energy network expansion, is expected to achieve double-digit gross margin in Q3, Q4 to 15%。

                   

Improve the connected ecology: multi-product force

                  

In recent years, with the accelerated development of the "new four modernizations" of automobiles represented by "electrification, networking, intelligence and sharing," automobiles are changing from a single means of transportation to a "third space" that integrates leisure, entertainment, office and other functions.。

The new NIO EC6 will be released and delivered in September, when NT2.All eight models of the 0 platform have been launched, and their products will be updated, and more features and services will be developed。

It is reported that next year will not deliver new products。However, its sub-brand Alps will release its first model in the second half of next year, the TT model has been offline, the new product is currently developing smoothly and the market outlook is optimistic, and the second model is already under development.。

Unlike NIO, the Alps will focus more on product quality and sales for the mass market, and will not have too many models.。NIO, on the other hand, is more concerned about product personalization and differentiation for the high-end market.。

In addition, the Weilai mobile phone will be officially delivered in late September。NIO Mobile will provide a mobile connected experience centered on parking spaces around NIO users.。The company said that the launch of the mobile phone will help increase the competitiveness of the car。Currently plans to deliver mobile phone products in late September。Weilai is not to compete with mobile phone manufacturers for the market, but to improve the car's ecology。

                   

Promoting industry transformation: power exchange business "turn positive"

                 

In June this year, Weilai announced the cancellation of the standard car free power exchange rights, is expected to have more users to pay for power exchange services in the future, battery service revenue will grow with sales.。Li Bin said that the demand for charging and swapping services is higher among used car users, and the proportion of users is also growing.。For NT3.0 for the power station, a rough estimate if 60 times a day to complete the power exchange, basically can achieve break-even, about 20% of the power station has reached this standard.。Therefore, in the long run, power exchange is a sustainable business。

Weilai said the company is speeding up the pace of expanding the power exchange network to more cities, is expected to deploy and install more than 100 power exchange stations in August, this year plans to build 1,000, all using the "rechargeable, replaceable, upgradeable" model, the development of fast charging technology will also improve the service capacity of power exchange stations.。

It was revealed that NT3.0 of the exchange station will improve the overall capacity, including product experience and performance, and with the development of core technologies, significantly improve all aspects of efficiency and global competitive advantage.。

For strategic cooperation, NIO is willing to open up NIO's next-generation battery technology and charging network to the entire industry to catalyze the transformation of the entire industry.。Insiders said the company is in preliminary communication with some original equipment manufacturers (OEMs).。In short, NIO is open to all forms of technical cooperation.。

              

Q2 loss exceeds expectations: big banks cut target price

             

For the Weilai Q2 results report, the major banks have issued opinions on its performance.。

Bank of America Securities issued a report that Weilai's second-quarter auto gross margin improved from the previous quarter due to a decrease in 2022 ES8, ES6 and EC6 promotion discounts; operating expenses expanded significantly due to an increase in staff, sales promotion, research and development expenses; net loss of $6.1 billion, far less than the bank's expected $5.3 billion loss。In addition, the company's third quarter 5.5-5.The delivery guidance for 70,000 vehicles also missed market expectations.。

As a result, Bank of America Securities lowered its 2023-2025 sales forecast by 3%, 5% and 7%, respectively, and the period's net loss will continue to expand, the target price is also reduced from HK $126 to HK $116, but based on its new models launched on the positive expectations of gross profit recovery, maintain a "buy" rating.。

Bank of Communications International Research Report refers to the second quarter of promotional activities to put pressure on gross margins, the company's net loss of 60.600 million was significantly higher than the bank and market expectations of 25% and 19%。Although NIO is accelerating the sinking market and sales force expansion, the limited audience for high-priced models, plus the impact of the cancellation of overdraft orders for power exchange rights, is pessimistic about its Q4 delivery.。For its sub-brand "Alps" mass market positioning, the bank believes that NIO will enter the most competitive market segments, so the bank lowered its 2023 revenue forecast by 5%, predicting that its losses will expand to 18 billion yuan.。

In summary, BOCOM International downgraded its rating from "neutral" to "sell" and lowered its target price from 66.HK $6 down to 61.HK $2 to maintain its 1.5x 2023 Forecast Market Rate。