Earnings Call Transcript - NIO Q3 2020

Operator, Operator

Hello, ladies and gentlemen, thank you for standing by for NIO Inc.'s Third Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. And I will now turn the call over to your host, Mr. Rui Chen, Director of Investor Relations of the Company. Please go ahead, Rui.

Rui Chen, Director of Investor Relations

Thank you. Good morning and good evening, everyone. Welcome to NIO's third quarter 2020 earnings conference call. The company's financial and operating results were published in the press release earlier today, and are posted at the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board and Chief Executive Officer; Mr. Steven Feng, Chief Financial Officer; Mr. Stanley Qu, VP of Finance; and Mr. Jade Wei, EVP of Capital Markets and Investor Relations. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP financial measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, go ahead, please.

William Li, CEO

Hello, everyone. Thank you for joining NIO's Q3 earnings call. In the third quarter of 2020, NIO delivered 12,206 ES8, ES6 and EC6 vehicles, representing a strong growth of 154.3% year-over-year and 18.1% quarter-over-quarter. In October 2020, we delivered 5,055 vehicles, achieving another monthly delivery record. The ES6 has been the fastest selling electric SUV in China for 13 consecutive months. The ES8 has reached the number one position in sales this year in the premium electric SUV segment, priced above RMB400,000 in China. Our third product, the EC6, began deliveries in September. We have gained and maintained a great word-of-mouth reputation for our product quality and service, continuously receiving positive feedback from our users. In the 2020 China new energy vehicle experience index released by J.D. Power in September, NIO ranked highest in new vehicle quality among all brands. Following the launch of the battery-as-a-service product, NIO's products and services have been increasingly accepted by more users. The new order intake in October broke the historic record and exceeded our expectations. In the fourth quarter, we are confident that deliveries will further grow to between 16,500 and 17,000 units. In terms of gross profit, supported by steadily increasing quarterly deliveries, an increase in higher margin products in our mix, as well as continuous improvements in material costs and manufacturing efficiency, our gross margin has continued its upward trend, with vehicle margin and overall gross margin reaching 14.5% and 12.9% respectively, surpassing our previous expectations. NIO's existent efficiency is becoming clearer. The operating loss has narrowed to RMB946 million in the third quarter, representing an 18.4% decrease month-over-month and a 60.7% decrease year-over-year. In addition, we have achieved positive cash flow from operating activities for the second consecutive quarter in Q3. We are confident to achieve positive operating cash flow for the full fiscal year 2020. Next, I would like to share some key topics of the company. Regarding R&D, we believe that the navigate-on-pilot feature, utilizing FOTA in October, has further boosted the competitiveness of NIO Pilot, receiving great reviews from both users and media. By fusing environmental data from the sensor suite with high-definition maps, NoP can guide the vehicle to follow the navigation route, automatically drive from on-ramp to off-ramp, and overtake slower cars. It can engage not only on highways, but also urban expressways with optimizations based on specific use cases in China. We are accelerating the development of the second-generation technology platform, NP 2.0, the core of which is an industry-leading mass production autonomous driving system. We will share more details about NP 2.0 at NIO Day 2020. On November 6, NIO launched the 100kWh battery pack, featuring a highly integrated cell-to-pack architecture with a 37% energy density increase, significantly expanding the driving range of our product lineup. It has also adopted advanced technologies, including thermal propagation prevention designs, all-climates thermal management, and a bidirectional cloud-based BMS to enhance battery safety and performance. The 100kWh battery pack will begin deliveries in December. Together with the launch of the 100kWh battery pack, we provide users of the 70kWh battery pack with permanent upgrades and flexible options to upgrade by month or year. As of today, we have closed the loop for our innovative BaaS models: vehicle battery subscription, swappable, and upgradable battery solutions. Regarding production capacity, our own supply chain production capacity reached 5,000 units per month in September. Our teams are diligently working with partners to further elevate our production capacity, targeting an overall supply chain capacity of 7,500 units per month in January 2021 to meet growing user demand. Concerning our sales and service network, NIO has opened 22 NIO Houses and 159 NIO Spaces across 106 cities, along with 159 power swap stations in 70 cities in China. Furthermore, we are developing the second-generation power swap station, which will offer lower costs and better experiences, with plans to deploy these stations in the first half of 2021. As our user base continues to expand, the NIO user community is becoming increasingly vibrant. November marks the second anniversary of the NIO user volunteer initiative. As of November 10, 2020, we have 3,101 user volunteers from 118 cities who promote NIO and contribute to the community through auto shows, live streaming platforms, delivery centers, and NIO Day. The trust and support from our users have always been our greatest motivation to do more and be better. On November 26, 2020, NIO will celebrate its sixth anniversary. Thanks to prior support and team efforts, we have achieved a significant milestone, but we remain in the early stages. In facing fierce competition and intense challenges, we will stay committed to making decisive investments in products and core technologies, while offering the best services and holistic user experiences to meet the expectations of our loyal user community. Thank you for your support. With that, I will now turn the call over to Steven to provide the financial details for the quarter. Steven, please go ahead.

Steven Feng, CFO

Thank you, William. I will now go over our key financial results for the third quarter of 2020. To be mindful of the length of this call, I encourage listeners to refer to our earnings press release, which is posted online for additional details. Our total revenues in the third quarter were RMB4.5 billion, or $666.6 million, representing an increase of 146.4% year-over-year and an increase of 21.7% quarter-over-quarter. Our total revenues are comprised of two parts: vehicle sales and other sales. Vehicle sales in the third quarter amounted to RMB4.27 billion, or $628.4 million, accounting for 94% of total revenues for the quarter. This represented an increase of 146.1% year-over-year and an increase of 22.4% quarter-over-quarter. The increase in vehicle sales year-over-year was primarily due to the sales increases of the ES6 and ES8. Other sales in the third quarter were RMB259.2 million, or $48.2 million, representing an increase of 157% year-over-year and an increase of 11.3% quarter-over-quarter. The increase in other sales year-over-year was largely attributed to increased revenues derived from home chargers installed, service packages, energy packages subscribed, and accessories sold, aligning with the increase in vehicle sales in the third quarter. The cost of sales in the third quarter reached RMB3.94 billion or $580.3 million, representing an increase of 91.4% year-over-year and an increase of 15.7% quarter-over-quarter. This rise in cost of sales was mainly driven by the increased delivery volume in the third quarter. Gross profit in the third quarter was RMB585.8 million or $86.3 million, marking an increase of RMB874 million from a gross loss of RMB201.6 million in the third quarter of 2019 and an increase of RMB282.7 million from the second quarter of 2020. The rise in gross profit was primarily fueled by increased vehicle sales and higher vehicle margins. Gross margin for the third quarter was 12.9%, compared with 12.1% for the same quarter of 2019 and 8.4% in the previous quarter. The increase in gross margin was primarily driven by improved vehicle margins in Q3. Specifically, the vehicle margin for the third quarter was 45%, compared with negative 6.8% for the same period in 2019 and 9.7% in the second quarter. This increase in vehicle margin resulted from a reduction in the purchase prices of certain materials and lower unit manufacturing costs, particularly due to increased production volumes of the ES6 and ES8 in Q3. R&D expenses in Q3 were RMB590.8 million or $87 million, representing a 42.3% year-over-year decrease and an 8.4% increase quarter-over-quarter. The annual decline in R&D expenses was partially due to design and development costs that occurred in Q3 2019 for the EC6 and new ES8 launch in Q4 2019, together with cost-saving measures and improved operational efficiency in R&D functions. SG&A expenses in Q3 were RMB940.3 million or $108.5 million, representing a decrease of 19.2% year-over-year and an increase of 0.4% quarter-over-quarter. The decline in SG&A expenses year-over-year was primarily driven by overall cost-saving efforts and improved operational efficiency in marketing and other supporting functions. The loss from operations in Q3 was RMB946 million or $139.3 million, signifying a 60.7% decrease year-over-year and an 18.4% quarter-over-quarter increase. Share-based compensation expenses in Q3 amounted to RMB49.2 million or $7.3 million, reflecting a 30.1% year-over-year decline and an 8.3% quarter-over-quarter rise. The decrease in share-based compensation expenses year-over-year was driven by fewer options granted due to a decrease in employee numbers, and the impact of some of the share-based compensation expenses recognized using the accelerated method, where expenses decrease over the vesting period. The net loss in Q3 was RMB1.05 billion or $154.2 million, a decline of 58.5% year-over-year and an 11% decrease quarter-over-quarter. The net loss attributable to NIO's ordinary shareholders in Q3 was RMB1.19 billion or $175 million, representing a decrease of 53.5% year-over-year and a 1.6% decline quarter-over-quarter. Basic and diluted net loss per ADS in Q3 stood at RMB0.98 or $0.40. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, the non-GAAP adjusted basic and diluted net loss per ADS were both RMB0.82 or $0.12. Our balance of cash and cash equivalents, restricted cash, and short-term investments totaled RMB22.2 billion or $3.3 billion as of September 30, 2020. Moreover, we've achieved positive cash flow from operating activities for the second consecutive quarter. Regarding our business outlook, as William mentioned, for the fourth quarter of 2020, the company expects deliveries to be between 16,500 and 17,000 vehicles, an approximate increase of 100.6% to 106.7% from the same quarter of 2019, and an approximate increase of 35.2% to 39.3% from the third quarter. The company also anticipates total revenues for Q4 2020 to be between RMB6.26 billion and RMB6.44 billion or between $901.8 million and $947.9 million. This would represent an approximate increase of 119.7% to 126% from the same quarter of 2019 and an approximate increase of 38.3% to 42.2% from Q3 2020. This outlook reflects the company's current and preliminary view on the business situation and market conditions, which are subject to change. Now this concludes our prepared remarks. I will now turn the call back to the operator to facilitate our Q&A session.

Operator, Operator

The first question we have is from Tim Hsiao from Morgan Stanley. Your line is now open.

Tim Hsiao, Analyst

Hi, Will and Steven, Jade and Tim. This is Tim from Morgan Stanley. Congratulations on a strong result and thanks for taking my questions. So, I have two questions and we'll quickly go through them, first in Mandarin. My first question is that we saw NIO making solid operational progress this year on all fronts, such as the launch of EC6, BaaS and the 100kWh battery pack. So looking to 2021, in addition to the fourth model launch and ongoing investment in autonomous driving, what else would be our key focuses for R&D investment? And if possible, could management share any rough guidance regarding the overall R&D spending versus 2020? My second question is about BaaS, battery-as-a-service. Could you please share some market feedback on the battery-as-a-service program? And with the launch of the 100kWh battery pack, what are our expectations of the take rate of BaaS services for 2021 and beyond? These are my two questions. Thank you.

William Li, CEO

Thank you for your question. Regarding the R&D focuses for next year, as I mentioned in my prepared remarks, the NP 2.0 is a core technology focus. The core of NP 2.0 is our industry-leading mass production autonomous driving system. Additionally, we are also focusing on other ongoing projects. For our vehicle models, we have successfully launched three SUVs. The next product we plan to launch will be a sedan on the NP 2.0 platform, entering the sedan market. We are also developing other vehicle models, including a second sedan in our pipeline. With these two new products, we believe we will complete our product portfolio. Regarding the BaaS take rate, we are pleased to see the take rate increasing weekly following our announcement in August. In November, the take rate of BaaS among new orders reached around 35%, exceeding our previous expectations. This is significant as the BaaS model is designed to be made to order, resulting in a reflection in our future deliveries. We are optimistic about this momentum for BaaS take rates and believe this will continue to increase as users gain a better understanding of its benefits. BaaS helps to lower the initial purchase price and alleviates users' concerns regarding battery degradation, as well as providing flexible upgrade options. Following the 100kWh battery pack launch, we believe the competitiveness of BaaS has been significantly enhanced. With increased user understanding of BaaS benefits, we expect the take rate will continue to rise over time.

Tim Hsiao, Analyst

Perfectly clear. Thank you, William, and congratulations again on your results. Thank you.

Operator, Operator

Thank you. And the next question we have is from Ming Lee from Bank of America. You may proceed with your question.

Ming Lee, Analyst

So, my first question is regarding the margin expansion from the second quarter to the third quarter; your gross margin increased around 5 percentage points. Could you give a rough breakdown on how you would improve your gross margin? And do you also see any extra contribution from the sales of NEV credit? So that's my first question. Thank you, William.

Stanley Qu, VP of Finance

Hi Ming, this is Stanley. The vehicle margin increased in Q3 compared with Q2, primarily due to two factors. First, the average selling price rose by RMB10,000 per vehicle, mainly driven by higher sales of the more expensive ES8 in Q3. Second, the cost of goods was reduced by RMB7,000 per vehicle, due to a decrease in costs of the battery pack. The revenue from NEV credits will be recognized as other revenue in Q4 and will not be included in Q3's financial results. Regarding service revenue, we are continuously working to improve the service margin and reduce losses. We expect a positive trend in the future.

Ming Lee, Analyst

Okay. That's it for me.

William Li, CEO

Almost speaking regarding the gross margin for other services and sales, we believe it will be further optimized as our user base continues to expand. This growth will reflect in our economic scales. In Q2 and Q3, the changes are not very evident, but we are confident that continuous optimization will occur in the future.

Rui Chen, Director of Investor Relations

Hi Lee, I think your line got dropped.

Operator, Operator

Sorry, the participant's line got disconnected. I'll move on to the next one. We have Bin Wang from Credit Suisse.

William Li, CEO

Operator, let the management answer the question first.

Ming Lee, Analyst

Just to recap a little on the question. Basically, the question is about the average selling price in the fourth quarter. Is it expected that the average selling price will increase compared to the third quarter by around RMB12,000 to RMB13,000? We would like to know if this is driven by the weight or the 100kWh battery pack. Also, what is the take rate ratio between the 100kWh battery pack and the 70kWh battery pack?

William Li, CEO

Regarding the sales revenue guidance, we are happy to clarify that, as Stanley mentioned, revenue from NEV credits will enhance our other sales revenue in Q4. In our guidance, we haven’t considered an increase in average selling price. According to current orders, we believe the average selling price in Q4 will remain similar to that of Q3. As we just started deliveries of the 100kWh battery pack in Q4, we don't expect it will significantly affect gross margin in the short term, but we are confident about continuously improving our gross margin throughout Q4.

Rui Chen, Director of Investor Relations

Operator, we can move on to the next question.

Operator, Operator

Certainly sir. The next question is from Bin Wang from Credit Suisse, your line is now open.

Bin Wang, Analyst

Actually, I just want to know what's the margin effect going forward from BaaS. We've seen a few patterns, for example, BaaS adoption, the 100kWh battery pack and some interest rate subsidies for different battery types. And how will this affect our margin? Secondly, about new products, we have seen competitors benefiting from potentially lower pricing or lower margins. So are there plans for an even larger SUV, perhaps the ES9? We’ve seen competitors running for much larger vehicles. So, what is the timing for even larger products? Thank you.

Stanley Qu, VP of Finance

I will break that down into sectors to further explain the cost value improvement. First, we mentioned the subsidies; we further reduced the subsidy given to end users in Q3 following the launch of our BaaS model. As a result, in Q3 there may have been a minimal sector shift due to the subsidy reduction. Second, regarding economies of scale, the production volume in Q3 peaked at 12,000 vehicles, a 20% increase compared to Q2. As William mentioned, we expanded production capacity in September to 5,000 units. Manufacturing costs are expected to remain on par with Q2. Regarding BaaS and the 100kWh impact, I’ll turn it over to William.

William Li, CEO

To add some points regarding manufacturing cost and efficiency, we will continuously enhance our manufacturing efficiency and cost. We believe this will gradually reduce costs. In Q3, contributions were seen compared to Q2, but this will lessen as we progress. Nevertheless, we will keep optimizing manufacturing efficiency and costs. For BaaS, we will sell cars to users and batteries to the BaaS company. Thus, it won't affect vehicle gross margins. However, the battery upgrade service could provide significant benefits to other revenue. In the long run, this will not substantially impact vehicle gross margins but will be beneficial for other revenues. Regarding credits, we include those in other revenues rather than vehicle pricing. For new product planning, we have a comprehensive and stepwise market entry strategy. We started with flagship SUVs, moved to mid-sized SUVs, and then the Coupe SUV. The next phase involves entering the sedan market. Careful consideration of market segment sizes and volume objectives is crucial. Currently, richer markets are not our focus.

Stanley Qu, VP of Finance

Also, regarding one-time factors in Q3, we did not receive significant sales rebates from our suppliers during that quarter, so I don't think any material impact occurred.

Bin Wang, Analyst

Okay. Can you also tell me about the 100kWh battery and whether that would improve our margin? I think in this call, you also mentioned a 150kWh battery coming. Do you see upside for margins from battery upgrades?

William Li, CEO

With the 100kWh battery pack, users can purchase it as an option, which will improve vehicle gross margins. Additionally, we offer flexible upgrade options that can positively impact our service gross margins. These are two different avenues for revenue. Following the 100kWh battery launch, we’ve observed users choosing to include the 100kWh battery pack as an option, and some users are opting for flexible upgrades monthly or annually. We believe this is likely to enhance our company's gross margins. However, for the gross margin of new vehicles, we don't see a significant short-term impact; in the long run, it will contribute positively to our margins due to the boost in other sales and revenues. Our strategy is that the 70kWh battery pack meets daily needs. If the user needs to travel longer distances, they can subscribe to bigger batteries. This on-demand flexibility is a major advantage of our service. We believe it will significantly contribute to the growth potential of gross margins in the long run, and the introduction of the new pack will provide excellent opportunities to enhance our existing users' competitiveness regarding the 70kWh battery pack.

Bin Wang, Analyst

Thank you.

Operator, Operator

Thank you. The next question is from Edison Yu from Deutsche Bank. Your line is now open.

Edison Yu, Analyst

Thanks, everyone for taking the questions. First, can you talk a little about the operational plan to boost the production target in January? What needs to get done to reach that goal? Secondly, regarding the next-gen autonomous platform, what are your latest thoughts on in-sourcing chip design and implications for Mobileye, especially in relation to LiDAR?

William Li, CEO

We emphasize overall supply chain production capacity, not only our own plant's capacity. We work closely with supply chain partners to ensure they support us in increasing production capacity. Users currently experience some delays in vehicle pick-up due to capacity constraints. We are striving to expedite delivery to meet user demands. Right now, we’re focusing on expanding our production capacity to 7,500 units. Regarding chipset for NP 2.0, there’s great interest in the industry. However, we need time to disclose specific information at NIO Day 2020. It's early to share details, but we aim to provide the most advanced chipset performance in the industry, which can maintain our leading position for years to come. Regarding the LiDAR discussion, autonomous driving must be assessed from two perspectives: user availability and accident prevention. LiDAR can enhance both factors. While costs associated with LiDAR are a consideration, balancing technology capabilities is essential. As camera and compute power improve, LiDAR may find its role in niche scenarios, contributing to accident reduction.

Operator, Operator

Thank you. We have the next question from Nick Lai. Your line is now open.

Unidentified Analyst, Analyst

Let me translate my question very briefly. The first question is regarding the cash burn and CapEx and investment for the next year. For instance, William just mentioned our monthly capacity can ramp up to 7,500 in January. Would that mean that in the next year or so, we need to expand our capacity at the Shanghai plant? On top of that, what should we consider regarding the CapEx needed for building swapping stations and establishing NIO Space? So, my first question is about cash burn and CapEx. Secondly, regarding longer-term autonomous driving strategy: based on what William mentioned, can we understand that our long-term strategy is to procure chips from top vendors while developing in-house capabilities?

Stanley Qu, VP of Finance

We have CapEx allocated for improving our production capacity, most of which will be covered by January. NIO will utilize effective CapEx on its own, but we also have revolvers.

Steven Feng, CFO

Yes, and we will also invest in expanding our sales and service network, as well as our power swap stations. However, we plan to manage our growth carefully. Therefore, I don't anticipate a significant cash burn next year.

William Li, CEO

Regarding our current development plan and cash position, we believe short-term financing is unnecessary; we should have sufficient resources to support our business development. Concerning autonomous driving, our goal is to build in-house full-stack capabilities. We have always maintained this in-house capability. Recently, we have strengthened our algorithm and system development capabilities. Since 2016, we've developed the first-generation NIO Pilot in-house. For the second-generation NIO Pilot, we will ensure our capabilities regarding algorithm data and system development.

Unidentified Analyst, Analyst

Thank you.

Operator, Operator

Thank you. We have the next question from Jeff Chung from Citigroup. Your line is now open.

Jeff Chung, Analyst

So my first question is about first quarter next year sales volume outlook. Will it still expand quarter-over-quarter? My second question is about the differences between vehicle gross profit margin and non-vehicle gross profit margin growth outlook and forecast. Thank you.

William Li, CEO

Thank you for your question, Jeff. It's quite early to provide guidance for Q1 2021. We need to ensure we are prepared regarding our production capacity to meet user demand and order backlogs. Current order momentum requires we maintain sufficient production capacity in Q1 to fulfill existing orders. Our business model targets order management instead of inventory. We prefer to control order levels within a reasonable range, ensuring that users do not face long wait times for vehicle delivery. We are actively working to ramp up production capacity and improve user experience. We are confident in achieving this target in the future. Gross margins have been steadily rising. As we've observed, non-vehicle gross margins have historically been lower than vehicle gross margins. However, both gross margins have been on an upward trajectory. As I mentioned earlier, carbon credit revenue will now contribute to non-vehicle gross margins moving forward. This year, due to increased sales, carbon credit numbers have surged by over 2.5 times, and pricing should also double next year. Overall, we anticipate carbon credit revenues to be four to five times higher next year compared to this year. Many OEMs are discussing purchasing carbon credits from us, suggesting that the credit system will benefit the EV industry's growth.

Jeff Chung, Analyst

So my last two questions are about the carbon credit. Will it impact our P&L next year in Q4 or will it be spread evenly throughout next year? And my second question is about the tax rate on our NoP and BaaS, currently and going forward. Thank you.

William Li, CEO

The confirmation for carbon credit revenue is flexible. We plan not to confirm revenue for a specific quarter next year, as this depends on market conditions. Selling too early may lead to lower pricing. Regarding the BaaS take rate, as I mentioned earlier, the November take rate for BaaS reached 35% among new orders. We anticipate continuous long-term improvements in this area, while the take rate for NIO Pilot is around 50%. After launching Navigate On Pilot, we expect even better performance.

Operator, Operator

You have the next question from Nae Yi from Securities. Your line is now open.

Unidentified Analyst, Analyst

Hi, thanks for taking my question. Great quarter, guys. My first question is: could you comment on your thoughts regarding Tesla's made in China model Y? Will it impact your order momentum? Secondly, could you provide updates on your internationalization plan? Do you have a timetable for going global? What would be your stock market? Which models will you introduce to international markets? Additionally, how will you hire local, competent teams?

William Li, CEO

Thank you for your question, Nae. Tesla has announced local production of the Model Y. We believe this provides more consumer options, potentially accelerating EV adoption in the market. We recognize that Tesla's strategy differs from ours. Since last year, they have reduced prices multiple times. Their pricing strategy is primarily based on cost. The last year's price cut impacted our order intake briefly, but recovered quickly, and thus we saw a record order intake in October. Our transaction price is significantly higher than Tesla's average selling price, reflecting our unique advantages in products and services. The introduction of the Model Y will benefit the overall market. However, we believe the competition mainly lies between Model Y and Model 3, as we maintain unique advantages with our offerings. The growing market presents significant opportunities, feeding our confidence in sustainable long-term growth.

Steven Feng, CFO

This is Steven. I’d like to give a high-level update on our globalization efforts. We have a solid short-term target to enter the EV market in the second half of 2021. Additionally, our globalization team has a long-term vision for positioning NIO as a global brand and plans to implement this strategy gradually. We have three guiding principles: First, we will maintain our user-centric approach and price model, which is our global philosophy; Second, we aim to reinforce our premium brand positioning against competitors like BMW, Audi, and Tesla; Third, we will localize our service to meet European markets' needs.

Unidentified Analyst, Analyst

Perfect. Thank you.

Operator, Operator

Thank you. That will be the last question for today. I'd like to turn the call back over to the company for closing remarks.

William Li, CEO

Thank you again for joining us today. If you have any further questions, feel free to contact NIO's Investor Relations team through the contact information on our website. This concludes the conference call. You may now disconnect your lines. Thank you.

Steven Feng, CFO

Thank you, everyone.

Stanley Qu, VP of Finance

Thank you, everyone.

Operator, Operator

Thank you, everyone. That will conclude our conference for today. Thank you all for participating. You may now disconnect.