NIO Inc. expects delivery of 11000 to 11500 vehicles in the third quarter, with both the vehicle gross profit margin and the comprehensive gross profit margin exceeding 10 per cent in the second half of this year. In addition, Li Bin said that BaaS's innovative business model of car-electricity separation has made significant progress.

NIO Inc. held an analyst conference call after the pre-market results were released on Tuesday, Aug. 11.

On the conference call, Li Bin, founder of NIO Inc. Automobile and CEO, said:

• The gross profit margin in the second quarter was much higher than the company had expected, and said that NIO Inc. would continue to raise its gross profit margin next, and was very confident that both the vehicle gross profit margin and the comprehensive gross profit margin would exceed 10% in the second half of this year.

• NIO Inc. is pushing ahead with mass production of the EC6 as planned and delivery is expected to begin in late September.

• Battery as a Service (BaaS) has made significant progress in its innovative business model of vehicle-electricity separation. The company has completed all the product announcement and certification required for the separate sale of the whole vehicle and the battery, and the first BaaS model vehicle has also completed the process verification of insurance, loan, licensing and so on.

The following is a transcript of Li Bin's speech at the conference call:

In the second quarter of 2020, NIO Inc. delivered more than 10,000 units in a single quarter for the first time, delivering a total of 10331 ES8 and ES6 units, an increase of 190.8 percent over the same period last year and 169.2 percent month-on-month. NIO Inc. 's delivery volume reached 3533 vehicles in July, the second highest monthly delivery in history. Delivery in the first seven months of this year increased by 111.3% compared with the same period in 2019, and ES6 has been the No. 1 electric SUV market in China since October last year. In the first half of this year, ES8 also won more than 400000 of the sales of medium and large luxury electric SUV in China.

In the third quarter, we are confident that quarterly delivery will hit another record high of 11000 to 11500 vehicles.

In terms of gross profit margin, with the jump in quarterly delivery volume, the increase in bicycle revenue, the decline in the procurement cost of materials such as battery bags, and the improvement in manufacturing efficiency, our gross profit margin made a major breakthrough in the second quarter, with a vehicle gross margin of 9.7% and a comprehensive gross margin of 8.4%, much higher than our previous expectations of 5% and 3%.

Next, we will continue to increase the gross profit margin, and we are very confident that both the vehicle gross profit margin and the comprehensive gross profit margin will exceed 10% in the second half of this year.

On the basis of the regular gross profit, the company's systematic efficiency has improved in an all-round way, and the operating loss in the second quarter of 2020 further narrowed to 1.16 billion yuan, down 64.0% from the same period last year and 26.1% from the previous year. The substantial increase in delivery volume, the "direct sales + to-order production" model, and the support from supply chain partners have enabled us to achieve positive cash flow from operating activities for the first time in the history of the second quarter of 2020.

The second quarter of this year is a landmark quarter for NIO Inc., the company has achieved breakthroughs in delivery volume, gross profit margin, operating efficiency and cash flow. After more than a year of continuous efforts, we have found the right pace, which can not only strictly manage and implement the company's short-term business objectives, but also ensure the investment in R & D and service system, and establish the company's long-term competitive advantage.

Next, I would like to share with you some of the key tasks in the near future.

Research and development，With the improvement of the overall situation of the company, we have accelerated the progress of new product development, and will increase research and development investment in self-driving technology, in order to establish industry-leading technological advantages and ensure long-term product competitiveness.

Product aspectNIO Inc. 's intelligent electric sedan SUV EC6 went on sale on July 24, with a price starting from 368000 yuan before the subsidy. EC6 has been widely recognized by the market and users, and the order performance after opening the reservation exceeded our expectations. We are pushing ahead with the mass production of EC6 as planned and delivery is expected to begin in late September.

Production capacityThe manufacturing team is upgrading the production schedule of the Hefei plant from 15JPH to 20JPH, while coordinating supply chain partners to increase production capacity. We will reach a full supply chain capacity of 4500-5000 units per month in a single shift by the end of August and early September.

Sales of network servicesSo far, we have 22 NIO Inc. centers and 119 NIO Inc. spaces, covering 89 cities in China. NIO Inc. Exchange Power Station has been built, covering 63 cities across the country. Next, we will continue to increase the space of NIO Inc. and the layout of the power station to better serve users.

Meanwhile,Battery as a Service (BaaS) has made significant progress in its innovative business model of vehicle-electricity separation.We have completed all the product announcement and certification required for the separate sale of the whole vehicle and the battery, and the first BaaS model vehicle has also completed the process verification of insurance, loan, licensing and so on. This is a major breakthrough in NIO Inc. 's technology and business model innovation.

At present, we are still making final preparations for the formal provision of Baas mode services, and the implementation plan will be officially released in the third quarter. With the increasing recognition of users, the government and the industry, it is believed that the competitive advantage of our "rechargeable, exchangeable and upgradable" products and service system will gradually appear.

As more and more cars are delivered to users, our user base is getting bigger and bigger, and NIO Inc. 's user community is becoming more and more mature. On August 8, 2020, the bid of the host city of NIO Day 2020 completed the voting. More than 40,000 NIO Inc. users actively participated in the vote. After fierce competition, Chengdu stood out from the 10 bidding cities and finally became the host city of NIO Day 2020.

NIO Inc. 's every progress is inseparable from the trust and support of users. This year's NIO Day bid once again reflects the vitality and passion of NIO Inc. community.