NIO Inc

NYSE:NIO

Earnings Call Transcript

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for NIO Inc. Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions]

Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Head of Investor Relations of the company. Please go ahead, Rui.

[Rui Chen, executive]

Good morning, and good evening, everyone. Welcome to NIO's Fourth Quarter and Full Year 2024 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website.

On today's call, we have Mr. William Li, Founder, Chairman of the Board and Chief Executive Officer; and Mr. Stanley Qu, Chief Financial Officer.

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 Stock Exchange of Hong Kong Limited and the Singapore Exchange Securities Trading Limited. 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 unaudited non-GAAP measures to comparable GAAP measures.

With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.

[Bin Li, executive]

Hello, everyone. Thank you for joining NIO's 2024 Q4 and full year earnings call. In Q4, the company delivered a total of 72,689 smart EVs, setting a new quarterly record. In December, our monthly deliveries surpassed [indiscernible] for the first time. For 2024, the company's total deliveries reached 221,970, marking a 38.7% increase year-over-year. The NIO brand continued to lead the premium segment, delivering 201,209 vehicles, securing a 40% market share in China's BEV segment priced above RMB 300,000.

The ONVO brand delivered 20,761 vehicles in the mainstream family market. The market share of the ONVO L60 have been steadily increasing since its launch, ranking among the top 3 in China's BEV SUV market priced between RMB 200,000 and RMB 300,000.

In January and February, due to seasonality and the Chinese New Year holiday, the company delivered 27,055 vehicles. We expect the total deliveries in Q1 to reach 41,000 to 43,000 units, reflecting a year-over-year growth of 36% to 43%.

On the financial side, our efforts in supply chain optimization and the cost control have delivered strong results. NIO's vehicle margin improved to 14.9% in Q4, while ONVO achieved a positive vehicle margin in the early stage of production ramp-up. As a result, the company's overall vehicle margin reached 13.1% in Q4. At the same time, the profitability of our aftersales services continued to improve along with growth in technology service revenue, leading to a positive gross margin in other sales in Q4.

Now I'd like to share some updates on our products and operations. Starting this year, our 3 smart EV brands have entered a new product cycle. For the premium brand, NIO, at the NIO Day on December 21, we launched NIO ET9, a flagship smart executive sedan. As a result of NIO's 10-year tech innovation, ET9 sets a new benchmark for premium smart executive EV. With industry-leading technology and distinctive experience, it has been well received by users in the segment.

The fourth edition in a limited offering of [ 999 ] units sold out within hours, and the signature version continues to see strong demand. ET9 delivery will begin at the end of this month. Besides NIO's [indiscernible] products, ET5, ET5T, ES6 and the EC6 will launch their 2025 models in Q2. featuring upgrades in design, cutting edge experience and smart driving chip.

Moreover, with another major products launched in the second half of this year, the enhanced product line up will further solidify NIO's leadership in the premium BEV market while driving its overall profitability.

For the mainstream mass market brand, ONVO, the first product L60 gained a strong recognition among family users for its safety, space, class-leading energy efficiency and a convenient recharging experience. ONVO's second product, L90 is positioned as a flagship large family SUV. It will be introduced in Q2 and the delivery in Q3. ONVO's third product will be launched in Q4, forming a well-rounded SUV lineup to cater to a broader range of mass market users.

For the high end small car brand, Firefly, since its debut in December 2024, Firefly has received broad attention, particularly from young buyers and the family looking for a [indiscernible] car. The brand is set to launch and begin delivery in April, leveraging NIO's steady network for rapid market expansion.

With these 3 brands, the company is building a comprehensive product metrics spanning RMB 150,000 to RMB 800,000, catering a diverse user group. As we expand our sales and service networks, they are set to reach more users and drive sustainable growth.

In terms of smart driving technology and experience, AI technology continues to drive us towards our vision of [ relieving stress ] and reducing accidents. Prioritizing AI-based safety enhancements, NIO is [indiscernible] the industry-backed automatic emergency [indiscernible] feature. It led -- it leads the market in [indiscernible], object detection and [ use case ] cabins. To date, NIO's smart safety has prevented over 3.4 million potential accidents for users, and the release of [indiscernible] has further improved driving safety. Meanwhile, we've made [ breakthroughs ] in switching to our next-generation architecture based on the NIO WorldModel, [indiscernible] will provide driving, parking and safety assistance across all scenarios. The early bird program will begin in early April with mass release gradually rolled out.

Globally, NIO has 183 NIO Houses and 462 NIO Spaces, while ONVO has 449 stores in China, ensuring a well-balanced sales [indiscernible].

On the service side, the company operates 388 service centers and [ 64 ] delivery centers. We are putting more efforts in improving operational efficiency so as to better support our new product cycle and deliver on exceptional user experience.

As of now, the company has deployed 3,245 [indiscernible] stations worldwide, including 970 stations on highway in China, having [indiscernible] over 69 million swaps for NIO and ONVO users. In addition, NIO has built over 25,000 power chargers and the destination chargers.

Battery swap remains the preferred recharging solution for NIO users and long trips. During the Chinese New Year holiday, we set a new record with over 137,000 batteries swaps in a single day with top stations handing over 118 swaps. With unmatched speed and convenience, battery swaps is the optimal recharging solution for long distance and holiday travel. It's a strategic advantage where we reinforce our competitive edge of the BEV market, laying a strong foundation for the sales goals of our 3 brands here in the upcoming product cycle.

We are actively engaging with partners in more countries and regions to expand our global footprint. As we grow our global sales channels and start Firefly deliveries, the company is accelerating its global expansion while delivering best-in-class EV solutions to users worldwide.

The company remains committed to social responsibility and sustainability. In December, MSCI upgraded NIO ESG's from A to AA. In general, Corporate Knights ranked NIO as the #1 card company in its list of 2025 Global 100 Most Sustainable Companies.

The competition landscape in the smart EV industry is evolving rapidly, making 2025 a critical for the market its shaping. This year, with 9 new models across 3 brands, the company is forming a comprehensive product lineup while a tech-driven cost optimization will further enhance profitability. With global expansion picking up speed, the company will be able to unlock new revenue opportunities. In the meantime, the company is enhancing operational capabilities and the business of revenues, a core team ensuring greater value creation and efficiency. With this action in place, we are confident in navigating fair competition and achieving our full year operating targets.

Thank you for your support. With that, I will now turn the call over to Stanley for Q4's financial details. Over to you, Stanley.

[Stanley Qu, executive]

Thank you, William. Let's now review our key financial results for the fourth quarter of 2024. Our total revenues reached RMB 19.7 billion, increased 15.2% year-over-year and 5.5% quarter-over-quarter. Vehicle sales were RMB 17.5 billion, up 13.2% year-over-year and 4.7% quarter-over-quarter, primarily driven by higher deliveries partially offset by a lower average selling price due to changes in product mix.

Our other business segments also delivered solid performance. Other sales were RMB 2.2 billion, grew by 33.8% year-over-year and 12.7% quarter-over-quarter. The annual growth was from increased sales of parts, accessories after sales vehicle services and provision of power solutions, along with a rise in sales of technical R&D services. The increase quarter-over-quarter was driven by higher sales in technical R&D services, used cars and other parts, accessories and aftersales vehicle services.

Looking at margins, vehicle margin was 13.1% in this quarter compared with 11.9% in the Q4 last year and unchanged from last quarter. The year-over-year change increase was mainly due to lower material cost per unit as the margin turned positively this quarter, mainly due to the increase in the provision of technical R&D services as well as the sales of parts, accessories and aftersales vehicle services with relatively higher margins. Overall, gross margin was 11.7%, up from 7.5% in Q4 last year at 10.7% last quarter.

Turning to OpEx. R&D expenses were RMB 3.6 billion, decreased 8.5% year-over-year and increased 9.6% quarter-over-quarter. The year-over-year decrease was mainly driven by reduced personnel costs and design and development costs, while the quarter-over-quarter rise reflects additional investments in design and development, partially offset by the decreased personnel costs.

SG&A expenses were RMB 4.9 billion, up 22.8% year-over-year and 18.7% quarter-over-quarter. The year-over-year increase was mainly driven by increased sales and marketing for new brands and products and higher personnel costs from sales and service network expansion. The quarter-over-quarter increase was mainly due to the same enhanced sales and marketing efforts and higher professional services costs for general corporate functions.

Loss from operations was RMB 6 billion, down 8.9% year-over-year and up 15.2% quarter-over-quarter. Interest and investment loss was RMB 0.2 billion compared with investment income of RMB 1.4 billion in 2023 Q4 and RMB 0.3 billion in 2024 Q3, primarily due to the fair value change of equity investment.

Other loss, net in Q4 was RMB 0.5 billion, primarily due to the loss from the revaluation of overseas RMB related assets caused by the depreciation of RMB against U.S. dollars this quarter. Net loss was RMB 7.1 billion, showing an increase of 32.5% year-over-year and 40.6% quarter-over-quarter.

Lastly, we ended the quarter with total cash and cash equivalents, restricted cash, short-term investments and long-term time deposits amounting to RMB 41.9 billion.

That wraps up our prepared remarks. For more information and the details of our unaudited fourth quarter and full year 2024 financial results, please refer to our earnings press release.

Now I will turn the call over to the operator to start our Q&A session. Thank you.

[Operator]

Your first question is from Tim Hsiao from Morgan Stanley.

[Tim Hsiao, analyst]

This is Tim from Morgan Stanley. I have two questions. The first question is about cost reduction effort because a lot of market focus is put on NIO's latest round of restructuring. So I just want to know that how much of cost savings would management expect to achieve? And when are we going to see the contribution emerging in upcoming quarters? That's my first question.

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding the cost reductions, actually, since last year, we have already started the cost of [indiscernible] initiatives. And for the 2024 full year, we were also on track for the cost reduction initiatives. As you can see in our vehicle margin for Q4, it has exceeded our expectation, and we will continue such cost reduction actions this year from multiple aspects, including supply chain, R&D. And in that case, we foresee that our vehicle margin will also continue to grow starting in Q2.

And in terms of expenses, actually in Q4 last year, as we have launched the NIO brand, ONVO, together with its product, we have started to make investments and expenses in developing its sales and service networks as well as in the brand-related activities. And such activities and expenses will continue in Q1 this year including of the NIO brand and also the sales and service networks.

But in the meantime, starting Q1 this year, we have started an all-employee comprehensive cost reduction initiatives covering R&D, supply chain, sales and also service teams. We call it [ CBU or Cell Business Unit. ] Basically, we asked all the teams and employees to take the ownership and accountabilities of the company's operational targets. We already have seen some good results and actions taken voluntarily by the R&D teams by the sales and service teams in reducing the cost and improving the efficiency.

And the results of such actions will be reflected in our balance sheet in the coming quarters starting Q2. As we continue to strengthen our cost control and also expenses management in the second half of this year, together with the improvement in the sales volume, in the vehicle margin as well as in the expense control, we are confident that we are going to achieve our breakeven target in Q4.

[Tim Hsiao, analyst]

My second question is about ONVO. I just want to know that what actions could ONVO take to regain the growth momentum. Will NIO stick to the [indiscernible] brand strategy where it could potentially change ONVO a sub-brand on to NIO to save cost and enhance efficiency? So that's my second question.

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding ONVO, its sales performance starting this year didn't meet our expectations, and we have also reviewed the comprehensive reasons and causes for its performance. The first reason is because of the brand awareness and -- the brand awareness and exposure. As ONVO is still a new brand, in terms of its brand awareness -- and awareness, it is actually far below its competitors. We have also done some studies and research on the influence of the brand awareness of ONVO. And in terms of the brand awareness, it is only 1/3 of that of NIO.

In that case, as we consumed all the existing order backlogs, we are facing larger pressures regarding the fresh orders. Starting this year, especially during and after the spring festival holidays, we have also taken a series of actions to help strengthen and improve the brand awareness and exposure. We have rolled out some off-line advertisements in the train stations and also in the elevators of apartment buildings. We have also doubled down on the social media campaigns to help improve the exposures, and we are seeing some good effects in helping ONVO being more famous and well known.

And the second reason regarding the coverage of the point of sales. We have been ramping up the sales store coverage of the ONVO brand. Last year, when we just launched the brand, we have around 105 stores in China. And by the end of last year, we have opened up another 100 stores. And so far, we have more than 400 stores in China. Yet most of the stores are still quite new in terms of their efficiencies and productivities, they are not yet to a mature level. So it will take some time for these new stores to start yield real results.

We have also done a comparison between a mature store being in operations for more than 3 months in comparison to a newly established store. The productivity can be different -- can be as different as 3x. As this new store is getting more mature and skillful, we believe that they will also start to play a bigger role. So as you can see, we have made some investments in our sales and service networks in Q4 last year and also Q1 this year, and we've been under the pressure for this investment and expenses, yet we also believe that this store and network will soon start to yield results and [indiscernible] with effect.

And the third reason is also relevant to the maturity that is regarding the maturity level of our sales force. For the fellow teams of the ONVO brand, 60% of them have been in the company for less than 3 months. And it will take some time to train the team and for the sales teams to polish their soft skills to be able to yield good results and make deals.

As the team is getting more mature day after day, we also see that more and more fellows are now able to making deals. And we also encourage these fellows to do more proactive outreach by going out of the stores to actively reach out to the potential users and help expand the funnel, and this will also help us to improve the order performance.

And for this year, we -- if we look at the month-over-month trend for the number of fresh orders, it has been increasing steadily. And in terms of the number of test drives that we've been receiving and doing month-over-month, it is also breaking the record. And we believe that these fresh orders and the test drive will also soon be converted into orders and sales volume.

And the fourth reason is regarding the power swap station availability for the ONVO users. As in the past several months, we've been making more progressive modifications on the power swap stations to make sure that they are compatible with the ONVO products and also providing more batteries for the swap stations. Now more than 1,500 power swap stations in China are available for ONVO users. And also at the early stage of the product launch, we had the short supply of batteries. In that case, there was only one battery for the available power swap station, it's not enough for the ONVO users to experience the full power swap service. But now we are supplying more batteries for the power swap. In that case, the experience for the power swap among ONVO users are also improving, also enhancing a better word of mouth for the brand.

And also in many regions where we see more power swap stations available for ONVO users, we also see actually more sales volume for the ONVO products. Together with our Power Up County initiative, we believe that with more power swap stations available in the lower-tier cities, this will also help improve the penetration rate of ONVO in those lower-tier cities. And a very interesting number to share with you is that actually in 12 regions in China, the sales volume of ONVO has already outnumbered the volume of NIO. This is also a good effect or a result of our dual brand synergy and also strategy.

And also another compound factor is that our recent sales volume is majorly affected by the fierce competition as well as the negative public opinions on the brand and also PR attacks that has affected our volume by around 30% to 40%. But still even against this difficult environment, we still see a very high user satisfaction on the product L60. Actually, L60 has the highest product user satisfaction among all the products launched by the NIO company. And we also see a pretty good [ referral ] rate on the L60. This has give us confidence on the product going forward.

As we pick up speed with our orders and also test drives, as we further enhance the brand awareness, expanding our sales and service network, growing our team and their maturity level and also enhance the coverage and availability of the power swap stations for the ONVO users, we believe that the sales volume of L60 will pick up and also fulfill our expectations.

And regarding your question on the efficiency improvement and also the synergies can be leveraged between 2 brands. Actually, in terms of the aftersales services, power swap stations and as well as the supporting functions such as finance, human resources and some regional functions, this have been shared across 2 brands from the beginning. And recently, we are also making further adjustments in some regions for the supporting and the management roles. We also try to have one team to oversee both brands. And we see some good effects by having one team overseeing 2 brands in terms of the sales and service management.

And in terms of the point of sales of ONVO, with the sales network of ONVO, we will keep it separated and independent of the NIO brand as these 2 brands targeting different user groups and also are from different brand segments.

Recently, we are also having some pilot programs where we have the incentives and the policies to encourage the sales team to also sell the product from the other brands. We already have seen some good results by rolling out the pilot program.

[Operator]

The next question is from Bin Wang from Deutsche Bank.

[Bin Wang, analyst]

[Foreign Language] My first question is about your [indiscernible] gross margin including vehicle gross margin and overall gross margin. Meanwhile, you mentioned that you will [indiscernible] fourth quarter this year. So what's your assumption in terms of gross margin and volume?

[Foreign Language] And my second last question is that, previously, you guided your 2025 volume will be double year-over-year after the first quarter. Can you provide an update on the volume guidance?

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding your questions on the vehicle margin, normally, Q1 is the off season in the south of the vehicle products. And also in Q1, we are in between generations for our 5 and 6 series as they will soon be upgraded to the model year 2025 to clean up the inventories for the existing generation. We are also under pressure regarding the vehicle margin for the NIO brand.

And in terms of the ONVO brand, as William has mentioned, the sales performance of the ONVO product didn't meet our expectations in this year considering the amortizations and other factors. We are also under pressure and a challenging situation managing the ONVO product and its vehicle margin.

So overall speaking, the company's vehicle margin in Q1 will not be as good as you would have expected based on our margin performance in Q4 last year. But still, our full year target is to achieve breakeven in Q4. In that case, we have also mapped out a road map of our product margin. For the NIO brand, we would like to achieve a margin -- a vehicle margin of 20%. And for the ONVO brand, it will be 15%.

Regarding the actual actions that we have taken to control the cost and also improve the vehicle margin, there are several actions. The first is to implement a more systematic cost reduction initiative by making our products more platform-based and improving the commonalities across different products and also across brands. There are several examples. For example, we have implemented an overall platform strategy for the seats. Now the product from the NIO brand and ONVO brand share the same seat structure. With that, we are able to reduce the total [ BOM ] cost for the seat system by 10%.

And the second example is regarding the smart hardware. We have standardized the interfaces of most of the smart hardwares in the vehicles. In that case, we can further reduce the cost on the cables and connectors. The piece price per vehicle is reduced from RMB 2,000 to only RMB 1,000.

And the third example is regarding the in-house developed parts and also components as we've been making efforts in doing in-house development in the past 2 to 3 years, and we also see a very helpful cost reduction results over the past 2 years. For example, ET9 will soon be delivered with NX9031, our chip for the smart driving. And this chip will also be available on the model year '25 for the 5 and 6 Series product, our volume product.

In that case, the piece price will be decreased by around RMB 10,000 in comparison to the [indiscernible] solution.

And in addition to these cost reduction measures, we are also taking some systematic measures. For example, we have a very capable team doing cost management analysis and engineering. And starting 2023, we have been enabling and empowering the team. And now the team directly reports to me for any quotation, we're nominating prices, surpassing the cost estimation results by 7.5%. Such nomination decisions will need to be escalated to the [ EC ] level for the joint approval. With all these measures taken together, in 2024, we managed to reduce our BOM cost by 10%, and we will continue such efforts in 2025.

And the second major action or the second major contributor of improved vehicle margin will be contributed by the launch of our new models. As mentioned by William, this year, we are going to introduce and launch 9 new models, including completely new models as well as the model year [indiscernible]. For the model year [indiscernible], they will help improve the overall cost for this existing models. And in terms of the new models, in the second half of this year, the NIO brand is going to ONVO and introduce a major product with better -- with actually higher margin as well as more elevated brand and product positioning. This will help improve the overall vehicle margin of the NIO brand.

And for the ONVO brand in Q2, actually in April, they will -- ONVO, their second brand, L90, then start to deliver this product in Q3. And in the meantime, in Q4, ONVO is going to introduce another product. Both products from the ONVO will target higher margin and also higher segments. This will also help improve the overall product margin for the ONVO brand. So together with the cost reduction actions that we've been taking as well as the margin increase driven by the NIO products, we will gradually achieve our margin targets in Q4 and also for the full year.

And regarding your questions on the sales volume and the guidance for this year. In Q1, our sales guidance is to achieve a year-over-year growth of 36% to 43%. So around 40% year-over-year growth for the deliveries in Q1. And as for the full year, our target is still the same, just to double the sales volume from last year. And there are several drivers behind this. The first is the NIO car effect. As we've mentioned that this year, we are going to introduce 9 NIO products under 3 brands. Starting next week, we are going to deliver ET9. And with the launch and the delivery of these 9 new models, we will be able to fill up our sales volume for this year.

And the second key driver is regarding the ONVO brand as we are improving the overall network -- sales network and service network of ONVO, enhancing the maturity level of the team and also strengthening its brand awareness. It will also gradually yield better results. Even if it didn't fulfill the sales target we set for Q1, yes, we are confident in the continuous improvement in the ONVO brand.

And also further comment on the key driver behind the sales volume is the network effect of our power swap network and recharging network in general. If you look at the cumulative sales volume of the NIO brand and the distribution of the sales, actually half of this volume is contributed by the sales in the Yangtze River Delta area. For the [ Jiangsu ] province, we have already achieved the Power Up County Plan, which means that in every county in Jiangsu province, there is at least one power swap station. And for the [indiscernible] province, we aim to achieve also county level coverage by end of this month, except for 2 islands where they will not have the power swap stations.

And also for the power swap strategy in general, as you may know, our recent strategic partnership with CATL, this will further help us to expand our reach in the county levels with our power swap facilities. In the first half of this year, our power swap network will cover the counties of more than 10 provinces in China. And by the end of this year, cumulatively 27 provincial level divisions will have power swap stations available at the county level. And the network effect of this swap station will play a very important role because we have already proved that last year, we doubled our efforts on the power swap network in bigger provinces like [ Hubei ] and [indiscernible] provinces. And we already see some good results.

Before the swap stations were merely available in big cities, but then we find that the county level coverage is more important in promoting the cells. And for -- for the sales volume in these 2 provinces, after we achieve the county level coverage, their [indiscernible] were above the average. And this year, we will continue such efforts to cover more counties in more provinces, especially big provinces like [indiscernible]. With that, we will help improve the overall market share and the market reach of not only the NIO brand, but also the ONVO brand.

[Unknown Executive]

Especially ONVO brand.

[Operator]

The next question is from Paul Gong from UBS.

[Paul Gong, analyst]

The AI and the robotics has been a very hot topic in this earnings season. In one of your peers' earnings call, the AI has been mentioned by 49x during the whole call. But I guess it hasn't been mentioned here. Can you please remind us your latest thoughts on the AI autonomous driving, robotics, et cetera?

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding the application of AI technologies, NIO is the first car company to introduce an AI companion in the car. It's NOMI, and it's loved and well received by many users. For NOMI, it has its own large language model capabilities, NOMI GPT, but on top of that, it is also supporting third-party large language models.

With that, the satisfaction and also the interaction rate of NOMI is growing. NOMI is also a quite profit-making IP with a lot of popular merchandise and also high take rate. And in addition to the AI application on NOMI, we also have AI applied to our smart driving technologies and experience as last year, we have introduced the NIO WorldModel, NWM, and the latest AD version with smart driving release will be based on the NIO WorldModel. And actually, I have participated in some internal beta version tryout, and I can say that I really look forward to that version. It has quite good performance in terms of the active safety and the experience in general.

And of course, AI is a very important basic capabilities. In terms of AGI, in terms of [ robots ], in terms of the fundamental capabilities for AI. But for the foreseeable future, for us, we will mainly focus on our core business, that is the automotive product. And in that case, AI will be more of an enabler to achieve better product experience as well as better business and management as AI itself is one of our full stack capabilities and it is ever present in every aspect of our business.

And as many people are talking about how the automotive product is becoming an AI agent, and I believe that the company itself is also turning into an AI agent. But still for the short term, our primary focus is still our core business as well as our operating targets. But a side note here is that NIO Capital has invested in a lot of AI companies, especially industry-leading AI companies. And in that case, we're in close contact with the cutting-edge technologies and also the outstanding [ founding ] teams in the AI arena. And in-house, we also have capable AI talent working on the relevant view.

[Paul Gong, analyst]

Yes. Sorry, my second question. My second question is regarding the [indiscernible] models. I think the company has 8 models at the same time right now. And after this year's new model launch, it would move into some [ mid-teens ]. Given the [ cannibalization ] between each other and also one of the peers has demonstrated with even only one single model, the volume could still be achieved. Shall we consider to concentrate more into some blockbuster models and eliminate some of the less popular models to be more focused? What do you think is the most optimal number of models for each of the brands?

[Unknown Executive]

[Interpreted] Thank you for the question. As we now have 3 brands, NIO, ONVO and Firefly, our overall product strategy and portfolio for these 3 brands will also be quite different as it is also dependent on their respective segment and also brand positioning.

For the NIO brand, we will basically keep the existing lineup, spanning from RMB 300,000 all the way to RMB 800,000. And it will covering for me, for family and for business segments. With ET9 being delivered, we are completing this brand, this price coverage from RMB 300,000 all the way to RMB 800,000 price segments in the premium market.

And for the premium market users, they actually care more on the personalization and also the unique identity of the vehicle products. If you look at other premium brands like BMW and Mercedes, they actually offer 40, 50 products in their lineup. So this, for this segment, users care more about the differentiation and also the personality of their products.

As for the ONVO brand, we will be more careful with the number of products in the lineup. This year, we are going to introduce 2 new products under the ONVO brand. Together with L60, there will be 3 products in the lineup by end of this year and we will not drastically increase or expand the existing portfolio, but to control that within a reasonable range.

As for the Firefly brand, it is a high-end small car brand. In that case, it's not necessary to really offer too many different products. So our overall strategy is to have a differentiated product portfolio and lineup for different brands, but overall maintaining a rather stable and reasonable product lineup across 3 brands. But for each model, there will be also emphasize the highlights and also targeted user group.

[Operator]

The next question is from [indiscernible] from HSBC.

[Unknown Analyst]

[Foreign Language] The first question is about cash position, supply chain perspective against that and also potential financing. So we see our net cash position at above RMB 25 billion. But given the volatility between quarters, the supply chain coming from more conservative perspective and how sustained would that -- would that require additional financing? No matter if it's debt or equity. Can we have a little bit more clarification on that?

[Foreign Language] Second question is about the CapEx guidance. Can we see a little bit breakdown into a refreshed CapEx guidance this year? We talked about a commitment into swap network. But since we signed the collaboration with CATL, can we [indiscernible] to do some CapEx building? Can we expect the CapEx to taper off this year?

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding your first question on the cash reserves. By the end of 2024, our cash position was RMB 49.1 billion. And in Q1, as we see the decrease in the sales volume quarter-over-quarter, we did experienced an operating cash outflow. Yet, as we have introduced that this year will be a pivotal year for our product launch. As we witness the rebound start in Q2, we will also see major improvement in the operating cash flow. And also, as we have previously introduced, starting Q1 this year, we have conducted a series of adjustments and also streamlining activities. This will also reflect in our performance, financial performance starting Q2. Overall speaking, we will be prudent with our cash flow management to make sure that our resources can sustain our continuous growth and development.

And regarding your second question on the fund raising, we have various options -- we have various fund raising channels where the capital market -- for the U.S. capital markets, RMB capital markets, public or private, we will be planning our fundraising requirements and activities according to the operations of the company as well as the changes in the market.

And regarding the question on the CapEx. As we have mentioned that this year, we will launch major products. In that case, we have made the CapEx spending in the toolings and also the production equipment together with our supply chain partners. And in the meantime, as we are launching new products, our third factory is also going to be put in operations depending on the overall production plan.

So our CapEx this year will be higher than in last year, but still, we will have a very prudent measure and a manner in managing our investment pacing and also our cash position to make sure that we have a very good control over the spending.

In terms of the CapEx for the power swap stations. Starting last year in terms of the power swap network expansion, we have already started to adopt one principle, that is to leverage the resources of our power swap partners as much as possible. As last year, we have announced the Power Up Partner Plan where we invite the partners to jointly build the swap stations and the network. For the Power Up County Plan this year, most of the stations will actually be sponsored or built by our partners and by ourselves. In that case, the CapEx utilization for the power swap stations will also be relatively limited.

[Operator]

The next question is from Ming-Hsun Lee from Bank of America.

[Ming-Hsun Lee, analyst]

[Foreign Language] So first question is regarding your autonomous driving technology plan. When do you plan to roll out your end-to-end model? And in the future, do you consider to use the [indiscernible] chips in your car or you will use your Shenji chips in all of your NIO branded model? That's my first question.

[Unknown Executive]

[Interpreted] Thank you for the question. Actually, last year, we have already implemented the end-to-end solution to our active safety features. As different companies may have a different priority, we're, of course, ranking on the technology applications. And for us, we believe that safety matters the most. That's why we have implemented the end-to-end model firstly in our active safety features and we did see major improvement regarding the safety level week-over-week by 40%. So it is playing a very important role in providing a safer trip for our users.

And in terms of the end-to-end solution-based, Navigate On Pilot Plus for the city roads, we have also started small-scale testing and internal testing, and we plan to release that to our users by the end of April after a series of preparations and also approval applications.

And regarding the use of the chip for smart driving. ET9 is going to premiere our in-house developed chip for the smart driving. It is made with advanced manufacturing process, NX9031. And after ET9, our 2025 model year, the 5 and 6 Series will also be launched and equipped with the in-house developed chip for the smart driving. So all the future new models will be equipped with this in-house chip.

As for the ONVO brand, currently, it is using the Orin-X chip for the smart driving functionalities and it does not have a plan to use [indiscernible].

[Ming-Hsun Lee, analyst]

My next question is regarding the OpEx because in the past few quarters, we continue to see your gross margin continue to improve Q-on-Q. But for the operating expenses, do you have the latest guidance and a new plan? For example, in the past, William mentioned that the stabilized R&D will be [ RMB 13 billion ] every year? And could you give any new update for this number? And also for the sales and marketing expense? Do you have any target ratio, yes, OpEx ratio for this number?

[Unknown Executive]

[Interpreted] Thank you for the question regarding OpEx. In terms of the R&D funding and expenses, for this year, we will continue to have the same intensity level for the R&D expenses, around RMB 3 billion every quarter on the non-GAAP basis. Of course, as mentioned by William, this year, we have rolled out the CBU mechanism where we emphasize more on the projects with high return and also high yield. In that case, we will also optimize our project initiation and approval process to make sure that our R&D expenses are reasonable and also efficient.

And regarding the SG&A expenses, we did have bigger challenges to manage in the first quarter of this year as Q1 is normally the off-peak season for the sales, the overall volume in Q1 is not so high. In that case, the SG&A expenses account for a bigger part in -- to the sales revenue.

And also in the coming -- in this quarter, we are still building up and expanding the sales and service network as well as growing the sales force capabilities for the ONVO brand. In that case, ONVO's SG&A expenses is also higher. But as we have introduced, we are going to take a series of actions to improve the efficiency and the productivity of the teams and also to streamline the non-frontline sales functions to consolidate some of the sales functions between the NIO and the ONVO brand and also to leverage NIO's network for the sales of Firefly.

With all these actions taken, we expect the better results to be reflected in our financial performance in the coming quarters. As we grow our sales volume and also gradually achieve the breakeven target in Q4, you will also see SG&A accounting for smaller portions to the sales revenue. And with that, you will see also the effect reflected by the improvement in both volume and also in the efficiency of people and expenses.

[Operator]

The next question is from [indiscernible] from CICC.

[Unknown Analyst]

[Foreign Language] So my question is regarding to the other sales -- other revenues. And we can see that in the fourth quarter, the gross profit margin of other sales is already positive and reached 1.1%. So could you please break down the reasons for this?

[Unknown Executive]

[Interpreted] Thank you for the question. Regarding the gross margin of other sales, it mainly consists of 3 things: the revenues from the aftersales services, revenues from the power services and also revenues from the technical services we provide to the supply chain partners and also to affiliated parties. And in Q4, we have the positive margin on other sales. It's mainly because we have been continuously improving the efficiency of the aftersales services.

Of course, in terms of the power swap or the power service in general, as we are still making advanced deployment of the facilities and infrastructure network, the loss is actually not significantly narrowed from the power perspective.

And for the other sales to be with positive gross margin in Q4 last year, it's mainly because of the revenues from our technology services provided to the partners and also the affiliated parties. It's around RMB 220 million in Q4 last year, yet such revenues are more project-based and also it's relevant to the cadence and the progress of the services we provide to them. In that case, there will be -- in the future, there will be also similar revenues, but it will not be a recurring regular revenues from that perspective.

In 2025, as we continue to increase our vehicle population, we also foresee continuous increase in the efficiency of our aftersales services. As for the power networks, as we are still making advanced deployment of the power swap stations, we will still encounter slight [ loss-making ] with the combined margin of the aftersales services and the power services if we exclude the technical services.

In terms of the technical services, if we can make major deals or if we can make major progress, probably there will be some good news to this call.

[Operator]

The next question is from Tina Hou from Goldman Sachs.

[Tina Hou, analyst]

So I have a quick one. Just regarding our longer-term outlook, say, by 2030, do we still maintain our previous, I think, volume and the margin outlook? And could you please remind us of your revenue scale -- sorry, your sales volume scale target as well as your maybe overall gross margin as well as operating margin?

[Unknown Executive]

[Interpreted] As right now, the company is still striving to be breaking even in Q4 this year. If we set for a longer-term outlook for the future, we believe that for the smart EV companies or for the automotive industry in general to maintain a relative competitive edge among the competitions, an annual volume of 2 million units with 20% gross margin, 7% to 8% net margin, that will be a baseline for the -- for a smart EV company to survive for the longer term.

[Operator]

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

[Rui Chen, executive]

Thank you so much for joining us today. If you have further questions, please feel free to contact NIO's IR team through the contact information on our website. This concludes the conference call. You may now disconnect the line. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]