NIO Inc. Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. The filing is an annual Form 20-F, not a standalone fourth-quarter filing; fourth-quarter operating data are provided, but fourth-quarter financial statements are not separately presented.
Business Context
NIO is a Cayman Islands holding company whose principal operations are in China. It designs, develops, jointly manufactures and sells premium smart battery-electric vehicles, and provides battery swapping, charging, Battery as a Service, financing, service and other vehicle-related offerings. Vehicles are manufactured primarily through JAC and Jianglai. NIO reported 91,429 vehicle deliveries in 2021, including 25,034 in the fourth quarter.
- 2021 models delivered were ES8, ES6 and EC6. ET7 deliveries began in March 2022 and ET5 deliveries were expected to begin in September 2022.
- As of December 31, 2021, NIO operated 777 battery-swap stations, 3,404 charging piles, 318 mobile charging vans, 54 NIO service centers and 321 NIO Spaces in China.
- NIO ADSs trade on the New York Stock Exchange. Class A ordinary shares began trading on the Hong Kong Stock Exchange on March 10, 2022.
Financial Metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | RMB36,136.4 million | RMB16,257.9 million | Up 122.3% |
| Vehicle sales revenue | RMB33,169.7 million | RMB15,182.5 million | Up 118.5% |
| Other sales revenue | RMB2,966.7 million | RMB1,075.4 million | Up 175.9% |
| Gross profit | RMB6,821.4 million | RMB1,873.4 million | Up 264.1% |
| Gross margin | 18.9% | 11.5% | Up 7.4 percentage points |
| Vehicle margin | 20.1% | 12.7% | Up 7.4 percentage points |
| Loss from operations | RMB4,496.3 million | RMB4,607.6 million | Improved 2.4% |
| Net loss | RMB4,016.9 million | RMB5,304.1 million | Improved 24.3% |
| Net loss attributable to NIO ordinary shareholders | RMB10,572.3 million | RMB5,610.8 million | Worsened, primarily due to redeemable non-controlling interest accretion |
| Basic and diluted loss per share/ADS | RMB6.72 | RMB4.74 | Loss per share increased |
| R&D expense | RMB4,591.9 million | RMB2,487.8 million | Up 84.6% |
| SG&A expense | RMB6,878.1 million | RMB3,932.3 million | Up 74.9% |
Other sales included RMB516.5 million of automotive regulatory-credit revenue, RMB526.2 million from packages, RMB291.2 million from battery upgrade services and RMB319.4 million from charging piles.
Cash Flow, Liquidity and Balance Sheet
- Operating cash flow was positive at RMB1,966.4 million, compared with RMB1,950.9 million in 2020.
- Investing cash outflow was RMB39,764.7 million, driven mainly by purchases of short-term investments and RMB4,078.8 million of property, plant and equipment and intangible assets.
- Financing cash inflow was RMB18,128.7 million, including RMB12,677.6 million of net equity proceeds and RMB9,560.8 million of convertible-note proceeds, partly offset by RMB8,000.0 million of redeemable non-controlling interest repurchases.
- Cash and cash equivalents were RMB15,333.7 million; restricted cash was RMB3,040.8 million including long-term restricted cash; short-term investments were RMB37,057.6 million. Management stated that cash, short-term investments and operating cash flow were sufficient for at least the next twelve months.
- Total assets were RMB82,883.6 million, total liabilities were RMB44,820.2 million and shareholders’ equity was RMB34,785.6 million.
- Total long-term borrowings were RMB9,739.2 million, while short-term borrowings and current portions of long-term borrowings totaled approximately RMB7,298.0 million.
- Material cash requirements totaled RMB24,742.6 million, including RMB11,333.8 million due within one year. These included capital commitments, leases, borrowings, convertible notes and asset-backed securities.
Material Changes Versus the Prior Comparable Period
- Vehicle deliveries increased 109.1% from 2020 to 91,429 units, while revenue increased 122.3%.
- Gross margin improved from 11.5% to 18.9%, principally from higher vehicle margins, scale benefits and higher average selling prices.
- Operating losses improved modestly, but the company remained unprofitable. Net loss improved, while loss attributable to ordinary shareholders increased because of RMB6,586.6 million of accretion on redeemable non-controlling interests related primarily to NIO China.
- R&D and SG&A expenses rose substantially as NIO expanded product development, sales and service networks, marketing and personnel.
- Cash and cash equivalents declined from RMB38,425.5 million to RMB15,333.7 million, while short-term investments increased from RMB3,950.7 million to RMB37,057.6 million.
- NIO issued US$1.5 billion of convertible notes due 2026 and 2027, completed an at-the-market offering of 53,292,401 ADSs for gross proceeds of US$2.0 billion, and exchanged approximately US$581.7 million of 2024 Notes for ADSs.
- NIO increased its ownership of NIO China to 92.114% after additional purchases and capital contributions.
- The contractual arrangements with the former Shanghai Anbin VIE were terminated in March 2021. Beijing NIO remained a VIE, but the VIEs contributed no external revenue and had immaterial operations and assets.
Guidance, Outlook, Risks and Unusual Items
- Management expected continued significant investment in R&D, production capacity, charging and battery-swapping infrastructure, sales and service networks, and new vehicle models. The filing does not provide formal full-year 2022 revenue or profitability guidance.
- The company expected to deliver the ET5 beginning in September 2022 and had begun ET7 deliveries in March 2022. A 150 kWh battery was expected to become available in the fourth quarter of 2022.
- COVID-19 outbreaks, semiconductor shortages, supply-chain volatility and logistics constraints affected production and deliveries. The filing states that production had not returned to full capacity as of the filing date in April 2022.
- Government NEV subsidies were scheduled to end on December 31, 2022, and the 2022 subsidy standard was reduced by 30% from 2021. NIO generated RMB516.5 million from automotive regulatory credits in 2021, but stated that future credit volumes and prices were uncertain.
- JAC’s renewed manufacturing arrangement runs through May 2024. NIO may need to renew the agreement or secure other manufacturing capacity thereafter.
- Hefei Strategic Investors have redemption, liquidation-preference and other rights. If specified NIO China IPO milestones are not met, they may require redemption at invested capital plus an 8.5% compound annual return, potentially creating a significant funding obligation.
- NIO remains dependent on contractual VIE arrangements for certain licensed internet services. These arrangements may be less effective than direct ownership and are subject to evolving PRC regulation.
- The company’s auditor was identified by the PCAOB as located in a jurisdiction where the PCAOB could not fully inspect or investigate auditors. The filing warned of potential HFCA Act trading restrictions or delisting risk if inspection requirements were not satisfied.
- Three shareholder securities class actions remained pending. NIO stated that it could not estimate any potential loss.
- Warranty liabilities were RMB1,963.0 million at year-end, including RMB1,078.9 million of warranty expense accrued in 2021. Warranty estimation was identified as a critical audit matter.
- Share-based compensation expense increased to RMB1,010.1 million, and unrecognized share-based compensation was RMB5,909.0 million at year-end.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021. The 2019 material weakness related to U.S. GAAP financial reporting personnel had been remediated.
Important Facts for Investors to Verify
- Whether higher vehicle margins can be sustained as product mix, subsidies, raw-material costs and competition change.
- Whether NIO can achieve timely, cost-effective ramp-up of ET7, ET5 and future models despite supply-chain and manufacturing-partner dependence.
- The maturity, conversion, repurchase and dilution terms of the 2024, 2026 and 2027 convertible notes, including the approximately RMB11.0 billion of contractual convertible-note principal and interest obligations shown in the cash-requirements table.
- Liquidity after capital expenditures, working-capital needs, NIO China obligations and potential redemption rights of strategic investors.
- Exposure to Battery Asset Company credit, operating and funding risks under the BaaS model.
- Resolution and potential financial impact of the pending shareholder litigation.
- Continuing compliance with PRC rules covering VIEs, data security, cybersecurity reviews, overseas listings, foreign exchange and required licenses.
- PCAOB inspection status and the continuing ability to trade NIO ADSs in the United States.
- Warranty claims, product recalls, autonomous-driving performance and battery-safety incidents.
- The sustainability of positive operating cash flow, given the company continues to report significant net losses and expects substantial capital expenditures.