Categories Consumer, Earnings Call Transcripts

Niu Technologies (NIU) Q3 2021 Earnings Call Transcript

NIU Earnings Call - Final Transcript

Niu Technologies  (NASDAQ: NIU) Q3 2021 earnings call dated Nov. 22, 2021.

Corporate Participants:

Jason Yang — Investor Relations Manager

Yan Li — Chief Executive Officer

Fion Zhou — Chief Financial Officer


Vincent Yu — Needham & Company — Analyst

Jing Chang — CICC — Analyst

Bin Wang — Credit Suisse — Analyst

Wei Chen — UBS — Analyst



Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies’ Second [Phonetic] Quarter 2021 Earnings Conference Call. [Operator Instructions]. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

Now, I’ll turn the call over to Mr. Jason Yang, Investor Relations Manager of Niu Technologies. Mr. Yang, please go ahead.

Jason Yang — Investor Relations Manager

Thank you, Operator. Hello everyone, welcome to today’s conference call to discuss Niu Technologies’ results for the third quarter of 2021. The earnings press release, corporate presentation and financial spreadsheets have been posted on Niu’s Investor Relations website. This call is being webcast from Company’s IR website and a replay of the call will be available soon.

Please note today’s discussion will contain forward-looking statements made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions and other factors. The Company’s actual results may be materially different from those expressed today.

Further information regarding the risk factors is included in the Company’s public filings with the Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statement except as required by law. Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results.

On the call with me today are our CEO, Dr. Yan Li; and the CFO, Ms. Fion Zhou. Now let me turn the call over to Yan.

Yan Li — Chief Executive Officer

Thanks, Jason and thanks to everyone for joining us on the call today. So in the third quarter, we have seen a strong growth again with our total sales volume reaching 397,000 units, a 57% year-over-year increase, making this our best quarter for sales in our history in terms of volume.

The sales volume in China market reached 392,000 units, a significant increase of 60% year-over-year, whereas the volume in the International market reached nearly 5,000, down 11% compared to last year, primarily due to the shipping issues that you are all aware of, that continue to delay orders that we have received and manufactured, but cannot leave the factory and therefore cannot be booked as sales.

In the first three quarters of the year, our sales volume totaled 800,000 units, an increase of 77% compared with the same period last year. Now the strong Q3 growth in the China market showcases the strength of our growth strategy which includes the expansion of our product portfolio to cover a wide range of electric scooters and the rapid expansion of our retail channels and geographic footprint. As mentioned in the last earning calls, starting this year we have launched five new vehicles under the new brand and five new vehicles under the Gova brand, which enabled us to have a wide range coverage of consumer needs from mid to high-end.

The new product design also take into account preferences of both male and female customers allowing us to attract a wider range of customer group. In the electric motorcycle class, our entry model, Gova G3 has a starting price of RMB3,699 and our top of the range NQi GT has a price tag of RMB20,299. We have a total of 8 series and 22 electric motorcycle product offerings.

For the electric bicycle class, we have our entry level Gova G0 with a price of RMB2,499 and our top of the line model, UQi starts with a price of RMB8,999. We have a total of 12 series in the 42 product offerings. From the design style, we have three series, the G, F and C each with distinctive design style under the Gova brand. And under the new brand we have the N and the U series, each with unique and elegant style.

In terms of performance, we offer a drive range of 40 kilometers to 100 kilometers on one charge for both electric motorcycles and electric bicycles. Since the rollout of China regulations on electric bicycles over the past 2.5 years, we have quickly developed a full product portfolio to cover the mid to high-end market. The full coverage was the key to fast growth in Q3 and also set the solid foundation for future growth in 2022. As we continue to expand our product portfolio this year, we’re simultaneously expanding our retail store footprint across China rapidly. Q3 is traditionally a peak season for sales, but low season for store expansion. However, this time we are able to cover our best sales quarter ever while also adding another 320 new branded stores across China, which is 1.6x of the expansion pace compared to Q3 2020.

As of September 30, we now have 2,686 stores operating in China. We’re well on track to have 3,000 stores in operation by end of 2021. These stores will serve as a foundation to drive sales growth for 2022. Now moving away from sales for a moment, I’m very proud of a milestone we hit as a Company last month. On October 11, our more than 2 million users helped us reach the 10 billion kilometers riding mark. It was the first time 10 billion kilometer has been recorded in two-wheeler industry history. To celebrate this awesome milestone, we launched a series of marketing campaigns with the slogan of, feel a bit proud or feel a bit new starting in September and will run through the end of the year.

The brand of Niu represent style, technology and freedom. Along with brand values, we have selected a set of represented Niu users and shared their story with Niu scooters over multiple channels. These users include the photographers, travel enthusiasts, talk show host and others. Each story showed how riding a new vehicle has helped them with their daily urban commute and makes their lives a little better or feel a little bit pride or proud with Niu. These stories and videos have been broadcasted over social media channels like Weibo, WeChat and in our website. And of course many of the KOLs and KLCs have also created their own content around the theme I feel a little bit proud, a bit new, just further amplifying our message had reached. In just a few short weeks of — all those have achieved nearly 100 million views. More importantly it helped to convey our brand value to our users and potential customers. The message positioned Niu not just as a electric scooter company, but also as a lifestyle brand.

Besides the user stories, we also launched a social media video campaign with a feature video of feeling little bit proud. The video has been aired across social media, offline and also have been even showcased in ads for the new James Bond film receiving more than 0.5 billion views.

Now considering Niu has more than 2 million users, we also engage our users with a treasure hunt, location-based game in our app. User receive a raffle ticket if they ride their Niu past a secret spot in their city. This ticket can be redeemed for various prices like accessories and also enter them into a lottery for 10 billion kilometer limited editions. In our initial rollout in ten cities over the past month, more than 2 million digital raffle ticket have been collected by our users showing just how engaged our users are with our brand, product and services.

All of those user-centric activities and marketing campaigns have improved our brand awareness significantly in the China market and those campaigns especially resonate was the Gen-Z users who are seeking brands that have deeper meaning. And Niu’s complement to style, technology and freedom is something they value greatly. The combination of marketing campaigns with our continued retail store expansion sets us up for another quarter of growth here in Q4.

Now looking at international sales for a moment here. Our Q3 was a little below expectation as compared with the China market. But this is not a result of decreased demand. As many of you are aware, international logistics continues to create ever longer backlogs and we’re not immune from it. In fact, our book orders were 50% higher than what we actually shipped. And everything that’s being shipped is typically on back order at any one of our point of retail across the globe.

Despite the low season in Q3, we’re in fact very optimistic with Q4 for the international market orders. We’re excited about tomorrow, actually, on November 23rd when will we will launch several new product at EICMA, the largest two wheeler shows globally held in Milan, Italy, including our most powerful 125 CC electric moped, the MQiGT-EVO, our first 150 cc hybrid moped, the YQi, and our upgraded e-bike the BQi and two additional KQi kick scooters, many of which will be shipped this quarter and in stores to kick up the sales season in February across Europe and the Americas.

First, in the electric motorcycle moped classes, we will launch the MQiGT-EVO. EVO will be the mark of new performance line. The MQiGT-EVO will be unveiled at EICMA and is the first product launched in our new EVO series. It has been redesigned inside out with the top speed of over 100 kilometer per hour and exciting zero to 60-kilometer per hour track time in under six seconds, outstripping its gas-powered rebels.

We believe this is a first electric moped that can really compete on price and outperform on power and speed with its petrol competitions in the 125 CC class of mopeds. In addition to the performance, the MQiGT-EVO has added a number of features that include keyless ignition, electric anti-theft locking and our all new TFT color dashboard customizable via the users’ app. We have already received several thousand orders to be shipped in Q4 and MQiGT-EVO will be in stores in Europe and America as early as February with the price tag of EUR5,000.

Besides the MQiGT-EVO, we’ll be also debuting our first 150 CC equivalent hybrid moped, the YQi. The YQi combine the best traditional IC engines and the lithium-ion battery powered electric motors. It comes with 150 CC IC engine coupled with 2.4 kilowatt electric motors providing acceleration that’s much superior to even a traditional 250 CC moped. The YQi is positioned as the gateway vehicle for EV for two wheeler enthusiast, who have not made the transition away from petrol. It is still in development and will be available in Europe and Americas in late 2022.

Now with the addition of YQi, MQiGT-EVO and also the upgraded MQi GTS [Phonetic] and the RQi electric [Phonetic] motorcycle, we have provided full coverage of motorcycles from 100 CC to 150 CC, greatly expanding our traditional offerings, our 50 CC equivalent electric moped internationally.

We believe this will further consolidate our leadership in the electric motorcycle market globally.

Now, as we mentioned last earning call, we have entered the micro mobility market with the pre-sales of our kick scooter product, the KQi3, on Indiegogo on July 13. After a successful run on Indiegogo, we then have received more than 15,000 orders by the end of September 30. Tomorrow at EICMA in Milan, we’ll bring two new kick scooter products to the market, something we call it a KQi3 Max [Phonetic], which will be upgrade of KQi3 Pro. It is equipped with more powerful upgraded 450-watt motor, and with a larger lithium battery capacities, which can easily reach a speed of 35 kilometer per hour, and have a drive range of 65 kilometers.

There is no mass market product like this in the market right now, and we’re excited about it. It will be priced at EUR949. We’ll also bring even more economical kick scooter into the family called the KQi2. The K2 takes many design cues of K3 and with more user customizable features. The K2 have a top speed of 25-kilometer per hour, and the riding range of 40 kilometers. They’ll be priced at EUR499. And with a sleek and stylish design, the K2 is expected to become a favorite urban mobility commuter globally. The K2 will be shipped before the end of December 2021. Now with the K3 and the K2, we have a robust lineup of kick scooter products with price starting at EUR499 up to EUR949.

We have a portfolio of offerings that meet the budget of wide range of customers who are looking for affordable solutions for their urban commute. We have already received many orders, and we expect to ship more than 20,000 units of kick scooters in Q4 to fulfill the first batch of orders. We will also expand our offerings into the e-bike market. Tomorrow at EICMA, we’ll launch our new e-bike product called BQi that has a stylish urban minimal design and is capable of extended ride range of 100 kilometers. Thanks to its two removable batteries. The BQi will be priced under EUR1,500, making it the most powerful and affordable commuter e-bikes to hit the market in 2022.

The continued growth for e-bike demand across Europe and the Americas is the exciting growth path for us in both those markets. And with product like BQi, we think we can quickly tap into the demand of the next 12 months. Now with the kick scooters and e-bike to cover micro mobility market, we’re also expanding our international sales channel. Besides the current 153 flagship and premium stores and 1,000-plus authorized dealers, we have also established our e-commerce presence on channels like Amazon and also offline channels, which will allow us to enter into consumer electronics to like a medium market in Europe and many across the US.

Supported by the diversified product offerings and channel expansions, we’re quite optimistic with our international sales in Q4 and in 2022 and beyond. Now, I will turn the call over to Fion to discuss our financial results. Fion?

Fion Zhou — Chief Financial Officer

Thank you, Yan, and hello everyone. Our press release contains all the figures and the comparisons you need, and we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial performance, we are referring to the third quarter figures, unless I say otherwise. And all the monetary figures are RMB unless otherwise noted.

Our quarter three sales volume reached 397,000 units, representing a 58% year-over-year growth. China sales volume increased by 60% primarily driven by new product launches in the past two quarters and the continued retail network expansion while new e-bicycle model, C0 and one upgraded e-motor cycle model G3 were available on the market in quarter 3. These two models contributed around 16% of our total sales volume in the third quarter.

We opened 750 new stores in China during the first half of this year. The newly opened stores not only contributed to our sales volume growth, but also played a critical role in promoting our brand and gaining our market share. We opened another 320 new stores in the third quarter, which will help us with further steady growth in the future quarters.

International sales volume however decreased by 11% as a result of continued challenges from international shipping. With regards to product mix, N series accounted for 6% of total sales volume, M series accounted for 6%, U series accounted for 13% and Gova products accounted for 75%. Out of the 75% from Gova products, 41% was from the low price model G0, F0 and C0, remaining 34% was from other Gova models with relatively higher retail price. The increased mix in Gova product was due largely to two reasons. First, the new Gova product launches in quarter two and early quarter three F0, C0, G3 and F4 has been very successful and drove quite a bit sales growth in quarter three.

Second, during the third quarter, Company provided promotional activities for the Gova series products in order to encourage faster adoption of compliance e-bicycles in China. Total revenue increased by 37% to RMB1.2 billion, slightly lower than guidance we provided earlier, primarily due to the lower than expected sales from international markets. Revenue from China e-scooter sales remained strong and increased by 45%. The accessories, spare parts and service revenue from China market also increased by more than 40%. The decrease in international markets we believe is short-term and we are looking forward to positive growth in the future quarters.

Our ASP in quarter three declined by 13% year-over-year. Let’s look at the details. In China market, the scooter ASP decreased by 90% year-over-year chiefly due to the sales from low price model G0, F0 and C0 which accounted for 41% of total sales volume compared with 27% in the same time last year.

In international markets, the scooter ASP decreased by 18%. As mentioned in the last two quarter’s earnings call, the depreciation of US dollar and the change in the way distributors place orders are the key reasons for the decrease. Compared with quarter two, our international scooter ASP increased by 5%. If we take out the impact from kick scooters, the ASP increase is around 14% quarter-over-quarter. The ASP of accessories, spare parts and services was RMB267 per scooter, a 29% decrease mainly because of the decline in sales from international markets.

Gross margin was 20%, 0.9 percentage points lower than this time last year, as a consequence of weaker international sales. This has reduced our margin by around 1.1 percentage points. However, 0.2 percentage point decline was offset by the increasing margin and increasing proportion of accessories, spare parts and services revenue from China market. Therefore, net impact was 0.9 percentage point decline.

Our total operating expenses excluding share-based compensation were RMB143 million, increased by RMB46 million or 48% year-over-year. The increase was caused by a RMB25 million higher branding and advertisement in sales and marketing expenses, RMB11 million higher depreciation expenses of new store openings and RMB13 million higher staff cost.

As a percentage of revenue, our operating expenses excluding share-based compensation was 11.7%, 0.9 percentage points higher than quarter three last year mainly due to higher branding and marketing expenditures. Our net income was RMB92 million, a 15% increase year-over-year. The adjusted net income was RMB102 million and the adjusted net margin was 8.3%, 1.8 percentage point decline compared to the same period in the last year. As mentioned above, due to the 0.9 percentage points gross margin decline and increase from operating expenses as [Phonetic] 0.9 percentage of revenue.

Turning to our balance sheet and cash flow. We ended the quarter with RMB1.6 billion in cash deposits and short-term investments. Our operating cash flow was positive RMB402 million, much higher than our net income. Our quarter three capital expenditures was around RMB76 million, mostly related to capacity expansion of RMB26 million and new store openings of RMB50 million.

And now let’s turn to guidance. We expect the fourth quarter revenue to be in the range of RMB840 million to RMB908 million, an increase of 25% to 35% year-over-year.

With that, let’s now open the call for any questions that you may have for us. Operator, please go ahead.

Questions and Answers:


[Operator Instructions]. Your first question comes from the line of Vincent Yu of Needham and Company. Please ask your question.

Vincent Yu — Needham & Company — Analyst

[Foreign Speech]. Hi management. Thanks for taking my question. I have questions on these three topics. One is on our overseas business, how do we think about the shipping constraints, will it continue to impact our revenue in the next quarter? And then how we think this backlog will be realized in next few quarters? And our second question is on the supply chain. How do we think about these rising cost and the parts [Phonetic] costs impacting our operations?

And the third question is, would like if you, management, share some insights on the e-scooter replacement cycle especially under current — actually soft macro condition. Thank you.

Yan Li — Chief Executive Officer

Hey, Vincent. If you don’t mind, I’ll answer this question in English.

I think first one with the shipping backlog, I think, Q3 has been a bit tough. Obviously, for International, Q3 also you look at it, it has actually historically has been a low season, because whatever we ship in Q3 is actually going to be arriving in Europe and Americas in sort of Q4. It’s actually — it’s actually the winter season, it’s actually low sales. So we actually expect the Q4 shipping start to improve especially October, November still bit tough, but we’ll start seeing actually capacity start to entail in second half, starting like November and also in December.

So we actually have a lot of orders in backlog and supposed to be go on the ship in December. Both from the motorcycle point of view, electric motorcycle and also the 20,000-plus electric scooters. So I think that’s for the international sales, international shipping backlog. It wouldn’t be — it wouldn’t be necessarily a block issue in Q4. Because demand side, we still see a strong demand for both motorcycles and also for the kick scooters.

Now on the supply chain issues, I think earlier this year, the supply chain issues was really a shortage of chipsets, especially the important chipsets that — we had that impact a little bit our business, but not significantly. And then we were able to actually redesign our MCUs and all the stuff actually user replacement, the domestic China chipset to replace some of the important ones. And that actually helps to reduce the impact. Right now, it’s actually the — the Q3 is nothing too much. I think really we’re looking at Q4. And the may be next year, there maybe pressure in terms of raw material prices, in term of lithium batteries.

Early — First half of this year, we actually see the pressure not from lithium battery, but from like all other stuff like copper, steel. So that actually impact the cost for our chassis, also the cost for tires, all those stuff. So we actually increased the product price basically in April this year to offset those — the raw material price increases.

Now going into 2022, we actually think there may be a case that the lithium battery price will go up a bit, which many of the — you guys already observed in the market, because the EV industry in China is actually booming. And so, that actually will create cost pressure on our side. And the remedy to that will be, we’re looking at potential solution to increase the product retail price as well as the exit [phonetic] factory price in early 2022 to offset that.

And this is not really new to us. So, in fact if we look at — you follow Niu for a number of years, every year we increased our product price by somewhere around 3% to 5%. Even though the average ASP sometimes declines because of product mix, but you look at the individual product wise, the price actually goes up, a lot of times because of CPI, also because we actually used to offset the cost increases.

The last thing was the policy induced the replacement volume. So we actually started to see some of the impacts start to kick in, for example in — it starts city by city. In the — early in the year as we see some provinces now like Beijing. Beijing just — Beijing actually in November 2018, they start to issue what you call the temporary licenses until the April of 2019.

And then, that temporary license is only good for three years. So actually start in November first, this year, CBL Beijing will disallow the temporary licenses, the yellow license. If you actually drive a yellow license electric scooter on the street, your scooter will get confiscated and then you actually got like RMB1,000 fine.

So that actually drive a bit retail sales in October as well as I think going forward, even the winter season for Beijing wouldn’t be that cold in terms of sales, because a lot of people actually need to buy replacement scooters. And we start seeing for Beijing, now then the second we start seeing for the entire Guangdong province, they are rolling out something similar that will actually — will probably be impacted starting this basically this winter season lasts until the next spring.

So, obviously you’re not going to see a huge jump like 4x, or 3x or 4x jump in from our retail demand. But it will still impact, I think the overall market demand. I think this is one of the reasons that even in Q3 we do have [Phonetic] quite a bit Gova products and actually during our call, you see the Gova product represents 75% of our sales in Q3. Because those replacements, a lot of those replacement not extremely high end, many are mid-end product. That’s why our mid-end product offerings start to really take up some of the market share starting in Q3.

Hopefully that addressed your questions.

Vincent Yu — Needham & Company — Analyst

Yes. Very helpful. Thank you.


Your next question comes from the line of Jing Chang of CICC. Please ask your question.

Jing Chang — CICC — Analyst

Hi. Jason, hi, thank you [Phonetic] for your communication, and congrats to Fion on taking over. I have two questions. The first is about the average selling price of accessories. So we can see that the average selling price of accessories and services fluctuated great on different quarters. So I wonder how much of the average selling price comes from overseas battery packs, and how much of it from the subscription service fee? And also other accessories? And also how do we anticipate on the fourth quarter and also the future?

And my second question is, you can see that the sales volume of N, M and U series decreased a lot in the third quarter compared to last year. So ASP and our new product launch next year are mainly focusing on high-end models. So first, how to look at the competitiveness of our new high-end products? And also if all the peers product keep low prices. And in addition how to see our sales growth momentum, and such product mix next year?

Fion Zhou — Chief Financial Officer

Okay, Jing I will answer the first question. And actually in quarter three the accessory and spare parts revenue was RMB19 [Phonetic] million and services revenue was RMB15 [Phonetic] million. And you know, as we mentioned the accessory and service revenue increased a lot in the China market. And this quarter we do see international market, and that’s why the accessory and services revenue declined in the international market. But with the recovery of the international sales in quarter four, as Yan mentioned and those kind of other revenues will recover with the same line as the international sales.

So we still rely on quite strong increase in the future quarters of this kind of revenue.

Yan Li — Chief Executive Officer

Okay. And I think for your second question, yes, I think for Q3, as I mentioned that N, M, U, which is new branded products which group N, M, U and their Niu branded products actually the volume actually did decrease partially because really in Q3 and the second half of the Q2, it’s actually the May and the June, we roll-out like five new Gova products. And that actually — and with the marketing campaign really tried to gain market share in the mid-end product replacement customers.

So I think that actually, — and if you look at our — because our business is not exactly direct to consumer. Our business growth is actually, we sell to distributors and distributor sell to retail stores and retail store to consumers. So along those lines there are capital being used by the distributors and capital being used by the retailers. To some extent you can understand that as we have more new product in Gova, our distributors and the retailers, they only have limited capitals, right.

So some of the capital will be occupied by the Gova product. I think that’s where it actually creates the capital drain [Phonetic] is done by the distributors on the Gova product left on N, M, U, that actually create a temporary decrease on N, M, U. Second is actually, we haven’t done too much in terms of — in Q3 haven’t really rolled-out, the up — the new product what we call, the new product for N, M, U except the M2S [Phonetic] which is upgraded version for M2.

So I think that also create a little bit drag in the N, M, U product. But going forward, I think this in 2022, we have planned actually quite a number of new products under the N, M, U series. And that will actually help to increase not only the percentage and also increase the sales volume of the N, M, U products. So we’re actually quite promising. I’m quite hopeful about 2022 for the N, M, U series.

Jing Chang — CICC — Analyst

Okay. Thank you.


[Operator Instructions]. Your next question comes from the line of Bin Wang of Credit Suisse. Please ask your question.

Bin Wang — Credit Suisse — Analyst

Thank you. I got two questions. Number one is about your service income. Is that linked to your low-end version of the Gova series, which means that Gova series naturally have less revenue income that’s why revenue growth has been lower compared to the scooter growth. Just wanted to know the different products, the rate if we see any difference. That’s number one question.

Number two is about, can you elaborate a little bit about your market dynamic also in U category because we’ve got very familiar with kick scooter on your upcoming hybrid products. You mentioned about cc hybrids, which means we have a engine in electronic scooter, [Indecipherable]. Thank you.

Yan Li — Chief Executive Officer

All right. So Bin I think I’ll address those two questions. One was the service income. Yes, so some of the Gova product are not, it doesn’t have the smart IoT devices. So to that extent we’re not going to see what you call, the connectivity income from those Gova products. And — but it’s not all Gova products doesn’t have the connectivities. There are portion of Gova products will have, what you call an add-on boxes posted at a store. So those Gova product actually, we were still able to charge the users still pay connectivity fee along the Gova product. So that may be addressed — some of the concerns here.

Second, we didn’t mention explicitly, but really starting this year, we’ll start getting service revenues from our sharing scooters. So, we’re getting about $10 per month per scooter, not entirely on the entire fleet. Some of the operators who haven’t started, haven’t paid yet, but practically on half of the fleet. So I mean, as we have more sharing vehicles deployed globally, you’re going to see that income, that revenue stream coming nicely. I think that’s two part of services.

Now on the new categories I assume you were asking about the hybrid products, yes, the hybrid products are our first attempt. We’ll debut this product actually tomorrow at EICMA. So you’re going to see the news on the design, it’s actually a beautifully designed product. What we see is actually there is one part of motorcycle category that we are not able to attack. That’s actually around the 150 cc to 250 cc motorcycles. That part of motorcycle still represent roughly about 30% of the market in Europe and the United States. But the reason being that it actually require longer drive range. If you simply just do electric, it will be too expensive for users to buy unless you go with the sort of the industrial product zero, which like EUR10,000 even more. So what do we have is, this is actually a completely internal design technology that actually combine a combustion engine with the electric motor, and that with — even with a battery into it. So actually will allow user to have a limited drive range, while limited by the gas tank. But at same time when you do a city commute, we’ll use more as the electric motors, such that it will actually give you a more environmental-friendly, inter-model usage, inter-model gasoline usage per kilometer. But this product will be probably available towards the second half of the 2022.

So this — in EICMA, we’re going to show the concept design on some of the technologies and the products still in development and will be ready in the second half of 2022.

Bin Wang — Credit Suisse — Analyst

Thank you.


Your next question comes from the line of Wei Chen [Phonetic] of UBS. Please ask your question.

Wei Chen — UBS — Analyst

Good evening, Jason, Yan and Fion. Thank you for taking my question. The first is about the margin. Investors are concerned about the price war in this year and which was most severe in the third quarter. We noted from mid-November, YADEA and AIMA have raised price by 5%. So, can I have your view on the price war under the impact margin trend in 2022? This is my first question.

Yan Li — Chief Executive Officer

Maybe I’ll mention first and have Fion to talk a bit more on margin part. Yes, so to be honest, I think those two players have been involved in price war and we are not engaged in the price war. But we did a bit marketing promotion, our Gova product in Q3. Because a lot of price war happens in the really low end, even with our Gova entry product at RMB2,499, we’re still like a mid-end product, we’re not even a low-end yet.

So to some extent, we see our margin still much, much higher than YADEA’s and AIMA’s margin. And obviously, now they start to raise price in September. We haven’t done that yet. Reason we haven’t done that yet, because we did a little bit in April that helped to absorb some of the cost, and that will also carefully observe the market to see when the right time to increase the price.

But as I mentioned earlier with what we observed, the trend of lithium battery prices there is likely that we’re going to increase price in early 2022. And we usually do that during the holiday season, while the Chinese New Year seasons will have a less impact from the retail. Yeah, I think that’s my comments.

Fion Zhou — Chief Financial Officer

Yeah. I think you already addressed all the factors.

Yan Li — Chief Executive Officer


Wei Chen — UBS — Analyst

Again, also because the margin, I know there are lot of moving parts, including the price war and also the commodity price. So what’s your general view on 2022 margin, because I see there are some margin pressure in third quarter. And what’s your view on the fourth quarter and 2022? Thanks.

Fion Zhou — Chief Financial Officer

So maybe I can give some insights, and then Yan will add extra comments. As Yan mentioned, actually even though we consider about the retail price increase in early 2022, we’re still facing the higher raw material cost problem. And luckily there we have made the cost optimization. And those initiatives began to show positive effect, and that’s why didn’t see any — the huge margin loss in this quarter. And those cost optimization initiatives will bring benefit in the future quarters. And with the strategy that we may increase the sale, the retail price was around 3% to 5%, which will not bring the — active feedback from the customers. I think we can still remain the good gross margin. And Yan?

Yan Li — Chief Executive Officer

Yeah, I think that really on one hand, I don’t see weakness in margin decline next year. But on the other hand, I think we’ll see a stable margin and with a slight increase.

Wei Chen — UBS — Analyst

Okay, thank you. And my next question about is, is about your new product. You just mentioned that you have prepared a lot of new products including the kick scooter, the electric motorcycle in 2022. Can — because we are not really familiar with these new market segments, can you give us more color like the sales guidance in 2022 or 2023? Which product line will become a significant contribution in terms of revenue in the next two to three years? Thank you.

Because I think some of the products are mainly for brand building, it’s not for volume sales. Correct me if I’m wrong. Thank you.

Yan Li — Chief Executive Officer

Yeah, I think let me put this way, right. So I think it’s too early for us to give our guidances. But I think there are three categories, one that we’re looking at the kick scooters. The kick scooter, the entire market reduced about — I think from what I read the probably like a 6 million to 8 million units per year depends on whether you include some the kids ones or not. And this year, so 6 million to 8 million mostly in United States and Europe.

So those two markets where we do have a strong brand in term of urban mobility, and I think this year we initially have our K3. And now with K3 Max and K2 and actually next year we’re going to have a couple of more kick scooter products that will give us a wide range of product that help us to cover the entire product range spend for that 6 million units of entire market — the entire market is 6 million units. So we’re actually quite optimistic with our growth in smart kick scooter.

Now the e-bike. E-bike is also about 6 million units year roughly about 80% or actually, yes, about 80% in Europe and about 10% to 15% in United States. So we have a two e-bike product so far. We have our Aero EB-01 that we launched last year start to make some sales this year and then we have our BQi to be launched at EICMA tomorrow. But that product wouldn’t be available for sales until Q1 or early Q2 of 2022.

So, but as we will actually start to actually generate more product along the e-bike categories. Both the kick scooter and e-bikes who have two dedicated team for it and we’re actually committed to those two product categories. So I do think they are volume or revenue generators. Now with the other motorcycle product, put this way, if we just look at the European market, then the not just look at the electric, entire European market, it’s about 1.5 million units to 2 million units a year in term of motorcycles.

Majority are petrol at this point. And then within that, the entire market above 50% are 100 CC below, and 50% are like 125 CC above. Our product offering used to be 50 CC below. By 50 CC below means the drive speed is like a 50-kilometer per hour. And we start to have like a 70 CC, 80 CC product like a drive speed of 70, 80-kilometer per hour.

So the MQiGT-EVO and also the upgraded N-GTS, and also the R product, both add 90-kilometer per hour, 100 kilometers, 120 kilometers. And those are actually ready to attack the other 50% of the market, which is 100 CC above. We never had product in that market. So it’s a wide space for us. And you can see those market actually, I do think those product are also revenue generators.

Wei Chen — UBS — Analyst

Very clear. Thank you.


I see there are no questions, thank you — seeing no more questions on the queue, let me turn the call back to Mr. Li for closing remarks.

Yan Li — Chief Executive Officer

Well, thank you, operator and thank you all for participating in today’s call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.


[Operator Closing Remarks].


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