On Thursday, NIO (NYSE:NIO) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
NIO reported a significant year-over-year increase in vehicle deliveries in Q1 2026, with total deliveries of 83,465 units, marking a 98.3% increase.
The company's gross margin improved to 19%, driven by higher-margin product sales, while vehicle margins reached 18.8%.
NIO maintained a positive non-GAAP operating profit and increased cash reserves to 48.2 billion RMB.
The company is focusing on expanding its product lineup and entering new market segments with innovative models like the ES9 and L80.
NIO plans to continue expanding its power swap station network and aims to achieve a vehicle margin between 17-18% for the full year 2026.
Management expressed confidence in the company's long-term competitiveness, supported by systemic innovation capabilities and a focus on premium brand positioning.
NIO's in-house developed ADAS technology is set to be introduced across more models, aiming to enhance competitive positioning.
Full Transcript
OPERATOR
Ladies and gentlemen, thank you for standing by for NIO Inc.'s first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Ray Chen, head of Investor Relations and Corporate Finance of the Company.
Ray Chen (Head of Investor Relations and Corporate Finance)
Please go ahead Ray Good morning and good evening everyone. Welcome to NIO's first quarter 2026 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 Lee, founder, Chairman of the Board and Chief executive officer and Ms. Danny Chu, 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 Security 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 the 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 gas financial information as well as unaudited non GAAP financial measures. Please refer to NIO's press release which contains a reconciliation of the unaudited non GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Lee. William, please go ahead.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Hello everyone and thank you for joining new Inc. S 2026 Q1 earnings call. In Q1 2026, the company delivered a total of 83,465 Smart EVs representing a year over year increase of 98.3%. Breaking it down by brand the new brand delivered 58,543 vehicles, maintaining its leadership in China's BEV segment priced above 300,000 RMB. The Envo brand delivered 13,339 vehicles, continuing to unlock its growth potential. The Firefly brand delivered 11,583 vehicles, ranking number one in China's high end small car segment. In April the company delivered 29,356 vehicles, up 22.8% year over year. Starting Q2, the three brands have entered an intensive product launch and delivery cycle, which is expected to support continued rapid delivery growth. We expected the total deliveries in Q2 to range between 110,000 and 115,000 units, representing year over year growth of 52.7% to 59.6%. On the financial side, the company's Gross margin was 19% in Q1, driven by a higher contribution from higher margin products. Vehicle margin came in at 18.8%, improving quarter over quarter for the fourth consecutive quarter. Margin for other sales, mainly services and community related businesses reached 20.6%, the highest level in the past four years. With both business scale and profitability achieving improvement. In Q1, the company maintained positive non GAAP operating profit and positive operating cash flow where cash reserves further increased to 48.2 billion. RMB. Has remained committed to the BEV roadmap while continuously strengthening its systemic innovation capabilities. Over the years, the company has built distinctive competitiveness across technology, products, services and user community operations. Supported by these capabilities, the products and overall experiences of Neo Envelope and Firefly have gained broad recognition among their respective target users. For the new brand since delivery began in late September 2025, the all new ES8 reached its 100,000th delivery milestone in just 215 days, setting a new delivery record among passenger vehicles priced above 400,000 RMB in China. As of April this year, the all new ES8 had remained number one in both the large SUV segment and the passenger vehicle segment, priced above 400,000 RMB for five consecutive months regardless of powertrain type. In Early April, the 2026 ES6, EC6, ET5 and ET5T were launched and delivered, further addressing involving user needs through enhanced product offerings. On April 9th we officially unveiled the new ES9, our flagship executive SUV. The ES9 integrates multiple industry first technologies and class leading features, redefining the standards of executive flagship SUVs and leading the segment into the BEV era. The ES9 will officially launch and begin deliveries on May 27th and we are confident that the ES9 will set a new benchmark in the flagship executive SUV market. Priced above 500,000 RMB no doubt. And. For the ongo brand, the L90 continued its strong market momentum in Q1 2026, ranking number one in the large SUV segment. Priced between 200,000 RMB and 300,000 RMB this year, onboard will achieve comprehensive upgrades in both product as well as core technologies. The 2026 L90 has already been officially launched and delivered. The upgraded L90 now features new in house developed NX9031 smart driving chip new world model and the SkyOS futoming vehicle operating system. On May 15, the Envo L80 L80, a flagship large five seat SUV with an innovative trunk and trunk layout was officially launched and delivered. The L80 is a breakthrough product in the large 5 seat SUV market and currently offers the largest cargo capacity among five seat SUVs in China. Through innovative space and scenario based lifestyle solutions, the L80 supports a wide range of scenarios for large 5 seat SUV users. In addition, the new L60 will make its debut in late May. The updated model will feature upgrades in exterior design and smart features, further enhancing its competitiveness. For the Firefly brands. The refreshed model has already started the deliveries in Q2, bringing comprehensive upgrades in powertrain performance and smart experiences. Going forward, Firefly will continue to introduce limited edition models to further strengthen its distinctive brand identity. 2. On Smart Driving earlier this year we officially rolled out a major new version of New World Model or nwm. Powered by the advanced architecture featuring the work model and closed loop reinforcement learning, the new version significantly enhanced the full scenario navigate on Pilot experience. Within 1/4 of the rollout, urban NLP mileage increased by 92% quarter over quarter while the proportion of smart driving usage time increased by 116%. So far, the smart driving system powered by NWM has been introduced across almost new products. In June, both new and mobile users will receive the next major NWM upgrade, bringing noticeable improvements across driving, parking and active safety scenarios. In terms of sales and service networks, the company now operates 168 new houses, 389 new spaces, 430AMO stores as well as 408 service centers and 90 delivery centers. We continue to optimize our sales and service network layout through the highly coordinated Sky Store model, expanding market coverage while strengthening local presence and increasing network density. As of now, the company has 3,916 power swap stations worldwide along with more than 28,000 power chargers and destination chargers. On May 10, the new ESMI successfully completed the 10,000 kilometer challenge in just 94 hours, 19 minutes and 11 seconds, setting a new record among BEVs in China. This further demonstrated the reliability, efficiency and convenience of battery swap. On May 20, the company released its 2025 environmental, social and Governance report and announced its Greenhouse Gas emissions reduction target, aiming to reduce the carbon footprint per vehicle by 43% by 2035 from the 2023 baseline. By delivering the high performance, smart EVs and exceptional user experiences, we aim to build a sustainable and brighter future together with our users and part. After 11 years of long term investment and persistence. The company has built full stack technology capabilities around the core technologies of smart EVs. At the same time, we have gradually established systemic innovation capabilities spanning R and D, supply chain manufacturing, quality, power services and user services. These capabilities not only enable us to continuously launch innovative products and lead industry development, but also serve as the core foundation for our continued brand development and long term competitiveness. Today, Neo, Envo and Firefly have each established clear market positioning with their core products steadily increasing market share in their respective segments. We are confident in achieving our business targets for the year and delivering sustainable growth beyond 2026. Thank you for your support. With that, I will now turn the call over to Stanley for Q1 financial details. Over to you Stanley.
Stanley
Thank you William let's now review our key financial results for the first quarter of 2026. Our total revenues reached 25.5 billion RMB, up 112.2% year over year and down 26.3% quarter over quarter. Vehicle sales were 22.8 billion RMB, up 129.2% year over year and Down 27.9% quarter over quarter. The year over year growth was mainly due to increased deliveries and a higher average selling price driven by positive product mix effect. The quarter over quarter decrease was mainly due to fewer deliveries. Other sales were 2.7 billion RMB up 31.2% year over year and down 9.7% quarter over quarter. The year over year growth was driven by increased sales of parts, accessories and after sales, vehicle services and provision of power solutions along with a rise in sales of auto financing services. The quarter over quarter decrease was due to decreasing revenues from technical R and D services and used car sales. Looking at margins, vehicle margin was 18.8% compared with 10.2% in Q1 last year and 18.1% last quarter. The year over year and quarter over quarter improvements were driven by a more favorable product mix. Other sales margin reached a record high of 20.6% in recent four years reflecting the continuing profitability improvements in our user base driven service and community related businesses. With the improvement in both vehicle and other sales margin, vehicle overall gross margin increased to 19% compared with 7.6% in Q1 last year and 17.5% last quarter. Turning to opex, R&D expenses were 1.9 billion RMB decreased 40.7% year over year and 7% quarter over quarter. The year over year decrease was mainly driven by lower personnel costs in R and D functions due to organizational optimization, reduced design and development costs from different development stages and improved operational efficiency. The quarter over quarter decrease was also mainly due to lower design and development costs from different development stages and improved operational efficiencies. SGA expenses were 3.5 billion RMB decreased 20.5% year over year and 1.1% quarter over quarter. The year over year decrease was mainly driven by lower personnel costs and related expenses in marketing and other supporting functions. Due to organizational optimization as well as reduced sales and marketing activities, the quarter over quarter SGA expenses stayed stable. Loss from operations was 0.3 billion RMB compared with loss from operations of 6.4 billion RMB in QI last year and profit from operations of 0.8 billion RMB last quarter. Excluding share based compensation expenses, adjusted profit from operations was 66.8 million RMB. Net loss was 0.3 billion RMB compared with net loss of 6.8 billion RMB in Q1 last year and net profit of 0.3 billion last quarter. Excluding share based compensation expenses, adjusted net profit was 43.5 million RMB. Furthermore, we generated positive operating cash flow this quarter and ended the quarter with 48.2 billion RMB in total cash and cash equivalents, restricted cash, short term investment and long term RMB deposits. That wraps up our prepared remarks. For more information and the details of our unaudited first quarter financial results, please refer to our earnings press release. Now I will turn the call over to the operator to start our Q and A session. Operator, please.
OPERATOR
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star2. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions and if you have additional questions, you can re enter the queue. The first question today comes from Bin Wong with Deutsche Bank. Please go ahead.
Bin Wong (Equity Analyst)
Thank you. Congratulations for a great result. I got two questions. The first one is about esmi. ESNI will launch next week. Can you share with the color for the order flow during the pre sale period and do you think the ESN monthly volume in the next several months? What's the roughly monthly volume guidance and might the ES9 impact ES8 order flow? That's my first question and second question is about gross margin. Can you provide a second quarter gross margin guidance given you have a better volume and also based on a cost increase such as memory? So basically, what's your outlook for the gross margin in the next several quarters. Thank you.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. Regarding your question on the ES9, we will officially launch and deliver the new ES9 on May 27th. And since the prelaunch of the ES9, its technology as well as its exterior and interior design are well recognized and well received by the market and our users. We started the test drive of ES9 from May 11 and after the test drive we also witnessed the growing momentum of the order intake on the model. Of course for us we seldom disclose the specific order momentum or order intake for the new models. However, we do have customers confidence in its overall performance in the executive flagship SUV segment above 500,000 RMB in China. And we also believe that it is going to change the landscape of the battery electric vehicle segment above 500,000 RMB. Overall speaking, we are confident in its competitiveness. And also since the prelaunch of the yes Mai, we actually didn't see that the launch of the yes Mai dilutein were cannibalizing the circus or even your attention to the yes 8. Instead it is generating positive impact on the attention and the order intake of the ES8. Especially after we had the prelaunch and also test drive started for the ES9, we have welcomed a lot of in store visits and traffic. Many of them maybe didn't know about the new brand or our product and after they were in the store. By experiencing and comparing between the yes 9 and the es 8, some of them find that the dimensions and also the use cases of the ES9 may be a better match for them. In that case, we have actually witnessed an increase in the order intake of the ES8 after the prelaunch of the ES9 one week after the ES9 launch. Actually the order intake for the ES8 increased by 30%. And starting since the test drive started from May 11, within one week, the week over week yes its order intake increased by 30%. In the first 20 days of May. Actually the order intake on the Yes 8 has created a new history high since October which is the ES8 launch last year we actually after as we have been digesting the order backlog on the ES8, we have also maintained a pretty stable and strong order intake on the ES8 without compromising on the strong order intake for the YES9. So by having the strong order performance for both models, we can see the positioning of these two products are quite distinguished or differentiated from each other. ES9 is more of a flagship executive suv. Well, it is more competing with the conventional combustion engine executive flagship SUV's like BMW X7 or Mercedes GLS, where for the ES8 it is more of an all around SUV that is catering both business scenarios as well as family purposes. So these two products are complementing each other while price wise they are well differentiated. So we are happy to see that those products are well received in their respective segments.
Stanley
Thank you for the question. Regarding your question on the Gross margin in Q1 we have achieved the vehicle margin of 18.8%, achieving quite good increments from both year over year as well as quarter over quarter. And in Q1 the increase in the vehicle margin is mainly because of the higher contribution by the higher margin models, especially the ES8 contributing 60% of the margin where ES8 itself has over 20% vehicle margin in Q1 and also in the meantime, although there are rising cost pressure because of the rising material costs, however our advanced inventories on such parts and components have partially offset such pressure in Q1 and in terms of the Q2 and the four year as you may have noticed that there is the rising material cost pressure facing by the entire industry, including the memory chips, battery materials like the lithium carbonate as well as NCM and also copper and aluminum raw materials. So starting Q2 and beyond, on average the cost impact per unit is around 10,000 or more than 10,000 RMB. But for the full year the company still aims to achieve a vehicle margin of around 17 to 18%. And to achieve a Q2 and a full year vehicle margin of 17 to 18% we will be taking several actions. The first is to further increase the product mix of products with higher prices and also higher margin contributions like the ES8 and ES9. And for other products with moderate margin, we will also maintain a stable pricing and also promotional policies. We will not compromise on the margin performance of such cars for the sake of a volume contribution. And thirdly, we will also work closely with our supply chain partners to promote on the engineering improvement, efficiency improvement as well as commercial negotiations to together mitigate the cost pressure. With that we will target for a Q2 and a full year vehicle margin of around 17 to 18%.
Bin Wong (Equity Analyst)
Thank you very much.
OPERATOR
The next question comes from Tim with Morgan Stanley. Please go ahead.
Ken Shah (Equity Analyst)
Hi, this is Ken Shah from Morgan Stanley. Thanks for taking questions and congratulations on another solid quarter. I have two questions. The first question is about the vehicle sales because we noticed that sales of the 8 and 9 Series Large SUV are expected to likely more than triple year over year this year, while the rest of the lineup is likely to see a roughly 20% year over year decline under our 40 to 50% full year volume guidance. So once the growth of the 8 and 9 series is fully unfolded and the groups the total volume might approach like a 500,000 units target. How does Neo plan to reboost the growth of subsequent models? For example like a 5, 6, 7 series which are likely to face greater competition in the market? That's my first question. Thank you for the question. As you can see, the overall volume growth this year is mainly driven by the models with high price and also high margin. They are playing an important role in supporting both our volume growth as well as our vehicle margin improvement. For the ES8 we will maintain stable and strong market performance while very soon we are going to start to deliver the ES9 and later we will also introduce the 5 seater of the ES8 as they will all play in such a role. And for the Armor brand we have L90 and L80 continue to beat the market share and sell in the price segment between 200,000 to 300,000 RMB. And also starting next year, our entire product portfolio will enter into a new phase of development where we are going to upgrade our ET5, ET5T, E, S6 and EC6 also to the latest technology, platform and digital architecture. Well, the envelope brand next year will also have new products. So in general we are going to maintain a pace of around seven to five new or relatively new products every year. Of course, with the launch of such new products, we don't pursue absolute increase in the volume of the cars. Instead, we would like to achieve a leading market share in each of their respective segments.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
And we also believe that our existing product portfolio and offering channel can support and sustain our competition and competitiveness in the market. In the first four months, the total sales of the company actually topped the passenger vehicle market in Shanghai. We've achieved 8% of the market share among Shanghai's passenger vehicle market. And as we continue to expand our channels and the network coverage, as we continue to deploy PowerSoft stations and facilities, as the users in the lower tier cities open up their mind for the battery electric vehicle product. We believe that our existing product lines as well as our upcoming products will help us to achieve a reasonable market share within the passenger vehicle market in China.
Ken Shah (Equity Analyst)
Thank you. Really thank you. My second question is the profit and OPEX Because NIO has posted two consecutive non GAAP profitable quarters. So do you anticipate maintaining the quarterly non GAAP profit target throughout 2026. In the meantime, can the current OPEX parameters, I.e. sGNA ratio below 10% and the quarterly R&D spending at 2 to 2.5 billion be adequate to support robust business growth moving forward? And when is the next R and D investment upcycle expected to begin? That's my second question. Thank you.
Stanley
Thank you for the question. For the full year 2026, our financial target is due to achieve positive non GAAP operating profit in terms of the OPEX guidance for the R and D expenses we target to maintain our non GAAP R and D investment expenses to be around 2 to 2.5 billion per quarter. For this level of spending, we believe that it will be enough to sustain and support our investments into the key technologies such as chips, operating systems and et cetera, to make sure that we have strong competitiveness and also technical leadership. And secondly, such investment scale will also support the launch and the rollout of new models every year as introduced by William. And in the meantime, as we keep the expenses from, we are also putting efforts in improving the overall efficiency and utilization of such resources. Last year we rolled out the CBU mechanism where under that mechanism we are now using less money to yield more R and D results. As mentioned, the productivity or the yield of 2 billion R&D investment as of today is equivalent to maybe the result of 3.5 billion R&D investment in the past years. And also for the entire company, we've been staying with the battery electric vehicle roadmap, which can make us more focused than spreading our efforts for range extended vehicles or BEV. In that case, we can be more efficient in making our investments, which is different from some of our peers where they have to split their efforts for different powertrain systems. And regarding the SGNA expenses in general, we hope that the SGA as a percentage of the revenue is around 10%. But it can be different from quarter to quarter. For example, in Q2 we have a quite intensive product launch and delivery cycle where the corresponding marketing and the launch expenses are actually higher than the previous quarter. So the absolute amount in Q2 had a surge, especially the selling expenses in Q2 surged a lot from the Q1 baseline. But in Q3 and Q4, as most of the new products will be already in the market by then, then the absolute amount in the second half will also be relatively lower. So there will be also differences from quarter to quarter.
Kim
Thank you, Kim.
Stanley
Thank you, Stanley. Thank you. Thank you.
OPERATOR
The next question comes from Paul Gong with ubs. Please go ahead.
Paul Gong
Thanks everyone. Thanks for taking my questions and congrats on this quarter. I have two questions. The first question is regarding the competition in the nine series or largest UV segment. I think the success of the ES8 since late last year has attracted competitors launching the largest uv. So we see see in this Beijing auto show and quite often are even priced with very aggressive pricing. How do you think about the competition in this segment and what is the moat for Nio? And how can Nio stay ahead in this segment as a sales leader champion in this high end largest UV segment? That is my first question.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. It's true that the all new ES8 has created many records. It has achieved 100,000 delivery milestone in just 215 days which is the fastest among all the cars priced above 100,000 RMB in China. And for five consecutive months it has been the south champion in the press segment of above 400,000 RMB as well as in the large SUV segment regardless of the powertrain types and looking at the sales of the large three row SUV priced above 400,000 RMB, yes it has achieved 49.7% market share. The reason for its success is because itself is embodiment of our 11 years of systematic capability and innovation development NAMA. In terms of such systemic capabilities and innovation, it includes our in house capabilities for full stack technologies as well as our capabilities for the innovative supply chain. The reason I would like to highlight the innovative supply chain is that on the ESNAR we have applied a lot of industry first technologies where we need to work hardly with our supply chain partners to mass produce and make this advanced technologies happen. We also have leading capabilities for the advanced manufacturing lifecycle quality which is well recognized by many authorities in the automotive industry. We also have our smart power systems, our charging and the swapping network and also we have established a nationwide premium and holistic car user scenarios and also holistic experience for our users. With the six system capabilities established in the past 11 years, we now are establishing ourselves as a premium brand and also is leading in the premium segment. And in addition to this systemic capabilities, we also have spotted two findings among new users who have chosen our products. The first is that the competition landscape of China's new energy vehicle market is now transitioning from a chaotic brand competition with a more clarified competition where the clarity has been introduced to the overall brand and competition landscape for the new energy vehicle market in China, where among all these competitors, Nio is widely recognized as a premium brand and also well accepted by the public as a premium brand. Among many users, they have already established a consensus where Nio will be the next car after Mercedes, BMW and audi. And in Q1, the NIO brand has an average selling price of 390,000 RMB. That is around 50,000 RMB higher than that of BMW and 50% higher than that than that of Audi. So these are lively examples. And in cities like Shanghai or around the Yangtze river delta area, where in the first tier cities in China, actually our market share has already surpassed the market share of the ICE models from all those traditional luxury brands. So in general, in the Chinese market, Nio has already established or starting to establish itself as a well recognized brand, premium brand, And for the Envo brand, its average selling price is around 240,000 RMB, which is also comparable with many tier 2 luxury brands. And now Envel is also the go to option for many families pursuing high quality and also premium car usage experience. And for Firefly, it has achieved 2/3 of the market share. In the high end small car market, its average selling price is around 50% higher than other small car competitors. But in terms of its design safety and also build quality, it is providing our users with sufficient value and also creating sufficient user value for them. So for the entire company, be it the Nio brand or our brand or the Firefly brand, we are positioning ourselves as premium in general. And this is also a consensus among the users. And also in addition for the new envelope and the Firefly brand, we have been insisting on the original design. We have been making long term dedication and a commitment to our product. And we also have corporate missions and values where our users find themselves can really identify with and resonate with all this mindset and mentality. Many users actually pursue beyond simple functions or configurations. They are more seeking for the emotion, connection and resonance. Plus we also have the community to create them such emotion experience. So when it comes to the computation, such emotion touch points can really create us a unique competitive edge where we don't need to be over aggressive with the prices. Not to mention that when the entire industry is under heavy cost pressure, a low price point may not generate you scale effect or economies of scale. In that case, a low price may not necessarily translate into an advantage. Especially for the rising raw material costs. On the memory chips, batteries, copper, aluminum. There is no economy of scales for such components, which means that a higher volume does not translate into a good margin performance of the car. In that case, for us, we will insist on our premium brand positioning and insist on providing our users good emotion experience.
Paul Gong
Thanks and well understood. My second question is required regarding the potential indirect price risk under the challenge of the raw material cost inflation. Just now Stanley mentioned cost inflates by about 10,000 or more than 10,000. I think it's not only your challenge, but it's even a bigger challenge for your competitors who price products at cheaper price level. Under this competition and the cost inflation challenge, do you think there is any opportunity to cut some of the incentives and indirectly raise a little bit of pricing for the industry and for yourself?
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. It's true that the entire industry is facing the cost pressure mainly driven by the raw material costs as well as the prices of the semiconductors, especially the memory chips. As mentioned by Stanley, the cost impact is over 10,000 RMB per car for our company. But our overall strategy is still to stabilize our prices. Well, in the meantime we are also dialing back on some discounts and promotions. Facing the same pressure, different companies may have different coping mechanisms and for us it's about stabilizing the prices while maintaining and improving our overall competitiveness on the products and the services than just sacrificing on the margin for the sake of the volume. Our strategy is to maintain a reasonable volume increase while keep improving our margin and EBIT performance as those are our key business targets. So over speaking, different companies have different coping mechanism and strategies and for us we will be insisting on our philosophy and to mitigate the impact, And in the meantime on the supply chain, since last year we've been promoting some new models working with our partners. One is transparent supply chain and another is a mechanism or a principle called primary and preferred partners. In general, we work closely with our partners to identify costs and processes that are not creating user value and we work with them to lower such costs or optimize such processes. In general, we believe that on the supply side there should be around 5 to 10% opportunities driven by such optimization. So for this year on the supply chain, we will be focusing on doing meticulous operations and management together with our partners to identify opportunities that can offset or mitigate the impact on the rising raw material costs.
Paul Gong
Thank you Paul. Thank you very much. That's quite helpful. Thank you.
OPERATOR
The next question comes from Nick Lai with JP Morgan. Please go ahead.
Nick Lai
Okay, thank you. William and management team, thank you for taking my question. This is Nick Foundation Morgan, two simple questions. The first question is can you give us a quick recap and quick update of our ADA strategy? And you mentioned earlier at the code that our own in house chips and this implant has started to be put in our selected model for now and I wonder how fast will our in house chip deploy to the rest of the model and how this ADA strategy is going to make our product much more competitive compared with our competitors. And at the same time I'm aware that our in house chip subsidiary has raised 2 billion renminbi through fundraising in the first quarter. How would that help our financing and R and D? Thank you. That's the first question.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. For Nio's in house developed smart driving chip NX9031. It is the world's first automotive grade chip of a 5 nanometer process and it comes with the industry leading capabilities in inference, data bandwidth, ISP performance as well as the interchip communications. And it was firstly mass produced on the new ETI in last March and to date we have already shipped more than 250 pieces, more than 250,000 pieces of these chips to our products. So the chip solution itself is already pretty mature. And earlier we have also introduced this chip to the envelope new product starting with L90 as by introducing this to the envelope brand we can also merge the autonomous driving where ADAS software baseline improving the overall R and D efficiency as well as enhance their data closed loop capabilities. And in the second half of this year we believe that more than 80 or 85% of our cars will be equipped with our in house developed smart driving chip. And in terms of our ad solution and ad roadmap, as you see that starting this year we are moving to the architecture featuring our new world model plus the closed loop reinforcement learning and it has great potential for the continuous development and iterations and as well as good efficiency because we are only using 20% of the cloud computing power in comparison to our competitors or peers to achieve the same level or even better smart driving experience and performance with this major version and upgrade. Our users actually all speak highly of the smart driving experience and later this year we will have another two major upgrades. So we are quite confident with the overall ad performance as well as its growth potential. And in terms of the business model for the adas we will continue our subscription services and the business model on the adas as it will also become a very important revenue driver among our other sales revenue mainly based on the services and also community related businesses. Although right now we are offering free subscriptions to some early users or new users. But for the use of cars they will have to pay for the ADAS subscription. So for the long term we see the potential in that. So in terms of our ad solution we have already completed the entire train from the chip to the model and architecture to the closed loop data as well as the business model. And in terms of the Shenzi and the recent financing. Of course a smooth financing driven by the Shenzi chip business can also give us more resources and flexibility in developing our upcoming chip products, especially chips that are more affordable.
Nick Lai
Thank you Nick.
OPERATOR
Next question comes from Jing Chong with cicc. Please go ahead.
Jing Chong
Yeah, hi, thank you for taking my question and congratulations on our robust profit in the first quarter. So my first question is about envo. We see that L80 has officially launched this month, so how do you see from the market feedback on the orders and also we see competitions currently. So how will the L80 overcome the new vehicle effect? Which means we see some new model have a quite large orders in the beginning, but later they will encounter the sharp decrease. So whatever exact on the L80 sustainable monthly sales performance and also for the overall Onwell brand, what's our strategy to be employed to enhance the brand awareness for OnWell in total?
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. For the armor L80 we believe it's a defining and also revolutionary product in the large five seater SUV segment. In general, the market size for the five seat SUV is three times of that for the three row SUV segment, which means that for the L80 it is being able to tap into a greater and broader market than the L90. And since the official launch of the Envoy L80 on April 29, we actually have received positive feedback both from the media as well as from the users who test drove the vehicles. And its order intake is also meeting our expectations regarding the target users of the envel 80. Actually the car can cater to a pretty wide range of user groups including young couples, couples with one kid, families with pet or families with kids that are already growing up. So for the envoy L80 we believe that its core competitiveness still is powered by the technology as well as its overall product performance, including how it has reimagined the space as well as all this lifestyle and scenario based solutions. So we believe that the Envoy L80 will drive the entire large 5 seater SUV segment into the Bev era, just like how L90 and the ES8 seat with the large sphere SUV segment. And right now for the envo brand the major challenge is still because of its overall brand awareness since after all Envelope has just started its delivery for around 20 months and we've also done this study on the almost awareness. Its current awareness is basically on par with the awareness of a new brand in the year of 2020. To raise its brand awareness we are also taking different approaches so that more people will be able to know about the brand. For example, we have collaborated and invited some celebrities to promote our product and brands where many of the celebrities have good reach among the target users of Envelope. And we are also asking our frontline colleagues and teams to really go into the field to go door to door to promote our products and invite users for the test drive. It takes a lot of effort but it is also taking effect. So overall speaking takes time to really establish and build the brand awareness on the envelope. But the good thing is that once the public or the users know about the brand, we have a pretty efficient conversion from knowing about the brand all the way to the order placement. Okay, thank you.
Jing Chong
Thank you. My second question is regarding to the other sales. We have seen that the gross profit margin of other sales has been have a significant improvement in the first quarter to above 20% which I think is historical high. So could you quantify the main drivers behind this margin growth and also is there any one off effect and also pride us maybe some outlook on the trend this year.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the questions regarding other sales. It mainly includes after sales services, service and maintenance, accessory E shop, power services and also new life merchandise. And we've been witnessing significant improvement in the after sales performance and Also financials since Q4 last year and in Q1 this year we have achieved over 20% other sales margin and with this result there was no one off impact and the key drivers of the improvement in other sales margins mainly because first of all Nio, the entire company has been committed to establishing this brand connections with our users and to deliver holistic experiences throughout the life cycle of the products that can go beyond their expectations. With that we have a very strong user stickiness and also a strong willingness to pay for these premium services. For example after self services, the accessory Eshop and the Neolife products all have actually are popular among our users and they also generate good and secondly we've been improving the overall efficiency of such services especially power services for the operating capex where operating cost per station we've actually achieved quite significant improvement. And thirdly, we are also leveraging our energy and power services by doing off peak and off peak charging and also great interactions and also electricity trading to be able to also generate good results. And with that we believe that our other cells, mainly our services and community related businesses are also embracing an inflection point and entering into a new phase of development. And for the full year 2026 we have the target for a 20% other sales mar. And going into a longer term, as we continue to increase our user base and also the efficiency of such services, we believe that the profitability of other cells, as mentioned services and community related businesses will also continue to improve. So in the long run, in addition to the new car sales, other sales will also become a very important and the key driver for our sustainable growth.
Jing Chong
Thank you Chan Mi. Thank you.
OPERATOR
The next question comes from Yu Qian Ding with hsbc. Please go ahead.
Yu Qian Ding
Thank you. Tian Yuchen here. Conscious of the time. I just got one question. So regarding the second half, could you talk a bit more about the new comp plan? Other than the current new models ramp up into second half, what's the biggest expectation in second half? Could you share the ES7 timeline and position among the current big size premium SUV pack you have? Thank you.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. In the second half of this year, the major new product we are going to launch will be the five seater version of the all new ES8. So in addition to that, our primary focus in the second half will be dedicated to selling cars and also serving our users well.
Richie
Thank you Richie. Operator, Next in the line please.
OPERATOR
The next question comes from Joey Yang with Bank of America. Please go ahead.
Joey Yang
Thank you management for taking my questions. I also have one question. On your battery swap station, can you talk about what are the targets number of your battery swap stations and also the targeted utilization rate by end of this year? When will the battery slot business achieve profitability on a standalone basis? Thank you.
William Lee (Founder, Chairman of the Board and Chief Executive Officer)
Thank you for the question. For our power swap stations at its peak, mainly during the holidays or busy hours, on average each station can deliver around 45 swaps per day and on the average days it's around 30 swaps per day. And for the short term, our focus will still be on rolling out and expanding our power swap network. And this year our target is to build a total of more than 1000 power swap stations. Especially starting Q3, we will be able to roll out our 5th generation power swap station at the scale. In the meantime, we are continuously improving the operational efficiency of our swap stations. But for the short term we will still need to make upfront investment and early deployment of stations. So for the short term the profitability of the power swap network is not our primary focus. But I would like to mention that for the services and community related businesses, basically other cells, it has already achieved profit and in that case the power swap business is also included in that part of the profit which means that we will have resources to sustain the continuous expansion of our swap station network.
Joey Yang
Thank you Julie. Thank you very much. That's very helpful.
OPERATOR
There are no further questions. I'd like to turn the call back over to the company for closing remarks. Thank you again for joining us today. If you have further questions, please feel free to contact Neal's IR team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you. That does conclude our conference for today. Thank you for participating.
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