Li said this in response to a question about Nio's sales expectations for Onvo's first model, and used English when referring to 'P&L'.

(Image credit: CnEVPost)

Nio (NYSE: NIO) typically doesn't announce sales targets or order numbers for a new model. But its management revealed something interesting in an interview today.

The company's sub-brand Onvo will contribute positively to the company's overall "P&L" when it reaches a sales volume of about 20,000 units a month, Nio founder, chairman and CEO William Li told media outlets, including CnEVPost, at a roundtable in Shanghai today.

Li made the comments in response to a question about Nio's sales expectations for the first Onvo model, and used English when referring to "P&L," which in financial terms means profit and loss.

Nio officially launched the Onvo (Ledao in China) sub-brand yesterday, and began pre-sales of its first model, the L60, a competitor to Tesla's (NASDAQ: TSLA) Model Y.

The Onvo L60 has a pre-sale price of RMB 219,900 ($30,460), which is RMB 30,000 less than the Model Y's starting price in China, and its official launch and deliveries are expected to begin in September.

While the Onvo L60 is RMB 30,000 cheaper than the Model Y, the model still has good gross margins, Li said.

Nio's gross margins had been around 20 percent in the first three quarters of 2021, a figure that was reduced to 7.5 percent in the fourth quarter of last year.

The company's research and development costs over the past 2-3 years have included investments in the Onvo brand, and deliveries of the new brand's first model later this year mean those investments will start to materialize, Li said today.

The Onvo brand will basically only launch one model a year , Li said.

If the product is done right, a single model could sell enough, as Tesla BYD has proven, he said.

Onvo's second model, which will be an SUV aimed at larger families, has already completed much of its development and will begin deliveries next year, Li said.

Separately, Li mentioned in a group interview with local Chinese-language media later in the day that the Onvo L60 still has good gross margins at its current pre-sale price, and that the company won't be selling the car at a loss.

The Onvo brand's R&D and marketing costs are already included in Nio's investment, and the sub-brand won't be considered for a separate listing in the future, Li said.

Onvo president Ai Tiecheng told domestic media that the brand plans to set up 100 directly-managed stores this year, so that when the L60 goes on sale in September, consumers will be able to experience the car in physical stores.

Onvo stores will be located mainly in areas including the automotive trade market, and may consider allowing external cooperation or franchising in the future to expand market coverage, according to Ai.

The brand will focus on expanding into tier 2, 3 and 4 cities, where it expects to overtake the Nio brand in terms of market share, Ai said.

($1 = RMB 7.2191)

Nio formally launches Onvo sub-brand, 1st model L60 to challenge Tesla Model Y