On Thursday, Nio Inc. (NYSE:NIO) reported relatively In-Line 4Q results, guiding for a "stable 1Q22 delivery of 25-26k units vs. 25k in 4Q21". However, the electric vehicle start-up said it could face production challenges in 2022 due to the continued shortage of chips.
"Chip supply is a big challenge [for us]," William Li, co-founder and CEO said on Friday's earnings call. "The main challenge is in some common and cheap chips, which will affect our production this year."
According to Li, NIO uses around 1,000 different chips in each car, with approximately 10% of those chips facing supply shortages. Li said the supply of high-end semiconductors, such as Nvidia's (NASDAQ:NVDA) Orin used to support the driver assistance system, was sufficient since NIO had already formed long-term partnerships with chip makers.
The shortage of chips has plagued the entire auto industry for quite a while now. It is no surprise that the car makers are setting guidance to accommodate. "Based on this experience in 2021, we have already taken into consideration of the chip cost increase in terms of setting our target for the vehicle gross margin." Li said during the call.
Apart from chip shortages, Li also said that rising prices of nickel and lithium could result in higher battery costs and affect its gross profit margin.
By Michael Elkins