William Li: Thank you for the questions. As we are very happy to see that many other car companies including peers, as well as other third party companies are also dedicating their resources into installing chargers in China. As the more chargers we have publicly, the better the charging experience and the charging efficiency will be. So we are also dedicating — we’re actually we’re also installing a lot of chargers. But in addition to that we also have many power swapping facilities, we are the car company with the most power swap stations. Some companies in the industry are also installing power swap stations. But so far, we are still the single largest swap station operators with already establishing — with that we have already established a very good network effect where we can further leverage on that.
So overall speaking, many other car companies who are serious about the battery swap or who are interested in battery swap, now choose to join our battery swapping network and alliances because they can also rely on our network effect. But another thing is that the charging and swapping this two are never in conflict with each other. Of course for the charging, there are some special benefits. For example, if you have chargers at home, you can always enjoy the best charging experience. Or if you’re on the go, and you only need to charge for 20% or 30% SOC, you can also choose faster charger. But if you need to have a full charge in a very short timeframe, power swap is still the best option for you. Like during the Spring Festival, over 90% of our users traveling on highways to do the power swap, then doing the charging.
So that’s the special benefits of our power swap, not to mention that battery swap station itself is a natural energy storage system. When users are doing power swap they don’t need to get off the card the entire process is fully automated. Not to mention that we also have a battery upgrade that is enabled by the swap abilities of the battery. For example, 80% of them chose 100 kilowatt hour battery pack. That is our long range battery pack. But before we had this many power swap stations in China 50% of our users actually chose 100 kilowatt hour battery pack. By having more users choosing standard range battery pack. The benefit is that if you’re only driving the car in Shanghai for the daily commute, you can be having a sufficient range with 75 kilowatt hour.
But when you need to have a weekend getaway where you need to travel for long distance during the holiday sites during the Spring Festival, you can use the flexible battery upgrade to upgrade to 100 kilowatt hour battery. For example, during the Spring Festival many of our users have chosen to upgrade their batteries flexibly. And very soon we will launch 150 kilowatt hour battery pack which will fulfill a very rare need maybe only 1% to 2% of the use cases where users needed to travel much longer. And another benefit of a power swap is regarding how it can benefit the management of the battery life. Because I can use the analogy, if you eat too fast, it can damage your stomach, then eating in a very slow manner, is the similar thing to the power swap, because if you always use supercharging, such quick charge may damage the battery life of your battery.
But with battery swap, we can balance out the battery life not to mention that we can also use other operating approaches and the mechanism to further enhance the battery life. So overall speaking, we don’t think battery swap and the charging are contradicting with each other and these two actually compounding.
Cheng Jing: Okay, thank you. My second question is regarding to the lower tier cities market. And I’ve see that in 2023, our sales proportion in tier 3 cities has been increased little bit percent. So, also ourselves proportion, especially 3 tier and below is still less than 20% compared to like BMW, which that will be exceeding a 40%. So in terms of marketing and other aspects. So do we have some assets to breakthrough further to the lower tier cities?
William Li: Thank you. Thank you for the question. It’s true that in 2024, we needed to solve the problem regarding enlarging our reach in the lower tier cities and also boosted the sales in those cities. We have realized the significance of this and we have already started to take actions in the second half of 2023 by enlarging our reach into the lower tier cities. Right now if you look at our sales volume distribution, basically, one 50% of our sales volume is contributed by the South in the Yangtze River Delta areas. And if we look at all the tier one cities, more than 70% of the sales actually happen in the first tier cities. So it’s very important for us to find the right approach to penetrate into the larger cities and enlarge our channel reach in this cities.
On the other hand, we have also realized that the infrastructure like the charging and the swapping facilities are also playing a very important role in boosting the sales in this lower tier cities. So this year, we will also focus on installing more chargers and the swap stations in the third or fourth tier cities so that we can enhance the overall user experience and competitiveness in those areas. This is an opportunity as well as a challenge for us in 2024. We need to find the efficient approach to tap into the lower tier cities and to improve the sales volume in those areas.
Cheng Jing: Thank you for answer all of my question.
Operator: Thank you. Your next question comes from Tina Hou from Goldman Sachs. Please go ahead.
Tina Hou: Thanks for taking my questions. So the first question is regarding your sales network and sales team expansion plan this year. So just wondering, for both the NIO brand and for the Alps brand, how many new stores do you expect to open this year and how many new sales people do expect to hire for each of these brands?
Stanley Qu: Tina, can you repeat your question please.
Tina Hou: Oh, sorry. So my first question is regarding your sales network and sales team expansion. So could you share for 2024 how many stores do you plan to open for both NIO and Alps brand? And also how many sales people do you expect to hire for these brands?
William Li: Thank you for your questions. For NIO as the brand actually we have already opened 500 new houses and new space in China. So for this year, our priority is not on opening up more stores or spaces for the NIO brand. Instead, we will focus on improving the efficiency of each point of sale, including phasing out some low efficiency locations and replace them with stores and the locations of higher efficiencies. And in terms of the salesforce for the NIO brand. So far, we have already have more than 5000 people on the team and enlarging the team will not be the focus either, instead, we will focus on the efficiency of the overall operations of the team. So enlarging sales team or increasing the number of sales stores for NIO will not be the priority for the current year.
But when it comes to our NIO brand, the second the brand, the approach will be different. We have already secured some locations and resources for the NIO brand. So we will not have a very long lead time to prepare for the store opening. Basically, when we launch the brand, we also hope that we can open no less than 200 points of sales for the second brand. In terms of people it’s the same logic as we can leverage the existing training system of NIO to train the team to make the entire sales team to be prepared for the launch of the very first model. So we will focus on the efficiency of such a sales team. Not to mention that for Alps, we will start with only one product so the efficiency of the cells should be relatively easy to manage and improve.
This is also another advantage of starting a brand based on existing resources and a network of NIO than starting everything from ground up. Thank you, Tina.
Tina Hou: Thank you very much, William. Can I just have a follow up? So with the Alps store location resemble that of NIO’s location?
William Li: As Alps, our second brand is targeting at different types of user groups with different prices segments and the range, which means that this brand will also have its own principal and the logic for the store locations and network development. So where else they will select their own stores and locations and also deploy the network according to their own demand. And of course, the sales network of Alps will also be more efficient as Alps does not need to have the full-fledged self-storage like NIO has. So its point of sales will be more efficiency oriented, similar to the sales stores of Tesla.
Tina Hou: Thank you. And my second question is, could you give us some CapEx guidance for 2024? And in the breakdown between vehicle CapEx and also your charging swapping infrastructure CapEx?
Steven Feng: Yes, sure, we will control our CapEx investment in 2024. Like, we already cancelled or delayed project with the payback period longer than two to three years. And generally, the cataracts in this year will be significantly lower than 2023. Regarding the deployment of our power swap station network, we will fully leverage the resources of our business partner for the further expansion as I mentioned Will in the previous statements. Yeah. That means we will not utilize our own resource to build the network.
Tina Hou: We’ll not utilize your own resource for?
Steven Feng: Yes, for the power sub network, station network. We minimize to use.
Tina Hou: That’s very clear and helpful. Thank you.
Operator: Thank you. As there are no further questions now, I’d like to turn the call back over to the company for closing remarks.
Rui Chen: Thank you again for joining us today. If you have further questions, please feel free to contact NIO’s investor relations team through the contact information on our website. This concludes the conference call. You may now disconnect lines. Thank you.
