The price cuts seemed to raise its revenue but might not sustain its profit growth
Niu Technologies (NIU: NASDAQ) (Chinese: 小牛电动), one of China’s largest electric scooter companies, reported yesterday a net income of CNY 47.6 million (USD 7.543 million) in the fourth quarter of 2021, registering a year-on-year decrease of 18.1%. The gross profit rate was 22.6% in the fourth quarter, compared to the figure of 25.2% over the same period of the previous year.
The company also recorded a revenue of CNY 3.705 billion in 2021, spiking 51.6% year on year, and a revenue of CNY 986.1 million in the fourth quarter last year, up 46.7% over the previous year.
According to the provider of smart urban mobility solutions, the gross profit rate fell due to a higher cost of raw materials and a different product structure.
Established in 2014, Niu started as a high-end brand, targeting young consumers with greater buying power. However, amid growing competition in the market of two-wheeler, giants such as Yadea (01585: HK) (Chinese: 雅迪), Aima (603529) (Chinese: 爱玛), and Xinri (603787) (Chinese: 新日) occupied a larger share. This forced Niu to lower prices in 2020 as it eyes a larger market with more price-sensitive consumers.
The company continued its price cuts in 2021, with an average domestic price of CNY 2,959 per scooter, down 8.8% annually, and an average overseas price of CNY 6,597 each, decreasing 31.9% over the previous year.
The pricing strategy boosted sales. Total e-scooter sales in the fourth quarter reached 238,188, up 58.3% year-on-year. Specifically, the number of electric two-wheelers sold domestically hit 205,239, with an annual growth of 49.2%, and that of the overseas market was 32,949, surging 155.8%.
“We expect our sales volume and market penetration to keep increasing in 2022 as we execute our growth strategy, further diversify our product offerings and expand our sales network,” said Li Yan, CEO at Niu.
As of December 31, 2021, the company had 3,108 shops in China selling Niu scooters. It also has 42 distributors in the global sales network spanning 50 countries.