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Niu Technologies (NASDAQ:NIU)
Q3 2020 Earnings Call
Nov 23, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Niu Technologies Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to Mr. Jason Yang, Investor Relations Manager of Niu Technologies. Mr. Yang, please go ahead.

Jason Yang -- Investor Relations Manager

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies' results for the third quarter 2020. The earnings press release, corporate presentation, and financial spreadsheet have been posted on the Niu investor relations website. This call is being webcast from Company's IR website and a replay of the call will be available soon.

Please note, today's discussion will contain forward-looking statements made under the safe harbor provisions of the United States Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions and other factors. The Company actual results may be materially different from those expressed today. Further information regarding the risk factors is included in the Company's public filings with the Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statements except as required by law.

Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results.

On the call with me today are our CEO, Dr. Yan Li, and our CFO, Mr. Hardy Zhang.

Now, let me turn the call over to Yan.

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

Thanks, Jason, and thanks everyone for joining us on the call today. We have had a strong growth in Q3 with our total sales volume reaching 251,000 units, a 67.9% year-over-year increase. The sales volume in the China market reached 245,000 units, a 70% year-over-year increase, while the volume in international market reached 5,600 units, a 6.3% year-over-year increase. Now, in the first three quarters, our sales volume reached 451,000 units, an increase of 43% compared with last year. Now, our strong growth in China was driven both by the market factor and our operational performance in the new product roll out marketing and channel expansions.

Now, first, let me quickly comment on overall market landscape in China. Now, the overall electric bicycle market has increased by 30% to 22 million units in the first nine months according to the Ministry of Industry and Information Technology. This increase was driven by three factors. First, the post COVID-19 settlement led to a high demand of individual mobility devices as more people find electric bicycle a more convenient and safer means for the daily commute. The second was adoption of 2019 China electric bicycle standard mostly started to regulate this industry with license plate, removal of uncompliant products and the such create a safer environment for the users. And lastly, with the lithium-ion battery cost continue to decline, the electric bicycle with portable lithium-ion batteries become more affordable. It was estimated that 20% to 30% electric bicycle this year are lithium versus 10% to 15% in 2019.

Now, amid the fast growth of electric bicycle market and in particular the lithium-ion based ones, we also accelerated our effort in new product rollout, marketing, and channel expansion. As we mentioned in the last earnings call, we introduced the M2 model in Q2 and MS model in July. Both M2 and MS inherited the family design of our signature M product viewed as a full cover electric bicycle. In Q3, M2 and MS series accounted for 18% of our total sales volume. Meanwhile, we also enriched the Gova series family with our G0, G2, and upgraded G3 series. G0, our entry-level product was launched at the JD June 18 campaign. With G0, G1, G2, G3, the Gova series now serves the full range of customers' needs from electric bicycle to electric motorcycles in China, with prices starting at a RMB2,299. The entire Gova series sales accounted for 37% of our total sales volume in Q3.

Now, the successful launch of M and G series continues to demonstrate our strong capability in product design and rollout. Furthermore, with G series entry price at RMB2,299 allowed us to cover the mid-end consumer segment and open up more markets in the lower-tier cities, which accounted for more than 70% of electric bicycle market.

Now, supported by the newly introduced product, we continue to expand our footprint through our store expansions and the new market entries. Now in Q3, we increased our dedicated branded store to a 1,266 stores and increased close to 200 stores as compared with Q2. This quarterly new store add was the all-time high as we significantly increased our efforts in retail expansion. Now, despite a fast increase of number of stores, our per store sales also increased by 40% to 50% in Q3 year-over-year compared with the same time last year. This demonstrates the healthiness of our retail operation as all retail stores enjoyed sales growth and were highly profitable. This is also a good indicator for future retail expansion. We are accelerating new store openings in Q4 this year as well as in 2021. Furthermore, with the Gova series, we were not only able to consolidate our leadership position in top-tier cities, but also able to build a good retail presence in the lower-tier cities.

To support retail expansion, we also scaled up our marketing activities in Q3. On the mass media front, we kicked off a Back to the Street, this is a new campaign and partnered with the hottest online competition show called Street Dance of China in Q3. This campaign was a coordinated effort of advertising and online show with more than 200 million views, interaction with all social media channels like Douyin, Kuaishou, WeChat, and Weibo and offline advertising in subways and buses. In general, total of 800 million brand exposures and continue to enhance our brand image as a cool lifestyle brand. We also continue to build our brand image with co-branding effort. This time, we worked with Gundam, a popular Japanese cartoon in China and rolled out a Gundam special edition based on our MS product. This co-branding has received quite a bit market hype with close to 50 million views of a new Gundam content across multiple channels.

Now, let me turn over to the overseas market. Our overseas market reached to 5,600 units, a small growth of 6.3% year-over-year, while in fact we had about another 1,000 orders in Q3 not able to shift in time due to the scarcity of international shipping. Now, even without delay of 1,000 orders, this demonstrates a swing back to normality in the overseas market as our Q2 sales overseas were actually down by 62% year-over-year. This is only the start as most people in our core demographics are working from home. So as more individuals goes back to work, we will continue to see growth across our markets for individual mobility. In Q3, we also increased our flagship and premium stores to 114 from 91 in Q2, and year-to-date, we have added 88 flagship premium stores, with now more than 40% of our sales from branded flagships and premium stores. Similar to China market, we will continue to expand our retail footprint with branded flagship and premium stores for Q4 and 2021. Along with our retail expansion, we have also upped our effort in the social media with close to 800,000 interactions on Instagram and Facebook. Now, while we are watching closely the COVID-19 situation globally, we're quite confident that our international sales will return to the healthy growth in Q4 this year.

Now, I will turn the call over to Hardy to discuss our financial results. Hardy?

Hardy Peng Zhang -- Chief Financial Officer

Thank you. Yes, and hello, everyone. Our press release contains all the figures and comparisons you need. We have also uploaded Excel formatted figures to our IR website for your easy reference. As I review our financial performance, we are referring to the third quarter figures unless I say otherwise and that all monetary figures are RMB unless otherwise noted.

Our Q3 sales volume reached 251,000 units, increased by 68% year-over-year. China sales volume increased by 70% as a result of retail sales network expansion and new product launch. International sales volume increased by 6%, lower than our expectations, mainly due to results of COVID-19 and the difficulty to fill containers for international shipping. We expect some of these challenges continue into the fourth quarter. We are currently working on different initiatives in order to deliver continued growth from international markets.

Regarding product mix, as we launched a few new products, the mix changed accordingly. N series accounted for 12% of total volume, M series accounted for 23%, Q series accounted for 28%, and the Gova series accounted for 37%. Out of the 37% from Gova series, 27% is from the mid-end product G0 model and the remaining 10% from G2 and other Gova models. The high percentage of G0 sales volume had a negative impact on our Q3 ASP and gross margin. Total revenues increased by 37% to RMB894 million, in line with the guidance we provided earlier. The increase was driven by higher sales volume growth of 68%, partially offset by a decrease in revenue per scooter or ASP of 19%.

There are a few key drivers for the ASP decline. First, sales of low-priced model G0 negatively affected ASP by around 11%. Second, the change in product mix in the other models, especially lower percentage of sales from the high price N series products negatively affected the ASP by around 4%. Third, the sales and promotion which directly comes to end customers affected our margin by around 1%. The remaining 3% decrease is mainly due to relatively slower growth in spare parts sales from overseas sharing operators due to the impact from COVID-19. We expect to some of these drivers continue into fourth quarter. Therefore, the ASP when compared with Q4 last year expects to decrease by similar percentage.

Gross margin was 20.9%, 1.3 percentage points lower than this time last year. The lower gross margin was mainly due to a few factors. First, the sales promotion and discounts we offer to end customers affect the margin by 0.7%. Because we offered sales discount to end customers, we are able to save our marketing and sales expense. As a percentage of revenue, our sales and marketing spend reduced by 3%. Second, we disposed discontinued products. The disposal price was below cost and hence negatively affected our margin by around 0.9%. Third, higher sales volumes for our mid-end product, G0, which has lower gross margin, the impact is around 4%. However, we are able to offset such negative impact from G0 by cost savings on battery packs and various components. Overall speaking, the margin for the products are relatively stable compared with both last quarter and the last year. The decline in gross margin interest rate was mainly caused by sales discount and the disposal with total impact of 1.6%, which are both specific to this quarter.

Our total operating expenses, excluding share-based compensation, were RMB97 million, increased by RMB16 million or 20% year-over-year. The increase was mainly caused by the higher R&D expense of RMB10 million for staff cost and design expense. High SG&A expenses of RMB14 million mainly related to foreign exchange loss, tax and surcharge and professional fees. Sales and marketing expense, however, decreased by RMB8 million. As I mentioned earlier, we offered sales discount to end consumers, which affected our revenue and margin by 0.7%. We were then able to reduce our marketing expenditures. As a percentage of revenue, our sales and marketing expense, excluding share-based compensation, was 5.4% compared with 8.5% in Q3 last year.

Our government grants were RMB1.1 million in this quarter, significantly lower than the RMB12.6 million in Q3 last year. The Company is eligible for additional government grant. We have applied for RMB10 million government grants but the payment from government was delayed. We will book government grants into our income statement only after we received in cash.

Our share-based compensation expense was RMB10.6 million, almost the same as what we had in the second quarter. Compared with Q3 last year, it is an increase of RMB4.5 million due to the new grants to employees during the quarter.

Our GAAP net income was RMB80 million and adjusted net income was RMB91 million, an increase of 25% year-over-year. Adjusted net income margin was 10.1%, 1 percentage point lower than Q3 last year. The 1% decrease was caused by a few factors. Our gross margin was 1.3% lower, but it was offset by higher operating leverage, which is 1.6%. We had lower government grants, which negatively affected our margins by net margin by 1.8%. If we exclude negative impact from government grants, our adjusted net income margin has actually improved against the last year.

Turning to our balance sheet and cash flow, we ended the quarter with RMB1.3 billion in cash, term deposit and short-term investments, an improvement of RMB300 million compared with last quarter. Our operating cash flow was around RMB300 million because of improved profitability, reduced accounts receivable, reduced inventory and increased accounts payable. Our capital expenditure was around RMB30 million, mainly related to new store openings in China and international markets, additional machinery and R&D spending. We had a healthy balance sheet and a very strong cash flow in the third quarter.

Now, let's turn to guidance. We expect fourth quarter revenues to be in the range of RMB565 million to RMB615 million, an increase of 5% to 15% year-over-year. We expect continued sales volume growth from both China and overseas market. The ASP will decrease year-over-year due to the change in product mix, similar to what we saw in the second and the third quarter. In addition, in Q4 last year, we had strong sales in accessories and spare parts to sharing operators from overseas market. We do not expect such high sales in this quarter. Throughout this year, our orders from sharing operators have reduced significantly as a result of COVID-19. The revenue and ASP for sharing operators are usually much higher than other orders because they order not only scooters but also manufactured spare parts.

In the fourth quarter, we will continue expanding our retail sales network in China. We expect to open more new stores at faster speeds than what we did in Q3. We are also working on the construction of our new manufacturing facilities in Changzhou, which will better prepare us for continued growth in 2021. Our overseas markets began to recover. We have a very strong order book for Q4, which is a good start for the market recovery.

With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Questions and Answers:

Operator

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We do have our first question from the line of Roger Duan. Please go ahead.

Roger Duan -- Needham & Company -- Analyst

Hi, management. Thank you for taking my question. I have three questions. First is, there are several international countries in which we have local dealerships have reentered in lockdown. Can management share the magnitude of negative impact we can expect from this international markets for 4Q and potentially first quarter 2021? And my second question is somewhat tied to the first one. How should we think about the ASP trend for 4Q and 2021, given international markets continue to experience pressure and the lower priced G series products continue to grow as a percentage of units sold? And my third question is with regard to the competition, can management share any insights on how we're thinking about the competitions with industry leaders? In the past, we have largely avoided competing directly with -- by offering products in different price categories, but it has somewhat changed after our launch of G series. What is our strategy to continue to take market share from these legacy scooter makers? Thank you.

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

All right, thank you. I think those are great questions. I'll try to cover -- this is Yan, so I'll try to cover question one and three, and I'll have Hardy to cover two on the -- basically on the ASP front. So I think on the international market, yes, I think our Q2 was our worst case where we actually see a decline of 50% [Phonetic] in Q2 because a lot of stores closed in April, May, all the stores are closed and then that gave little confident to our distributors in terms of ordering, because you have to keep in mind, the Q2 sales -- the quarterly sales we see on the international, usually there is like -- that's actually the time we ship the product. So our retail, it's basically like a quarter after. Now, what happened in Q2 is most of the stores closed and that forced our distributors to actually not order anything. That's when we started seeing huge decline.

But as in -- starting in May, stores started to open and then that gave distributors the confidence. So we were seeing uptick orders in Q3. That's why we say up to about 6% [Phonetic], but in reality, I think we should have seen more, because we have like 1,000 orders of scooters not able to out our door because there really a scarcity of international shipping with containers.

We are actually quite confident with our Q4 from order book point of view. Actually, a lot of orders are coming in. We expect a really healthy growth for Q4. Now, the issue is actually booking the international shipping containers. This international shipping -- actually, the containers at this point seems to be a scarce resource at a lot of ports in Europe, there's not enough people working on the ports. But from order perspective, we're actually seeing a huge order tick up in Q4 for the international market. I think this on the 2C side.

Now, a little bit on the 2B side. On the 2B side, we're not seeing a great year this year. By 2B, most of our orders are for the sharing operators. Sharing operators this year haven't really been doing well this year. With the COVID-19 situation, with people working from home, you're not seeing a pickup in the sharing operators as opposed to last year where we see a lot of sharing operators order of scooters both from United States and from Europe. We are seeing some this year, but they have been -- the order has been slow. So -- but on this one, we're hoping that with Q4 and a next bit in Q1 in 2021, where the sharing operators -- the orders from sharing operators will come in, because I think we're already seeing a recovery, like for example, Rebel from United States, they're already seeing a recovery in term of the ridership in United States. So I think for the 2B side, we're seeing probably a little bit in Q4, but most likely Q1 next year -- Q1, Q2 next year where we're going to see a quite a bit uptick on international markets.

Now, lastly is actually where we are -- as we put out on the press release, we are basically starting a presales marketing campaign for the Indonesia market. This will be sort of our official entry to the Indonesia market. The actual sales or the revenue won't -- we won't see revenue in this year because presales will happen in December but most order fulfillment will be in February and March-ish, but that will actually will add a healthy growth in Q1 2021 and potentially the entire 2021 would basically this -- mark as a first step to enter the Indonesia market or Southeast Asia -- the major country in Southeast Asia. So hopefully that addressed your question number one.

I think just lastly I think on question -- I'll address question number three, then I'll give to Hardy to add on question number 2. I think yes, with completions, we are -- with the Gova series, we are entering into the mid-end market segments or mid-to-high, I think it's more or less mid-to-high market segment, where I think the traditional players like -- other brands have presence in that market. But so far, we have seen that our Gova series has been able to achieve quite promising results. With entry price as RMB2,299, I think we have price -- product ranging from RMB2,299 up to RMB4,000. And then the Gova series in Q3 actually accounts for about like 37% of our sales and it basically demonstrates -- and we are able to compete with traditional brands in that market range. Used to be we're the only ones in high end, but now we come to mid-end with the mid-end product with -- still with good-looking design and also a great riding experience in terms of product experience, we are able to gain huge -- gain market share from the traditional players.

And now the issue is, we are not -- this really marks the beginning of this journey where if you look at Q3, we added about 200 stores. So, even with additional 200 stores add, our per store sales actually went up by 40%. This is particularly because with this new end product, the stores are able to use this product to gain market share from competitors. And this also allowed to open more stores in our stronger cities like Tier 1 cities, Tier 2 cities, where we are able to approach -- basically target mid-end market consumers in that cities as well as allowed us to open more stores in the lower-tier cities, where we used to have little presence or zero presence.

And so with that, I think that's where we actually have more companies looking at we're going to accelerate the store opening efforts. And in 200 store openings in one quarter has market all-time high, I think that's the historical all-time high and we'll continue to beat our record in terms of store openings.

Now, I'll pass to Hardy on to address the pricing part.

Hardy Peng Zhang -- Chief Financial Officer

Yes. So, the ASP, as you've already seen, the third quarter numbers, ASP in the third quarter was down by 19% year-over-year. In the fourth quarter, in short, we expect the ASP compared with Q4 last year will decline at a similar percentage. However, we encourage you to look at the ASP by product segments, so the ASP for China scooter sales, ASP for international market and the ASP for accessories and spare parts. If you break them down, they may tell you different story. So the ASP for China market, if you look at the third quarter, the price was down by around 18%. Of that 18%, around 13% was affected by higher percentage of sales coming from G0. Last year, there is no [Indecipherable]. This year, G0 takes around 27% of total sales volume. That's affected China ASP by around 13%. The remaining 5% came from the change in product mix from other models, especially, we have a lower sales in the M series products. If you look at this trend in China going forward, the G0 model will continue to be there. However, we expect in the other models, we will see some improvement. Therefore, ASP for the China market, if you compare year-over-year, will have some improvement in the fourth quarter.

Then if we look at ASP for international markets, if you look at the quarter -- year-over-year change, actually in the -- this quarter, our overall ASP for international market increased by 27%, significant improvement mainly because there's small sales volume, therefore, this big change in the ASP. For the international market, our ASP is relatively stable. It's always anywhere around RMB9,000 to RMB10,000. So for international market, we do see quite stable -- relatively stable pricing.

Then, lastly on the ASP for accessories and spare parts services, this one for the China market, the price was relatively stable. However, for the overseas market, it was significantly affected by how much spare parts we can sell to the sharing operators. As mentioned in the call, this year, we do not have as much as orders from sharing operators in Q3 and expected in Q4. Therefore, we do see some pressure for the ASP going down. However, for next year, with the recovery from the international market, we do begin to see some new orders coming in for both sharing operators and also -- for both shared scooters and also for the sharing spare parts. For this part, we do see pressure into Q4, but next year, we do see some potential for improvement.

So in short, I think if you compare year-over-year in the fourth quarter, ASP will decline a similar percentage, but if you compare quarter-to-quarter, we do expect the fourth quarter ASP will improve compared with third quarter. If you look at next year, and I believe the Q3 and Q4 ASP will be quite positive [Technical Issues] for next year. So, this should answer your second question.

Roger Duan -- Needham & Company -- Analyst

Thank you so much.

Operator

Thank you. We have our next question coming from the line of Alex Potter from Piper Sandler. Please go ahead.

Alexander Potter -- Piper Sandler -- Analyst

Great. Thank you, guys. I guess my first question is regarding capacity in Changzhou. You mentioned you're still in the process of expanding the capacity there. How -- I guess, what's the update? How much is left to spend in terms of capex, and what is your annual capacity now versus what it will be next year?

Hardy Peng Zhang -- Chief Financial Officer

Yes. Alex, let me address your question. Currently, our design capacity is around 1 million units and the new capacity -- the new factory has another 1 million capacity, and we plan to bring the new capacity on board sometime during the second quarter next year, because from the second quarter, the peak season starts. The total capex for this new capacity will be anywhere between RMB100 million to RMB120 million, including the land -- including land. We started construction in October and it's going to take us around six months -- five to six months to complete the total construction. I hope this answers your question.

Alexander Potter -- Piper Sandler -- Analyst

Okay. Yes, yes. Thanks very much. I was wondering if you could talk a little bit about the promotions and some of the price discounting you talked about also in the quarter, which was an impact on gross margin and ASP. What were the -- what products were you promoting specifically, what promotions were you running, and how long do you expect to keep doing that?

Hardy Peng Zhang -- Chief Financial Officer

Yes. I think a very good question. I think for Q3, we have a different format of promotion this year compared with both early years and also from last quarter. We gave cash coupon to our end customers, and they can use this cash coupon to deduct the sales price. Therefore, we spent around RMB8 million for this promotion with a direct deduction from our revenue and also our gross margin. And we have this kind of promotion mainly because with Q3 -- I mean, because of the COVID-19, people are more sensitive for price. Therefore, we believe we direct these costs to end consumers is better than we spend money in different ways. However, from Q4 this year, we have no such promotion plan. Therefore, we more attribute to this kind of promotion one -- kind of one-off promotion in the third quarter.

Alexander Potter -- Piper Sandler -- Analyst

Okay. And was this specific for any certain types of products or was it broad?

Hardy Peng Zhang -- Chief Financial Officer

No, it's broad. So basically, the customer -- end consumers go to the store and they pick the model they like, and then it goes to a lottery system. Everyone will win, they'll get something. Someone gets RMB100 cash coupon and a direct deduction from their sales price, someone can get [Indecipherable] cash coupon, which can be deducted directly from the sales price.

Alexander Potter -- Piper Sandler -- Analyst

Okay, interesting.

Hardy Peng Zhang -- Chief Financial Officer

[Speech Overlap]

Alexander Potter -- Piper Sandler -- Analyst

Okay. And then the last question from me is on the regulatory change. Can you remind us when exactly the new regulation will be enforced? And it sounds like you do think that you're getting some demand, because I know people are obviously going to be forced by the new regulation to replace their scooters. Do you think that people are doing that now? When do you expect the most of that demand to materialize?

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

Alex, it depends on city by city. First of all, the new regulations, basically, the temporary new regulation was announced in 2018. It started enforced on April 15, 2019, and different cities actually give different years. For example, city Beijing [Phonetic], they gave temporary license plates in 2018 and they said basically the temporary license plate can have a -- you can use the scooter for three years, which essentially means some of the scooters will be out of street by end of 2021 or I think early 2022, so which we won't expect to see, what do you call, a -- the replacement or uncompliant temporary license scooters starting -- actually starting next year. So, I think that also -- this also an indicator -- I think this is actually a driver for us to quickly expand -- add more stores in those cities -- in highly regulated cities. And the good thing for us is actually our market share and our presence is actually much, much stronger in the highly regulated cities, because most of the highly regulated cities are the Tier 1, Tier 2 cities, where in the Tier 3, Tier 4 cities, I think the regulation is still being enforced very -- some places, very loosely, where you won't see this uptake into model replacement yet.

Alexander Potter -- Piper Sandler -- Analyst

Okay, great. Thanks very much guys.

Operator

Thank you. We have our next question coming from the line of Bin Wang from Credit Suisse. Please go ahead.

Bin Wang -- Credit Suisse -- Analyst

Okay, thank you. I actually also have three ones. The first one is about a very top-down angle, about the overall market, because if you see the number from MIT in the number three quarter, the overall production in China increased by 61% year-over-year, and for you actually outperformed, yes. But if you really excluding the G series actually in the high end, it's only around 11% growth. So can I make sort of conclusion is that the high-end markets actually is much slowing down and [Indecipherable] is the key driver? Can I have that conclusion? Meanwhile, actually because the [Indecipherable] have some impact on the high-end and the low-end seem to don't care. So how to elaborate -- how to understand the different segments have quite a big different growth? That's number one.

And number two is about the guidance. Basically, can you explain why the [Indecipherable] number is so bad and why a huge rebound in the growth in the November and December? So, based on your guidance in the revenue, we cannot get a number, say, RMB150,000, net of cash. So it means that November and December have more than 50% growth. So can you elaborate whether my calculation is correct or not about November-December growth? If it was correct, why the [Indecipherable] have such a high growth after big dip in the October? Meanwhile, what's the guidance for next year 2021 based on the November and December momentum? That's the second one.

The third one is about new growth and new stores, because if you see in the past one year, you have been launched quite a few showcases called MRI and RRI, but doesn't see this new product bring any volume. So -- and number one, when will be next product -- volume product and why this new product didn't bring any volume? So how to think about your new product plans for the coming years? Meanwhile, what's your store guidance for next year or maybe end of this year and next year? Thank you.

Hardy Peng Zhang -- Chief Financial Officer

I think your first question is about the volume [Indecipherable]. I think if you look at the information published by the Minister of Information, Industry and Technology, their Q3 electric bicycle volume growth is anywhere between 40% to 50%, depending on which market you're talking about. Our growth definitely is much higher, we are growing [Indecipherable] about 70%. You're also correct that the G0 is a key driver for us to grow in China, and our high end, the U series has a grown around 11%.

I think one of the key reasons is after the new regulation was enforced, the new regulation says the top speed also gave some great winnings to the electric bicycles. Therefore, a lot of the function also, including [Indecipherable] other functions, we were not able to add to this electric bicycle. Because of that, definitely customers do not want to pay high price for the extremely high price models, and I think that's one of the key reasons why the high price models have lower growth rates compared with the right models with electrical bicycle categories.

And for your second question about the sales volume in October, November and December, I think that you have ranged roughly OK. I think in October, as already mentioned in our earnings release, it's part of this because of the operational disruption in our factory, because in September we used up to the -- used to have a full usage of our utilization of our factory because of the huge demand in the third quarter, therefore, we have to make some maintenance for our machineries, for our factories to make sure we have a safe environment to produce -- to prepare for November and December. Because of that, we did some of the sales volume shift to November and also December. This is one reason that's why you see the high volume in November and December.

The second reason, as we already mentioned, we continue to open new stores in China as we already see our trademark for us to open new stores as we launched G0 model, mid-end model. Also, we have opened them all -- we have accelerated our -- the opening process, which will also help us to increase our sales volume [Indecipherable] December. So that's significant few drivers for continued sales volume growth in November and December. For next year's guidance, we are making it in next year, so we won't mention it during this call.

In terms of new product launch, I think I will comment a few words and then I will leave to Yan to comment on next year's plan. For the new products, the TQi, RQi and also the EUB product we launched early this year, they are not -- they have not entered into mass production yet. Therefore, we are not the ones who drive our volume growth for the year. The reason is the TQi, RQi and EUB, they are [Indecipherable] for overseas markets, they're still priced also much higher. This year, because of the COVID-19, the overseas market for different reasons, we are not able to achieve high volume growth. Therefore, we postponed the mass production of some of the models for TQi, RQi and EUB. For next year, we do plan to launch additional models for the China market and the new products we will launch sometime during the second quarter. We believe some of the new models we launched in China will be key products and continue to drive our volume growth in China.

For the overseas market, what we are doing is we begin to use our Gova products to launch -- to enter into the Southeast Asia market, especially Indonesia market. Since December this year, we are going to launch Gova motorcycle model in Indonesia market, and we begin presales in the middle of December. We believe that will help us to drive the volume growth in the Southeast Asia market. So, these are some of the comments on the new product launch and how they can drive our volume growth in the next year.

Yeah, I think it answers to question [Indecipherable].

Bin Wang -- Credit Suisse -- Analyst

Okay, thank you.

Operator

Thank you. We have our next question from the line of Jing Chang from CICC. Please go ahead.

Jing Chang -- CICC -- Analyst

Thank you for taking my question. Basically I have two questions. The first one is about the store and channel expansion. So, what's our target next year for store expansions? And we see other competitors opening stores at higher speed. So I want to know what our major concerns or difficulties in terms of opening stores.

My second question is we are going to sell e-motorcycles in Indonesia. So can you share some details on our strategy in terms of production, so whether you export or build a factory there, and our channel and also our products compared to the local brand motorcycles, and also maybe a long term sales target. Thank you.

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

Thanks. Good questions. The first one, store openings, so as I mentioned earlier, in Q3, we were able to add about 200 stores, and so keep in mind, Q3 usually has been our busy sales quarter where our distributors are not willing to open stores, but this year actually with the effort, we see we actually have the capability to open 200 stores in one quarter, and now we're actually thinking about up that game in Q4, opening more stores than Q3 and we actually have the higher ambition for next year. So it depends -- I guess, it really depends on how we wrap up the Q4 this year, we will have more relative growth for next year. So I think that's basically on the store expansion.

And more importantly, if we look at the data here, it's actually we have the capability to open faster more, because even with Q3, with 200 store adds, our per store sales still went up by 40%. So that means there is actually a lot of room to open new stores at this point. So you can easily see we can actually get to 200 or 300, 400 stores in Q4, and we'll see how that -- it depends on how fast this construction can be finished and that will actually will set the guidance for next year as well on a quarterly basis.

Now, with the Indonesian market, I think it's -- yes, one, we will have to -- initially, it will be local -- it will be sort of CKD method, because Indonesia has a huge tariff, if you ship the entire product from China, I think the tariff is about 40%, so that will make the pricing not relevant. We want to actually enter the Indonesian market not -- we have a high-end product, but we want to enter sort of at the mass affordable product level, affordable price range product, so which actually will ensure we're not being viewed as the luxury product but more a mass daily commute product. So this will actually -- right now, we have a -- basically, manufacturing partner in Indonesia will help us to assemble the product, even with some of the parts being locally sourced and that will actually get to a lower tariff, initially about -- less than 8% to 10%, because it's mostly on parts. And that's probably will happen for next year. The latter half of next year, we'll see -- depends on how the sales volume goes, we might have to actually invest to build a factory in Indonesia. Hopefully that answers your questions.

Jing Chang -- CICC -- Analyst

Thank you, thank you. That's all for my questions.

Operator

[Operator Instructions] We have our next question coming from the line of Sebastian Van Hellen [Phonetic]. Please go ahead.

Sebastian Van Hellen -- Analyst

Hi, good evening. With the upcoming importance of the Gova series, to what extent do you intend to use aftersales to protect your margin? Thank you.

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

I think even with Gova series, I think the aftersales will be still conducted by our branded retail stores. So from using aftersales to protect margin, I think it's similar method as with other series. I think the question -- when we look at the actual margin of the Gova series, it's actually slightly less than our new series, but not significantly less. It's probably a couple of percentage less, because even though it's actually marked at lower prices, some -- because it's using a --the battery uses -- it's not LCM or NCA batteries, it's actually LFP batteries, which actually it's an alternative but it's actually cheaper than the LCM and NCA batteries. The lower end of Gova series doesn't have the smart IoT, the smart IoT is add-on. So for people who actually take a series at the base -- basic level, it doesn't have the smart IoT, so that actually help to reduce the cost and reduce the price set as well. But our app does support the product, where the users can actually -- with or without IoT, the users can download the app and they actually register the scooter on the app and be able to receive the same level of aftersales services on the app as well.

Sebastian Van Hellen -- Analyst

Okay, thank you.

Operator

Thank you. We have our next question from the line of Paul Gong from UBS. Please go ahead.

Paul Gong -- UBS -- Analyst

Yeah, hi. Thanks for taking my question. Actually I have only one question. You mentioned the tariff for the Indonesia market is 40%, so that's why you decide to build a factory over there. So in view of the [Indecipherable], how should we foresee the tariff going forward? And the local factory, is that still required in your view?

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

I think that's a great question. I think we are actually looking -- we saw the news as well, but we haven't really got sort of the detailed information yet. So if the actual detailed information, basically like motorcycle, electric motorcycles are actually covered by the tariff, then actually that will solve a lot of our issues as well. Let me put it this way, frankly, we'd rather have everything manufactured in China where we have really tight controls with our own factories, quality assurance, everything, and from management complexity, it's actually much easier to get manufactured in China versus shipping parts to Indonesia and having locally assembled and manufactured there. We understood why the tariff was there, because a lot of motorcycle brands are locally manufactured there, so there is actually a local protection there into that industry, but if that opened up where the tariff is being reduced significantly, actually -- that actually will change our manufacturing planning. That's one of the reasons right now we don't actually -- we decided not to, for example, buy a land or build our own factory in Indonesia, we're simply still watching out of the -- by using a more flexible, using a partner as assembly option at this point, because that gives us the flexibility, depending on how that whole trading thing goes.

Paul Gong -- UBS -- Analyst

Okay. Thank you very much. Very helpful, thank you.

Operator

Thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Li for closing remarks.

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

Right. So, thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Jason Yang -- Investor Relations Manager

Yan Li -- Chairman of Board of Directors, Chief Executive Officer, and Chief Operating Officer

Hardy Peng Zhang -- Chief Financial Officer

Roger Duan -- Needham & Company -- Analyst

Alexander Potter -- Piper Sandler -- Analyst

Bin Wang -- Credit Suisse -- Analyst

Jing Chang -- CICC -- Analyst

Sebastian Van Hellen -- Analyst

Paul Gong -- UBS -- Analyst

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