To The Moon

Earnings Review | NIO, in a Do-or-Die Effort, Strives for the Last Ticket to Achieve Quarterly Profitability

$NIO Inc.(NIO)$   's financial report today shows mixed results. Initial success has been seen in controlling its SG&A expenses, but there is a noticeable decline in the vehicle sales gross margin and the average selling price per vehicle.

NIO has always been among the Chinese new automakers with the most severe financial conditions and profitability challenges. Despite NIO's emphasis on "long-termism," investors' patience is not without limits.

Meanwhile, other new automakers have started to get back on track. XPeng Motors spent two years reorganizing: restructuring the supply department, dismissing 10 senior executives, and forming an alliance with Volkswagen to strictly control costs. These changes have resulted in several consecutive months of sales exceeding 30,000 units, and its financial performance is increasingly clear.

Core Financial Indicators

Vehicle sales reached RMB 16,136.1 million (US$ 2,252.5 million) in the second quarter of 2025, marking a 2.9% increase from the same quarter in 2024 and a substantial 62.3% rise from the first quarter of 2025.

Total revenues stood at RMB 19,008.7 million (US$ 2,653.5 million) for the second quarter of 2025, showing a growth of 9.0% year-over-year and 57.9% compared to the first quarter of 2025.

Gross profit for the second quarter of 2025 was RMB 1,897.5 million (US$ 264.9 million), reflecting a 12.4% increase from the second quarter of 2024 and more than doubling with a 106.3% increase from the first quarter of 2025.

The net loss was RMB 4,994.8 million (US$ 697.2 million), a slight decrease of 1.0% from the second quarter of 2024 and a reduction of 26.0% from the first quarter of 2025. After adjusting for share-based compensation expenses and organizational optimization charges, the non-GAAP adjusted net loss was RMB 4,126.7 million (US$ 576.1 million), down 9.0% from the second quarter of 2024 and 34.3% from the first quarter of 2025.

The company's cash reserves totaled RMB 27.2 billion (US$ 3.8 billion), higher than the RMB 26 billion recorded in the first quarter.

Key Highlights and Concerns

Positive signals in the financial report

NIO's overall gross margin has improved. The company's overall gross margin was 10.0% in the second quarter of 2025, compared with 9.7% in the second quarter of 2024 and 7.6% in the first quarter of 2025. Considering its declining vehicle gross margin, the result indicates that the improvement in the overall gross margin is related to its service revenue.

This quarter's SG&A expense reduction met expectations. For SG&A, the company's guidance from the previous quarter was to reduce it sequentially in Q2, and to account for less than 10% of revenue under non-GAAP measures by Q4. Currently, Q2 SG&A has indeed decreased by 9.9% sequentially. Public information shows that after organizational adjustments in the second quarter, NIO laid off 5,000 employees, which the market believes mostly pertains to its bloated services and sales departments.

During the Q1 earnings call, management guided a 15% year-over-year reduction in R&D expenses for Q2, termination of low-return projects, and optimization of investment efficiency. Actual R&D expenses in Q2 decreased by 6.6% year-over-year.

Areas below expectations

Vehicle sales revenue was 16.14 billion yuan, a year-over-year increase of only 2.9%, which is significantly lower than the 25.6% increase in deliveries, directly reflecting the impact of product mix adjustments on the average selling price. Management also acknowledged in the financial report that the vehicle gross margin decreased from 12.2% in the same period last year to 10.3%, "mainly due to changes in the product mix."

Earnings Guidance

NIO has provided a relatively optimistic sales guidance for the third quarter: it expects to deliver between 87,000 to 91,000 vehicles, a year-on-year increase of 40.7% to 47.1%; total revenue is projected to be between 21.8 to 22.9 billion yuan, a year-on-year increase of 16.8% to 22.5%. CEO William Li stated, "The strong market response to the ONVO L90 and the all-new ES8 has bolstered our overall sales momentum."

This guidance still implies an expected decline in revenue per vehicle. Additionally, the realization of this guidance largely depends on the market performance of new products. The all-new ES8 is expected to start deliveries only at the end of September, and there is still uncertainty regarding the ramp-up speed and market acceptance of the new product.

Summary

Overall, the earnings report was mixed. The stock price fell by more than 15% once after the earnings were released, but then rebounded significantly, and is currently up in pre-market trading.

~Valuation:

Nio's price-to-sales ratio is 1.51, which is at the 29th percentile over the past five years; in contrast, Tesla's price-to-sales ratio is 11.61. This reflects the market's skepticism about Nio's profitability.

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