Nio Narrowed Its Losses But Fell Short On Revenue And Guidance

On Tuesday, Nio Inc NIO reported a narrower-than-expected third quarter loss. Like other automakers in China, Nio was pressured to slash prices, thinning its margins, in response to the price war that Tesla Inc TSLA ignited at the beginning of the year.

Nio’s Third Quarter Highlights

Nio reported revenue below estimates of 19.4 billion yuan as sales amounted to 19.1 billion Chinese yuan which is about $2.7 billion. On the bright side, revenue rose 47% YoY. Unfortunately, Nio still made a loss of 2.67 yuan per share, which is better than the loss of 2.91 yuan that analysts expected. Nio also succeeded to narrow down its loss from the second quarter when it amounted to 3.7 yuan, which is an improvement of 24.8%. But, Nio still reported a higher loss compared to 2022’s comparable quarter.

Gross margin amounted to 8%, falling from last year’s comparable quarter when it amounted to 13.3%. Nio’s vehicle margin amounted to 11%.

Fourth Quarter Guidance

For the December quarter, Nio guided for revenue in the range between 16.1 billion yuan and 16.7 billion yuan, which would be a YoY growth in the range between 0.1% and 4.0%. This guidance is short of 22.4 billion yuan that analysts expected. As deliveries, Nio is expecting to deliver between 47,000 and 49,000 vehicles during the last quarter of the year, which would represent a YoY increase of 17.3% to 22.3%. With lower costs of materials and components, along with an improved manufacturing capacity, CFO Steven Wei Feng expects the vehicle margin to rise to 15% in the fourth quarter. As for 2024, Nio is targeting the vehicle margin in the range between 15% and 18%. 

Nio Is Focused On Becoming More Efficient 

Since its story began in 2014, Nio is still finding its way towards profitability. Its strategy includes a better spending discipline. Nio CEO William Li reiterated that the automaker has identified ways to optimize its operations by lowering costs and boosting efficiency. But due to fierce competition, by Tesla and BYD who run the EV show in China, as well as other startups like XPeng Inc XPEV and Li Auto Inc LI. Nio had to trim its workforce by 10% last month. Perhaps an even bigger concern is that Chinese consumers are still cautious with their spending and unlike BYD who is challenging Tesla with affordable EVs, Nio aims to appeal to the premium EV customers. Li announced that Nio will be deferring or even terminating projects that don’t bring in financial rewards over the coming three years as the EV maker gets ready for an even more intensive competition. Even Tesla, as the EV king, has its hands full with BYD seems determined to even seize its BEV crown in the current quarter, after already dethroning Tesla in EV sales last year. BYD also has significantly better gross margins than Tesla. Moreover, Tesla reported its worst earnings in two years with its latest third quarter report, showing even the one who started the price war isn’t having a good time. But Nio stock has been struggling all year long, being down almost 25% year-to-date.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.