Nio Provides A Glimmer Of Hope With Margin Improvements And Optimistic EV Delivery Outlook

On Thursday, Nio Inc NIO issued its unaudited first fiscal quarter results that showed its financials were hurt by promotional activity and the price war Tesla Inc TSLA ignited, as loss widened despite improved margins. But Nio managed to lift the spirits with a more optimistic second quarter outlook. Moreover, it recorded YoY growth in May 2024 deliveries, along with Li Auto LI and XPeng Inc XPEV, but Nio was the only with triple-digit percentage gains, while Tesla made it to the headlines by recalling as many as 125,000 EVs.

First Fiscal Quarter

For the quarter ended on March 31st, revenue fell almost 12% YoY to $1.372 billion and net loss widened 9.4% YoY to $718 million net loss, reporting a loss of 33 cents a share, both of which reflect the ongoing pressure on profitability within the competitive EV market shaped by a bruising price war. Nio reported it delivered 30,053 EVs, leaving it far behind Li Auto but ahead of XPeng.

On a brighter note, vehicle margin improved from 5.1% reported for last year’s comparable quarter, as it rose to 9.2% due to lowered material cost per unit. Gross margin also substantially improved, rising from 1.5% to 4.9%, reflecting the success of Nio’s efforts to manage its costs more effectively and manage its manufacturing process.

Despite the challenges, Nio’s cash reserves stood at $6.3 billion on March 31st. 

A More Optimistic Q2 Outlook

While Li Auto gave a tepid guidance for the current quarter that fell short of Wall Street estimates, Nio guided for current quarter deliveries between 54,000 and 56,000 EVs, translating to an increase of 130% to 138% on a YoY basis and a sequential rise of 80%, easily surpassing Deutsche Bank's expectations for 47,500. Nio also expects EV sales to more than double on a YoY basis, guiding for revenue between $2.297 billion and $2.373 billion, also surpassing the analyst consensus of $2.064 billion.

After a weak start of 2024, Nio’s deliveries improved in April and May. Considering that Nio reported April deliveries of 15,620 and a May's record 20,544 deliveries, implying June deliveries to be in the range from 17,836 to 19,836vehicles. May’s 20,544 deliveries mark an impressive 233.8% YoY jump. Meanwhile, Li Auto delivered 35,020 vehicles, translating to a 23.8% YoY rise, and XPeng delivered 10,146 EVs which is a 35% YoY increase. 

The nine-year-old company is yet to turn profitable.

Analyst Aaron Ho of CFRA Research found Nio’s Q2 delivery guidance to be weaker than expected, expecting the EV maker to report a loss in in 2024-2025 and warning of increased R&D spending due the company’s commitment to its battery-swapping strategy, autonomous driving, the upcoming Onvo branded mass-market cars, along with costs resulting from its European expansion, all of which threaten to further burden short-term profitability.  

Like the EV pioneer Tesla, Nio is facing a growing competition besides the leading BYD Company Limited BYDDY, Li Auto and XPeng, with new players like Xiaomi and Huawei entering the market. Like many of its peers, Nio is broadening its customer base in response and boosting sales with more affordable EVs, while also trimming its workforce and deferring long-term projects that won’t result in financial gain within the next three years. Nio is also set to launch its new Nio Onvo L60, which is seen as a more affordable rival of Tesla Model Y, marking Nio’s push into the mass market in China, after traditionally targeting the higher-end EV segment.

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