Nio's Substantial Growth Shows Its Aggressive Expansion Is On Track

Last week, Nio Inc NIO reported its second quarter results as it continues its aggressive expansion. But despite both quarterly and annual improvements, Nio still posted a loss and missed Wall Street revenue estimates. CEO William Bin Li proudly noted that Nio achieved a record-breaking delivery of 57,373 premium smart EVs, securing over 40% of the market share in the premium battery EV segment that is also facing intensified competition.

One of its rivals, Tesla Inc TSLA reported soaring sales in China in August. More precisely, China Passenger Car Association reported that Tesla hit 2024-year highs in domestic sales in China last month, rising 37% from July. With China sales seemingly roaring back in August, Tesla is also a reflection of rebounding demand in China’s competitive EV market. But in August, Tesla still only held 8.3% of China’s EV market.

Second quarter highlights

For the quarter ended on June 30th, Nio had already revealed its deliveries grew almost 144% on a YoY basis and consequently, revenue grew 98.9% YoY to $2.40 billion but were below Wall Street estimates that averaged $2.44 billion due to the damage inflicted by lower average selling prices that were the result of changes in vehicle product mix and user rights adjustments that were made since last June.  But gross margin expanded to 9.7%, improving significantly from 1% posted for 2023’s comparable quarter as Nio finally ramped up its production and deliveries, with vehicle margin almost doubling from last year’s comparable quarter to 12.2%. 

However, despite strong growth, Nio still ended up with an adjusted loss of 2.21 yuan or $0.30 per share. 

A strong Q3 outlook

Nio expects to deliver 61,000 to 63,000 vehicles during the current quarter, which represents a YoY rise of 10.0% to 13.7%. It guided for revenue in the range between $2.63 and 2.70 billion.  

Nio continues to accelerate.

During the second quarter, Nio showed a significant more than double increase in revenues and vehicle deliveries, along with a noteworthy margin rise per vehicle. For the fourth quarter, Nio’s management set a target of 15% for the vehicle margin. Operating expenses remain problematic as loss from operations narrowed only 3% despite a 76.1% sequential rise in revenues. It’s no secret that building out the sales infrastructure is an expensive endeavor, but Nio promised more progress is to come later this year. On Friday, JP Morgan shifted its stance and upgraded the stock, seeing a financial turnaround for Nio upon the latest results. In addition, things are bound to get even more interested when Nio launches its new lower-priced brand Onvo whose first EV is set to challenge Tesla Model Y or more precisely, Tesla’s best-selling EV.

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