Nio: Empty Promises Won't Work; Survival Holds the Key to Its Future​

$NIO(NIO.US) $NIO-SW(09866.HK) On June 3, 2025, before the U.S. market opened and after the Hong Kong market closed, Nio released its Q1 2025 earnings report. Although the Q1 performance was poor, the Q2 guidance shows marginal improvement. Let’s take a detailed look:

1. Automotive revenue missed market expectations again, but it was within Dolphin Research’s expectations: Revenue per unit this quarter was 236,000 yuan, down 4,000 yuan sequentially. Although it hit a new historical low and missed the market expectation of 241,000 yuan, the decline can be attributed to increased discounts on older inventory and the negative impact of the L6’s higher proportion in the product mix.

2. Gross margin from vehicle sales fell back to around 10%, consistent with prior market communication: Nio had previously communicated that the gross margin for vehicle sales this quarter would be around 10% (after the Q4 2024 earnings call). The sequential decline was mainly due to lower unit prices and a 42% drop in sales, leading to higher per-unit depreciation costs.

3. The operating profit miss was mainly due to unadjusted SG&A expenses, but improvements will be seen in Q2: The operating loss this quarter reached a near-historic high of -6.4 billion yuan, missing market expectations by 700 million yuan. Of this, 600 million was due to SG&A expenses not being cut in time. Management has stated that Q2 will see significant adjustments reflected in the financials.

4. Q2 sales guidance is strong, giving Nio hope for survival: Q2 sales guidance is 72,000-75,000 units, implying June sales of 25,000-28,000 units (April and May sales were around 23,000 units). The market had expected June sales to be flat with May, but the guidance suggests further growth. Sales are Nio’s lifeline.

5. Q2 revenue guidance implies a sequential rebound in unit prices, though below expectations. For Nio in its critical situation, sales volume is more important: Q2 revenue guidance implies a unit price of 239,000 yuan, up 3,000 yuan sequentially, driven by the launch of the new 5566 models with lower discounts. The miss versus the market expectation of 244,000 yuan may be due to the lower-priced Firefly models ramping up in Q2. But again, sales volume is Nio’s lifeline.

6. Cash on hand dropped sharply this quarter! Nio’s cash on hand this quarter was only 26 billion yuan, down 15.9 billion yuan sequentially, a faster decline than Dolphin Research expected.

Dolphin Research analyzed the main reasons for the decline: cash losses accounted for -4 billion yuan, while 4.7 billion yuan was used to repay interest-bearing liabilities. Additionally, the drop in sales led to a 3 billion yuan reduction in accounts payable.

7. Net cash is critically low, leaving Nio with less than a year: Net cash this quarter was only 9.3 billion yuan, down 12 billion yuan sequentially. While Q2 will see a 4 billion HKD financing and improved cash flow from higher sales and reduced losses, Nio has less than a year left.

Dolphin Research’s view:

Overall, the poor Q1 performance isn’t the main issue. The focus is on Q2’s marginal improvement and Nio’s cash situation.

First, Q2 sales and revenue guidance show strong signs of marginal improvement:

① Q2 sales guidance exceeds expectations, implying June sales will continue to rise sequentially: Q2 guidance of 72,000-75,000 units represents a 71%-78% sequential increase. This implies June sales of 25,000-28,000 units, suggesting decent orders for the 5566 refresh. Sales are Nio’s lifeline.

Higher sales will also allow Nio to defer more supplier payments, reducing per-unit depreciation costs in Q2.

Thus, the improvement in cash on hand and gross margins in Q2 is highly certain.

② The 5566 refresh uses the Nvidia Orin-X chip, reducing costs by 10,000 yuan per vehicle and adding 4 percentage points to gross margins.

③ Layoffs are underway, and reforms will show in Q2’s financials: SG&A expenses are expected to adjust significantly.

Nio has implemented several reforms to survive:

a) Layoffs: Nio cut about 5,000 jobs in Q2 2025 and may cut more in H2. Dolphin Research believes the hardest-hit areas are service and sales, which had 25,000 employees at the end of 2024—far more than Li Auto’s 15,000, despite Nio’s sales being less than half of Li Auto’s.

b) Merging Ledao and Nio sales channels: Ledao’s sales system will merge into Nio’s, reducing overall sales expenses (e.g., rental costs).

c) Implementing CBU mechanism: Splitting into independent business units with clear ROI metrics to reduce SG&A expenses.

d) Supply chain reforms: Production-sales coordination + cost control, though Nio lags behind XPeng in this area.

Long-term, Dolphin Research does not see Nio as a safe investment:

① Cash on hand won’t last a year, and Nio’s adjustments are too slow, especially with the weak 5566 refresh:

The 5566 refresh focused mainly on cost-cutting by replacing the self-developed "NX9031" chip, with no upgrades to range—only 240 free battery swap vouchers. Compared to peers like XPeng, Xiaomi, and ZEEKR, Nio’s models lag in range, powertrain, comfort, and handling. With services being cut, brand premium alone may not suffice.

② This year’s pipeline lacks volume-driving models:

Nio’s only hope for volume is Ledao, but its two large EVs are priced higher than the L60. Nio’s supply chain control shows little improvement, making it hard to believe the L90+L80 can save Nio.

The Firefly, priced at 120,000-130,000 yuan, targets a niche market, missing a chance for mass appeal (like XPeng’s Mona M03).

③ With critically low cash, Nio has no room for error after Q2:

Cash on hand is only 26 billion yuan, net cash 9.3 billion. While Q2 will see a 4 billion HKD financing and improved cash flow, Nio has less than a year without new funding. After Q2’s certainty, sales stability is uncertain, especially with the weak 5566 refresh and limited pricing flexibility. Ledao’s L90+L80 aren’t volume drivers, and Nio has no room for error.

If sales decline again in Q3 and Ledao fails, Nio risks a liquidity crisis without external funding.

Dolphin Research views Nio as an unsafe investment (poor balance sheet metrics) but sees short-term opportunities if the stock pulls back after Q2’s strong performance. Avoid chasing rallies (max 10%-20%), as Q3-Q4 are highly uncertain.

PS: Dolphin Research previously detailed Nio’s issues in Is Nio Still Worth Loving Under Its Luxury Facade? Interested investors can refer to that report.

....To be continued