Nio: Through the "Storm", Can It Welcome the Dawn?

$NIO(NIO.US) released its Q2 2025 financial report before the U.S. stock market opened and after the Hong Kong stock market closed on September 2, 2025, Beijing time. Although the second-quarter performance was still below expectations, there has been marginal improvement. Let's take a closer look:

1. Car sales gross margin fell short of expectations this quarter: Nio had previously guided that with the launch of the revamped version of the 5566, the car sales price could recover from the inventory clearance trough of the first quarter. Additionally, the 5566 is equipped with the self-developed NX9031 chip, which reduces costs, allowing the car sales gross margin to rebound to around 12%-13% quarter-on-quarter. However, this quarter's car sales gross margin remained roughly flat with the previous quarter's clearance of old inventory at about 10.3%, with the core issue lying in the car sales price.

2. Car sales price continues to decline quarter-on-quarter: This quarter's car sales price fell by 12,000 yuan quarter-on-quarter to 224,000 yuan, lower than the market expectation of 241,000 yuan. The price reduction in the second quarter was even greater than during the first quarter's clearance of old inventory, reflecting Nio's continued focus on price cuts, with sales volume remaining the top priority.

3. Third-quarter sales guidance is still acceptable: The third-quarter sales guidance is 87,000-91,000 units. With the delivery of the Le Tao L90 already underway, the implied September sales are 35,000-39,000 units, an increase of 4,000-8,000 units from July's 31,000 units. Dolphin Research believes this sales guidance is still acceptable, especially since nearly 10,000 units of the Le Tao L90 were delivered in August, indicating further growth potential.

4. However, revenue guidance is relatively average, mainly due to car sales prices being below expectations: The third-quarter revenue guidance is 21.8-22.9 billion yuan. Assuming other revenue for the third quarter is 2.8 billion yuan (the same as this quarter), the car sales price would need to continue to decline by 4,000 yuan quarter-on-quarter to 220,000 yuan, significantly below the market expectation of 242,000 yuan.

5. Cost reduction and efficiency improvement have begun to reflect in the three expense areas: Selling and administrative expenses improved by 440 million yuan quarter-on-quarter to 3.96 billion yuan, better than the expected 4.2 billion yuan. This is mainly due to the merger of Le Tao and Nio's channel, as well as the organizational restructuring in the second quarter, which resulted in approximately 5,000 layoffs, primarily in the sales and service teams.

Research and development expenses also improved by 170 million yuan quarter-on-quarter to around 3 billion yuan this quarter, with further reductions expected in the second half of the year (Nio previously guided that R&D expenses would fall to 2-2.5 billion yuan in Q4 2025).

6. Loss reduction is still ongoing: Operating losses improved by 1.5 billion yuan quarter-on-quarter to 4.9 billion yuan, mainly due to a significant increase in other business gross margins, driving overall gross margin improvement, and the reduction in the three expenses. The operating loss rate narrowed from -53.3% to -26% this quarter.

Dolphin Research's View:

Overall, Nio's second-quarter financial report itself did not meet expectations, with the core issue still lying in the car sales price. The continued price cuts this quarter led to a car sales gross margin below company guidance, and the implied price in the third-quarter guidance is also significantly below market expectations, reflecting that sales volume remains Nio's primary pursuit. Although this financial report fell short of expectations, it is expected to lead to a stock price adjustment, but the main market focus will soon return to the ES8 model.

However, looking ahead to the second half of the year, Nio's marginal upward trend remains unchanged:

① Sales are expected to continue to improve marginally in the second half: The Le Tao L90 has already become a hit, and the ES8 is also receiving positive feedback from current order volumes. Especially with Nio's current business strategy still prioritizing sales volume, the expected pre-sale price of the ES8 will continue to be lowered to promote order conversion.

② The trend of narrowing net losses remains unchanged: The ES8 model has a higher gross margin, and if it can become a hit, it will continue to accelerate Nio's significant loss reduction. Nio's financial report also mentioned that the gross margin targets for the Le Tao L90 and ES8 could reach 20% in Q4 this year, with an overall vehicle gross margin target of 16%-17%.

Currently, with Dolphin Research's expectation of Nio's 2025 sales reaching 320,000 units, the corresponding P/S multiple for Nio in 2025 is 1.1-1.2 times, which is still not expensive. If the ES8 can successfully become a hit (achieving monthly sales of 10,000 units or more), and with the high margin of the ES8 accelerating significant loss reduction in the fourth quarter, Dolphin Research expects Nio's target market value to be 130-150 billion yuan, with an upward potential of over 30% compared to the current stock price.

Detailed Interpretation:

I. Continued price cuts in the second quarter, car sales gross margin below expectations

As the most critical indicator during each earnings release, let's first look at Nio's car sales profitability:

Nio had previously guided that with the launch of the revamped version of the 5566, the car sales price could recover from the inventory clearance trough of the first quarter. Additionally, the 5566 is equipped with the self-developed NX9031 chip, which reduces costs, allowing the car sales gross margin to rebound to around 12%-13% quarter-on-quarter. However, this quarter's car sales gross margin remained roughly flat with the previous quarter's clearance of old inventory at about 10.3%, with the core issue lying in the car sales price. Specifically:

1) Car price: Continued price cuts in the second quarter, car sales price fell by 12,000 yuan quarter-on-quarter!

① Continued price cuts in the second quarter, leading to a decline in car sales price

This quarter, Nio's car sales price was 224,000 yuan, compared to the previous quarter's clearance of old inventory, the car sales price fell by 12,000 yuan quarter-on-quarter. The price reduction in the second quarter was even greater than during the first quarter's clearance of old inventory, reflecting Nio's continued focus on price cuts!

Behind this is the generally low demand for the revamped 5566 (using the NT2.0 platform instead of NT3.0), and the declining competitiveness of the Le Tao L60. However, for Nio, which is in a critical survival period, sales volume remains the top priority.

② Increased proportion of low-priced Firefly also dragged down car sales price

In the second quarter, the low-priced small car Firefly began delivery, with its proportion in the model structure increasing by 11 percentage points quarter-on-quarter, which also somewhat dragged down the car sales price.

2) Car cost: Self-developed chip + scale effect reduces cost, car cost decreased by 11,000 yuan

In the second quarter, Nio's car cost was 200,000 yuan, a decrease of 11,000 yuan quarter-on-quarter, mainly due to the revamped 5566 using the self-developed "NX9031" chip to replace the NVIDIA Orin-X chip, reducing the cost per car by 10,000 yuan, combined with a 71% quarter-on-quarter increase in sales, releasing some scale effects.

3) Car gross margin: Continued decline in car sales price led to car sales gross margin below expectations in the second quarter

In the second quarter, Nio's car gross margin was 23,000 yuan, and the car sales gross margin was only 10.3%, below the market expectation of 12.9%, mainly due to the continued decline in car sales price this quarter.

II. Third-quarter sales guidance is still acceptable, but revenue guidance implies continued decline in car sales price

1) Third-quarter sales guidance is still acceptable, with an increase of 4,000-8,000 units in September

In the most critical third-quarter guidance, the sales guidance is 87,000-91,000 units. With the delivery of the Le Tao L90 already underway, the implied September sales are 35,000-39,000 units, an increase of 4,000-8,000 units from July's 31,000 units. Dolphin Research believes this sales guidance is still acceptable, especially since nearly 10,000 units of the Le Tao L90 were delivered in August, indicating further growth potential.

2) However, revenue guidance is relatively average, mainly due to car sales prices being below expectations

The third-quarter revenue guidance is 21.8-22.9 billion yuan. Assuming other revenue for the third quarter is 2.8 billion yuan (the same as this quarter), the car sales price would need to continue to decline by 4,000 yuan quarter-on-quarter to 220,000 yuan, significantly below the market expectation of 242,000 yuan.

Due to Nio's announcement at the end of August that all models would be equipped with a 100kWh long-range battery pack while maintaining the starting price, and the low-priced launch of the Le Tao L90, the market's main concern is also the car sales gross margin and loss reduction issue. Therefore, the most critical aspect is to see how the company guides the third-quarter car sales gross margin in the financial report meeting, and whether it still insists on the fourth-quarter breakeven target.

Looking at Nio's overall situation:

III. Second-quarter revenue and gross margin below expectations, but other business performed well

Nio's overall revenue in the second quarter was 19 billion yuan, below the market expectation of 19.7 billion yuan. The core reason for being below expectations was still the quarter-on-quarter decline in car sales price, but other business performed well, increasing by 770 million yuan quarter-on-quarter to 2.87 billion yuan, exceeding market expectations by 600 million yuan, mainly possibly due to a significant increase in technical service revenue confirmed this quarter (needs explanation in the financial report call), as well as increased energy services and component sales.

In terms of gross margin, Nio's gross margin was 10% this quarter, below the market expectation of 11%, still due to the car business gross margin performance being below expectations. However, other business significantly reduced losses this quarter, with gross margin improving by 13 percentage points quarter-on-quarter from -4.5% to 8.2%. Dolphin Research believes this may be due to the increase in high-margin technical service revenue this quarter.

IV. Finally seeing signs of cost control on the expenditure side

Nio has always been "lavish" in spending to build a luxury car brand, but facing tight cash flow in the second quarter, Nio finally showed clear signs of contraction in the three expense areas:

1) Sales and administration: Significant contraction, down 440 million yuan quarter-on-quarter this quarter

Previously, Nio's luxurious Nio house layout, along with a very comprehensive service system and personnel configuration, and the separate channel layout of Le Tao and Nio's main brand, led to consistently high selling and administrative expenses.

This quarter finally saw signs of cost control in selling and administrative expenses, which fell by 440 million yuan quarter-on-quarter to 3.96 billion yuan, below the market expectation of 4.16 billion yuan. Excluding SBC and one-time layoff expenses, Non-GAAP selling and administrative expenses also fell by 530 million yuan quarter-on-quarter to 3.7 billion yuan.

Dolphin Research believes this is mainly due to:

① Le Tao, which was previously laid out separately, has been integrated into Nio's main brand, leading to cost reductions from shared channels;

② Nio laid off approximately 5,000 people in the second quarter's organizational restructuring, with the sales and service teams likely being the hardest hit.

2) R&D: R&D expenses fell by 170 million yuan quarter-on-quarter, also showing contraction

This quarter, R&D expenses also improved by 170 million yuan quarter-on-quarter to around 3 billion yuan, mainly due to layoffs and high previous development costs (especially the iteration of the NT3.0 platform). Further reductions in this area are expected in the second half of the year (Nio previously guided that R&D expenses would fall to 2-2.5 billion yuan in Q4 2025).

In terms of operating profit, operating losses improved by 1.5 billion yuan quarter-on-quarter to 4.9 billion yuan, mainly due to a significant increase in other business gross margins, driving overall gross margin improvement, and the reduction in the three expenses. The operating loss rate narrowed from -53.3% to -26% this quarter.

In terms of net profit, the net profit attributable to the parent company was -5.1 billion yuan this quarter, with a quarter-on-quarter loss reduction of 1.75 billion yuan, but the adjusted net profit attributable to the parent company improved by 2.2 billion yuan quarter-on-quarter to -4.1 billion yuan.

For more in-depth research and tracking commentary on Nio by Dolphin Research, click:

Financial Report:

November 20, 2024, Financial Report Interpretation "Disappointed Again! Le Tao Can't Support the 'Fractured' Nio"

September 5, 2024, Financial Report Interpretation "Nio: Rarely Didn't Collapse, Can Le Tao Support the Future?"

September 6, 2024, Conference Call Minutes "Expected Le Tao L60 December Delivery Volume to Exceed 10,000, Q1 Vehicle Gross Margin to Reach 15%"

June 7, 2024, Financial Report Interpretation "Sales Return, Stock Price Still Falls, What Can Nio Rely on to Save Itself?"

June 7, 2024, Conference Call Minutes "Expected Q1 Car Sales Gross Margin to Return to Double Digits"

March 15, 2024, Financial Report Interpretation "Another Huge Loss! Can Nio Only Rely on Middle Eastern Investors to Survive?"

March 6, 2024, Conference Call Minutes "Still Maintaining a 15%-18% Gross Margin for the Year, Hoping Monthly Deliveries Quickly Return to 20,000 Units"

Research

June 13, 2023, Nio Hotspot "Nio: Finally Doing Subtraction"

December 21, 2021, Nio NIO DAY Research "'Blockbuster' ET5 Debuts, Nio Wants to Reignite the 'Future'"

In-depth

September 25, 2024, In-depth "Under the Luxury Exterior, There Are Still 'Lice', Is Nio Still Worth Loving?"

Risk Disclosure and Statement of This Article:Dolphin Research Disclaimer and General Disclosure