NIO's profitability has come under scrutiny. At a product launch event in Hangzhou on April 9, NIO-SW (09866.HK) founder, chairman, and CEO William Li spent over two hours showcasing the flagship SUV ES9, described as the culmination of the company’s 11-year development. However, the capital market did not respond favorably: the next day, NIO's U.S. shares fell 4.86%, while its Hong Kong-listed shares dropped 5.96%.
Li described the stock fluctuation as normal. In reality, markets are less interested in NIO’s vision and more focused on when the company will achieve sustainable profitability.
One day after the ES9 launch, on the evening of April 10, NIO disclosed its 2025 annual results. The company reported revenue of 87.488 billion yuan, up 33.1% year-on-year. Net loss attributable to shareholders narrowed to 15.571 billion yuan from 22.658 billion yuan a year earlier.
Investors reacted positively on April 13, with NIO’s share price rising 7.47% to close at HK$52.4 per share. Its market capitalization reached HK$129.8 billion (approximately 113.8 billion yuan).
Profitability Driven by "Number Crunching"
Although NIO remained unprofitable for the full year, its fourth-quarter 2025 results marked a milestone: a net profit of 283 million yuan, representing the company’s first quarterly profit since going public.
Deliveries in the fourth quarter reached 124,800 vehicles, up 71.7% year-on-year. Quarterly revenue was 34.65 billion yuan, accounting for 40% of full-year revenue and serving as a key driver of annual performance.
The main contributor to profitability was the high-margin model—the new ES8. With a starting price under 300,000 yuan under the BaaS (Battery as a Service) scheme, the ES8 led the large SUV segment priced above 400,000 yuan for three consecutive months. Monthly deliveries once exceeded 22,000 units, with a gross margin nearing 25%. In the fourth quarter, ES8 deliveries accounted for approximately 39,700 units, nearly 30% of total deliveries, making it NIO’s true "profit driver."
However, the composition of this profit is less impressive. Specifically, NIO’s R&D expenses in the fourth quarter fell 44.3% year-on-year to 2.026 billion yuan. Sales and administrative expenses dropped 27.5% to 3.537 billion yuan. Combined, these two key expense categories decreased by over 2 billion yuan compared to the same period last year, reflecting aggressive cost-cutting measures.
NIO CFO Steven Feng stated in an earnings call that both "cost reduction" and "revenue growth" contributed to the profit breakthrough. Li also acknowledged during the communication that the company has "become more capable" through transformation, shifting from heavy investment to a team-wide focus on cost efficiency and deriving "pleasure from number crunching."
Market observers have raised questions about the sustainability of profit achieved primarily through cost-cutting. Shen Miao, director of Chanson & Co., noted that while NIO is a new energy vehicle maker, high R&D and sales expenditures are not necessarily perpetual. Once products enter a stable phase, such expenses may decline unless intensified competition necessitates new models or core technologies.
Zhang Xiang, Secretary-General of the International Association of Intelligent Transport Technology, suggested that NIO’s profitability through cost reduction and efficiency improvements is sustainable. By developing a universal vehicle platform that allows new models to share resources, the company has driven revenue growth. Its multi-brand strategy, including brands like Firefly and Ledao, maximizes platform and component sharing, reducing per-unit costs. Additionally, internet-based management models have improved operational efficiency, while streamlined staffing and reduced compensation expenses further boosted profitability. Although adjusting expenses is common practice, its scope is limited by factors like invoices. In contrast, cost reductions through shared components and flexible production lines are more impactful.
10,000 Jobs Cut Last Year
Behind the profit lies a striking reduction in workforce. In 2025, NIO’s total headcount decreased from 45,600 to 35,000—a net reduction of 10,600 employees, or 23.2%.
The highest proportion of cuts occurred in R&D roles. Product and software development staff fell from 11,500 to 6,912—a reduction of 4,616, or 40%. Sales and marketing saw the next largest cuts: the user experience department decreased from 24,400 to 16,900, a drop of 7,525, or 30.8%. Administrative staff declined from 2,256 to 1,582, a reduction of 674, or 29.88%. The only area with increased staffing was manufacturing, where headcount rose from 7,441 to 9,653, an increase of 2,212, or 29.73%. This reflects NIO’s strategy of "cutting front-end roles while boosting production."
As a result of these adjustments, the company’s R&D personnel costs dropped from 8.8 billion yuan in 2024 to 7.6 billion yuan in 2025—a decrease of 1.2 billion yuan. Full-year R&D expenses totaled 10.6 billion yuan, down 18.7% from 13 billion yuan in 2024.
Reports indicated that some laid-off employees were given only 20 minutes’ notice before their departures. Li has previously explained that he and NIO President Qin Lihong share an office of less than 20 square meters and adhere to the same travel standards as frontline employees. He emphasized the importance of spending money wisely and improving return on investment.
Yuan Shuai, co-founder of the New Intelligence New Quality Productivity Salon, commented that by cutting over 10,000 jobs and significantly reducing salary expenses, NIO has delivered on its profit promise on paper. While such cost-cutting aligns with the business logic of efficiency improvement, it conflicts with NIO’s long-emphasized "full-stack in-house R&D" philosophy. Profit achieved by compressing future competitiveness may lead to diminishing marginal returns.
Yuan further analyzed that the automotive industry operates on long cycles, and a sharp decline in R&D investment could manifest as a lack of product competitiveness within 18 to 24 months. If sub-brands like Ledao and Firefly fail to quickly gain market share and achieve economies of scale, this "cost-cutting" profit may prove to be a short-lived accounting improvement rather than a sustainable turning point.
The Sword of Damocles: Debt
Beneath the profit glow, NIO’s balance sheet reveals underlying risks.
By the end of 2025, NIO’s total liabilities exceeded 100 billion yuan, reaching 111.7 billion yuan. Its debt-to-asset ratio stood at 89.8%, indicating significant repayment pressure.
More alarming are the company’s liquidity ratios: the current ratio was 0.98, and the quick ratio was 0.87. A current ratio below 1 suggests that current assets are insufficient to cover current liabilities, while a quick ratio below 1 indicates a liquidity gap even excluding inventory.
As of the end of 2025, NIO’s current liabilities amounted to 78.58 billion yuan, while current assets were 76.63 billion yuan—a shortfall of approximately 2 billion yuan.
Within current liabilities, notes payable and accounts payable increased by 55.03% compared to the previous year, indicating tightened credit terms from suppliers.
On the positive side, cash flow improved significantly. Net cash flow from operating activities in 2025 was 2.993 billion yuan, an increase of 10.842 billion yuan year-on-year, marking a transition from "blood transfusion" to "blood generation." The company’s cash reserves (including cash equivalents, restricted cash, short-term investments, and long-term time deposits) reached 45.9 billion yuan by year-end.
However, whether 45.9 billion yuan in cash reserves can sustain NIO amid 100 billion yuan in liabilities and ongoing losses remains uncertain. The company acknowledged in its annual report that "current liabilities still exceed current assets as of December 31, 2025," but expressed confidence that existing cash reserves and financing channels can support operations over the next 12 months.
If debt is NIO’s economic lifeline, changes in its ownership structure represent a hidden "power game."
As of March 31, 2026, Li held 7.1% of equity but controlled 34% of voting rights through a super-voting structure granting Class C shares eight votes per share. Compared to a year earlier, his equity stake decreased by 0.8 percentage points, while his voting rights fell by 2.7 percentage points.
This dilution resulted from two major fundraising rounds in 2025: a "lightning" placement in March raising HK$4.03 billion, and a September equity issuance totaling $1 billion. Full-year fundraising exceeded HK$11.8 billion.
Middle Eastern investor CYVN Investments RSC currently holds 16.7% equity and 11.8% voting rights, down from 18.6% and 12.7% a year earlier, but remains the largest shareholder. Tencent has exited the list of major shareholders.
This "minority control" structure ensures the founder’s strategic dominance but comes at the cost of continuous equity dilution. Each fundraising round "slices" existing shareholders’ interests, creating tension between "financing for survival" and "equity dilution" in NIO’s capital strategy.
Recently, Li stated in a closed-door meeting that NIO aims for full-year non-GAAP profitability in 2026, alongside 40% to 50% sales growth, targeting annual deliveries of 450,000 to 490,000 vehicles. He described profitability as a starting point, emphasizing that automotive competition is a marathon, and the fourth-quarter 2025 profit has boosted confidence among users, investors, and the team.
Whether quarterly profit can evolve into sustained annual profitability remains to be seen. Is NIO truly turning around, or is this merely a temporary rebound?
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