$NIO Inc.(NIO)$ 3Q25 Update: Improving Profitability and a Stronger 2026 Setup
The Tiger Research team maintains a BUY rating and $8 price target after NIO delivered a solid 3Q25 marked by meaningful margin recovery, stronger operating efficiency, and sustained momentum across its three-brand strategy. While 4Q delivery guidance of 120–125k units was slightly below prior market expectations, management highlighted continued strength in high-margin models and reiterated confidence in achieving 4Q breakeven. Looking ahead, the 2026 outlook appears increasingly constructive with a stronger SUV-led product cycle and improving cost structure.
3Q25 performance was broadly encouraging.
Revenue rose 16.7% YoY (14.7% QoQ) to RMB21.8B, supported by 87,071 deliveries (+40.8% YoY) across NIO, ONVO, and FIREFLY. Gross margin expanded to 13.9% (from 10.0% in 2Q), with vehicle margin improving to 14.7% (from 10.3%). Gains were driven by lower material costs, a better product mix, and ongoing cost-down execution.
Non-GAAP operating losses narrowed by over 30% YoY, reflecting efficiency improvements in both R&D and SG&A. Importantly, operating cash flow and free cash flow turned positive, aided by margin gains and stricter expense control. Liquidity strengthened further following the US$1.16B equity raise.
4Q outlook: Slightly softer volumes, but margin trajectory intact.
NIO guided 4Q deliveries to 120–125k units, up 65–72% YoY but below the >130k units previously priced in by the market. The softer guide mainly reflects subsidy withdrawal impact on ONVO’s price-sensitive models. However, high-margin models such as the new ES8 continue to show strong traction, helping maintain margin momentum.
Management reiterated a ~18% vehicle margin target for 4Q, supported by mix improvement and continued cost discipline. ASP should also benefit from ES8 carry-over orders flowing into early 2026.
2026 outlook: Strong product cycle and clearer path to profitability.
Management expects to reach a 50k/month run-rate in 1H26, underpinned by multiple new large SUVs built on the scalable ES8/ET9 cost structure. These models are expected to drive mix upgrades, scale benefits, and operating leverage.
NIO reaffirmed its ~20% vehicle margin target for 2026, supported by:
further material cost reductions
improved factory utilization
platform synergies across the three brands
SG&A is expected to trend toward 10% of revenue over time. Overseas expansion will adopt a capital-light, partner-led model, starting with FIREFLY across Europe, the Middle East, and South America.
Bottom line:
Despite near-term volume volatility tied to subsidy shifts, the underlying fundamentals continue improving. Margin normalization, stronger high-end model demand, disciplined cost execution, and a robust 2026 product cycle all support a clearer profitability path. With strengthened liquidity and improving operating leverage, NIO appears positioned for its next phase of growth. Maintain BUY.
Estimate revisions:
4Q deliveries –16%, revenue –18%, and non-GAAP operating income –RMB507M.
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