To The Moon

$NIO Inc.(NIO)$

NIO recently released its Q3 earnings, which fell short of expectations.

Revenue and Sales Performance

• Q3 revenue was ¥18.67 billion, down 2.1% YoY, below analysts' forecast of ¥19.17 billion and the lower end of management’s guidance (¥19.1 billion).

• Vehicle deliveries reached 61,855 units, slightly under the forecast of 62,053 units by just 0.32%, yet revenue was down 2.59%.

  

This discrepancy stems from a decline in average revenue per vehicle (ARPV). ARPV in Q3 was ¥270,000, down 14% YoY and below the forecast of ¥276,000. The drop was largely due to NIO’s second brand, ALDO, whose first model, the L60, is priced lower at ¥206,900–¥255,900. ALDO sold 832 units in Q3, and sales surged to 4,319 in October, accounting for 20.6% of total sales, further dragging down ARPV.

Facing "Volume Without Revenue"

• Q3 vehicle deliveries grew 11.6%, but revenue declined 2.1%.

• For Q4, NIO expects deliveries of 72,000–75,000 units (YoY growth of 43.9%–49.9%) and revenue of ¥19.68–20.38 billion (YoY growth of 15%–19.2%). This guidance falls short of analysts’ expectations, with a notable 9.4% gap in revenue.

Margins and Losses

• Gross margin slightly beat expectations at 10.7% (vs. 10.6% forecast). Automotive gross margin was 13.1%, helped by lower battery costs.

• However, net loss reached ¥5.06 billion, widening 11% YoY, marking the fourth consecutive quarter of losses exceeding ¥5 billion.

The worsening losses stem from rising expenses:

• Selling and administrative costs grew 13.8% YoY.

• R&D expenses rose 9.2% YoY, both outpacing revenue growth.
  Looking ahead, the launch of NIO’s third brand, Firefly, may further strain expenses.

Peer Comparison

• Li Auto is already profitable.

• Xpeng reported a Q3 loss of ¥1.8 billion, significantly lower than NIO’s losses.

While NIO’s main brand struggles with sluggish sales growth, ALDO has shown early success. If ALDO continues to scale, it could mitigate losses. However, NIO’s ability to achieve self-sustaining operations still hinges on significant sales growth.

Valuation and Outlook

• NIO’s price-to-sales ratio (P/S) is 1.04x, slightly below Li Auto’s 1.2x.

• With Q4 revenue growth projected to outpace Li Auto’s, downside potential appears limited.

NIO’s future depends on substantial sales expansion to achieve economies of scale and profitability.