NIO doubles deliveries and improves margins

SourceThe Motley Fool

Sep 2, 2025 16:06

NIO(NYSE:NIO) released its second quarter 2025 results on June 25, delivering 72,056 vehicles( a year-on-year increase of 25.6%) with total revenues of 19 billion RMB( 19% more than the previous year, 57.9% more than the previous quarter). Management set ambitious production and margin targets for the remainder of 2025, highlighted cost advantages driven by technology, and provided explicit guidance for deliveries, vehicle margin, and non-GAAP profitability for the third and fourth quarters.

Production targets double NIO deliveries

Recent monthly deliveries reached 21,017 in July and 31,305 in August, showing rapid sequential growth as new launches gain momentum. Management noted that supply chain constraints are easing as capacity for the Envoy L90 and ES8 increases, supporting a new quarterly target of 150,000 units for the fourth quarter of 2025.

“Our goal is that by October the full supply chain capacity for the Envoy L90 can reach 15,000 units monthly. For the ES8, as the increase in production takes more time, we expect the total capacity to achieve 150,000 units in December. With this, considering both demand and supply availability, our target for the fourth quarter is to achieve an average of 50,000 monthly deliveries for the three brands, which means 150,000 quarterly units combining all brands.”

– William Li, Founder, Chairman and CEO

If achieved, this capacity increase would roughly double deliveries compared to the second quarter, positioning NIO for significant market share gains in the electric vehicle segment.

Margin forecasts indicate financial inflection

The gross margin of vehicles (GAAP) was 10.3% in the second quarter, with an overall gross margin of 10%, while the adjusted net loss decreased by 34.3% compared to the previous quarter to 4.1 billion RMB. Management points to a strong improvement in the margin in the fourth quarter, driven by the full impact of new high-margin models such as L90 and ES8, and the continued cost optimization.

“We expect the gross margin for vehicles in the fourth quarter to be around 16-17% for the entire group in order to reach breakeven. Thanks to a decade of technological innovation, the in-house development of key components, and ongoing cost control efforts, we achieved not only competitive performance for the L90 and ES8 but also a very competitive cost structure. With this, our gross margin target for the L90 and ES8 in the fourth quarter is 20%.”

– William Li, Founder, Chairman and CEO

The planned improvement of the non-GAAP margin and breakeven point in the fourth quarter would mark a strategic financial turning point, supporting NIO's ability to self-finance its growth and invest in future innovation.

Proprietary technology drives cost and quality advantage

The upcoming large-scale implementation of NIO's proprietary smart driving chip (NX9031), introduced in the ET9 and the updates for the 2025 model, provides a potential advantage in technological differentiation and cost rationalization. Management also reported that J.D. Power quality ratings for the ET5 and ET5T led their segments, while the EC6 and ES6 ranked among the top two in their categories.

“We have made a significant initial investment in the development of the chip, but the performance of our NX9031 smart driving chip can match that of four industry flagship chips. Although we invested upfront in R&D, this chip also achieves savings in material costs.”

– William Li, Founder, Chairman and CEO

The sustained reduction of costs through the localization of software and hardware intellectual property can protect gross margins from price wars and allow for more aggressive and defensible pricing, reinforcing NIO's position as an innovative volume player.

Perspectives

The guidance anticipates deliveries for the third quarter of 2025 of 87,000 to 91,000 units, with a year-on-year growth of 40.7% to 47.1%, and a target for the fourth quarter of 150,000 units. Non-GAAP R&D expenses per quarter are forecasted at 2 billion RMB for the third and fourth quarters, and between 2 billion and 2.5 billion per quarter in 2026. The group's gross margin for vehicles is expected to be 16%-17% for the fourth quarter, with an explicitly targeted quarterly breakeven on a non-GAAP basis in the fourth quarter. There will be no new model launches before 2026, prioritizing capacity for existing products with pending orders.

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