NIO Stock Falls as Earnings Miss Offsets Strong China Economic Data

NIO stock is trading lower in US price action today despite a broad-based rally in Chinese shares. However, the Chinese EV (electric vehicle) company posted a wider-than-expected loss which dampened sentiments.

China’s official manufacturing PMI rose to 52.6 in February which is the highest since 2012. Reading above 50 shows an expansion in activity while those below signals a contraction. The Shanghai and Hang Seng rallied today and the latter rose above 4%. NIO too closed higher in Hong Kong price action.

NIO misses Q4 2022 earnings estimates

However, it spooked markets with its Q4 2022 earnings. NIO reported revenues of $2.33 billion in the quarter which trailed analysts’ estimate of $2.46 billion. It was nonetheless the first time that NIO’s revenues surpassed $2 billion in a quarter.

The company’s revenues rose 62.2% YoY and 23.5% on a quarterly basis. The steep rise in revenues was mostly led by higher deliveries as NIO delivered 40,052 cars in the quarter, a YoY rise of 60%.

Along with the revenue miss, NIO also posted wider-than-expected losses in the quarter. The company posted a per-share loss of 44 cents which was way ahead of the 26 cents that markets were expecting.

Gross profits plunge

Its gross profit also plummeted to $90.1 million in Q4 2022 which is 63.4% lower than the corresponding quarter last year. Also, the gross profit margin was only 3.9% in the fourth quarter and 10.4% in the full year. To put that in perspective, it posted a gross profit of 17.2% in Q4 2021 and 18.9% in 2021.

The company however had total cash and cash equivalents of $6.6 billion at the end of 2022. Having a strong cash pile is crucial for EV companies amid the price war.

NIO’s chairman and CEO William Bin Li said, “In 2022, we made positive strides in the research and development of core technologies and competitive products, infrastructure deployment and global market expansion, laying a solid foundation for the Company’s long-term growth.”

NIO provided Q1 2023 guidance

NIO delivered 12,157 cars in February which is nearly double what it did in the same month last year. The steep rise in deliveries is also due to a lower base as China’s Lunar New Year holidays fell in February last year.

The company expects to deliver between 31,000-33,000 vehicles in the first quarter of 2023. The guidance is below what it delivered in Q4 2022 and also fell short of analysts’ estimates.

Li said, “In 2023, we plan to deliver five new products based on NIO Technology Platform 2.0, deploy 1,000 additional Power Swap stations to further improve holistic user experience, and continuously strengthen our competitive advantages in key areas of smart electric vehicles.”

Notably, Rivian and Lucid Motors also provided tepid guidance. Rivian expects to produce only about 50,000 cars in 2023 while analysts were expecting the number at 60,000 or higher. Lucid Motors also expects to produce between 10,000-14,000 cars in 2023.

Lucid Motors’ guidance spooked investors

During the earnings call, Lucid Motors’ CEO Peter Rawlinson emphasized multiple times that the company is no longer constrained by production unlike in 2022 when supply chain bottlenecks took a toll on its production.

The company also stressed that it has the capacity to produce more cars in the year. Lucid Motors guidance meanwhile baffled many analysts as despite having reservations twice its guidance’s upper end, the company is not scaling up production.

Lucid Motors said that firstly the reservations are not binding and secondly it is being prudent with the guidance considering the macroeconomic slowdown. NIO too tends to provide conservative guidance

EV demand slowdown

Lucid Motors said that it needs to increase its brand awareness. Rawlinson said, “we need to amply focus now away from production to amplifying customer awareness that we’ve got this amazing car with unprecedented range technology efficiency, incredible driving machine, a great driver’s car.”

He added, “We need to amplify that message and broaden the awareness, which in turn will drive sales. And that is the focus right now.”

Rivian meanwhile said that it is still supply constrained. All said, amid tepid delivery reports from EV companies including NIO, markets are now apprehensive about the EV demand environment.

NIO dismisses short seller report

Last year, short seller Grizzly Research accused NIO of accounting fraud. It said that the company was inflating revenues while downplaying losses. It also cast aspiration on accounting for its battery subscription business.

Grizzly also talked about NIO’s arrangement with the Chinese government and said, “Our research also revealed hidden and opaque share agreements which benefit the Chinese government at the expense of public shareholders.”

Soon after the allegations, NIO formed an internal committee to investigate the claims. In its Q4 2022 earnings release, NIO said that the committee finds the allegations mostly unsubstantiated.

NIO said, “Based on the results of the Internal Review, the Independent Committee has concluded that the key allegations of the Short Seller Report are not substantiated.”

It added, “In particular, the Internal Review found that the allegations set forth in the Short Seller Report concern matters that had been accurately and adequately disclosed in the Company’s historical annual and periodic reports.”

NIO stock falls after earnings miss

While fellow Chinese EV makers like Li Auto and Xpeng Motors are trading higher in US premarkets today, NIO is in the red. Notably, Xpeng Motors also disappointed markets with its February delivery report and it was the only company among the pack that reported a YoY fall in February deliveries.

Over the last six months, Xpeng’s delivery reports have invariably spooked markets. The company is set to release its Q4 2022 earnings later this month which would offer markets more insights into its financial performance.