NIO Stock Rises on Better-Than-Expected Q3 Earnings: Key Takeaways

NIO stock is trading higher in early US price action today after the company released its earnings for the third quarter of 2023. Here are the key takeaways from the report.

NIO reported revenues of $2.61 billion in Q3 which is 46.6% higher YoY and 117.4% higher than the second quarter. The company’s revenues from vehicle sales rose 45.9% YoY to $2.39 million. NIO delivered 55,432 cars in the third quarter of 2023 which was 75.4% higher YoY.

In his prepared remarks, William Li, NIO’s CEO said, “According to the retail sales data from China Automotive Technology and Research Center, NIO ranked first in the battery electric vehicle market segment priced over RMB300,000 in China, with a market share of 45% in the third quarter of 2023.”

NIO reported an increase in gross margins

NIO generated gross profits of $208.8 million in Q3 and while it was 12.2% lower than the corresponding quarter last year, it was up sharply from the previous quarter. Also, its gross margins also improved to 8% in Q3 as compared to 1% in Q2. The company’s vehicle margin also rose to 11% versus 6.2% in the second quarter.

It expects vehicle margins to rise to 15% in the fourth quarter and is targeting a range of 15%-18% in 2024.

However, NIO reported a net loss of $663.9 million in the third quarter continuing its streak of losses. Like fellow startup EV companies, NIO is also looking at ways to cut its losses and cash burn and recently announced a 10% reduction in its workforce.

In the earnings release, Li said, “We have recently completed a thorough review of the Company’s two-year operating plans to determine our objectives, priorities, and action plans. Meanwhile, we have identified opportunities to optimize our organization, reduce costs and enhance efficiency.”

He added, “Our focus remains on advancing core technologies, developing key products, and expanding sales and service capabilities. We are confident in NIO’s long-term competitiveness in the smart electric vehicle market.”

NIO provided Q4 guidance

In October and November, it delivered 16,074 and 15,959 cars respectively. In the first 11 months of the year, it delivered 142,026 cars – 33.1% higher than the corresponding period in 2022. The company’s cumulative deliveries stand at 431,582.

NIO gave a guidance of delivering between 47,000-49,000 cars in Q4 which implies deliveries between 15,867 and 17,867 in December. While NIO is generally conservative with its guidance, the company’s deliveries have been trailing that of peers in recent months.

Chinese EV companies reported strong deliveries for November

For instance, Xpeng Motors delivered 20,041 vehicles in November which was 245% higher YoY and a new monthly record for the company. It was the second consecutive month where Xpeng Motors’ EV deliveries were more than 20,000. Also, its deliveries have risen every month for 10 consecutive months.

Li Auto delivered 41,030 cars in November – a YoY rise of 172.9% and a new monthly record for the Chinese EV company. It has impressed markets with its deliveries and its monthly sales have hit record highs for eight consecutive months, and November is the second month when its deliveries were more than 40,000. It has delivered 325,677 vehicles in the first 11 months of 2023 while the cumulative deliveries stand at 583,011. Li Auto had set a target of 300,000 deliveries for 2023 and hit that goal with one month to spare.

NIO Announces acquisition of plants from JAC

Putting rest to rumors, NIO confirmed that it would buy manufacturing facilities from Anhui Jianghuai Automobile Group Corp – popularly known as JAC. Currently, JAC jointly manufactures NIO’s vehicles but was looking to sell these assets – with markets speculating that NIO is looking to buy the assets.

In its release, NIO said, “Pursuant to the definitive agreements, the Company will acquire the manufacturing equipment and assets of the first advanced manufacturing base and the second advanced manufacturing base from JAC for a total consideration of approximately RMB3.16 billion, excluding tax.”

Notably, NIO has a strong balance sheet and had $6.2 billion as cash and cash equivalents at the end of September. It has been on a capital-raising spree since 2020 and most recently raised $1.15 billion through convertible notes between September and October.

EV price war

Meanwhile, there has been a price war in the EV market. The EV war in China began last year when Tesla lowered car prices. The EV giant’s price cuts were followed by similar announcements from other carmakers including Xpeng Motors, Ford, Toyota, and Nissan.

Earlier this year, even NIO lowered car prices. Previously the company had categorically said that it wouldn’t join the price war.

Automotive companies are reconsidering their massive investments amid the brutal price war which is taking a toll on their profits.

In July, Ford toned down its ambitious EV program and said that it would hit an annual production capacity of 600,000 by 2024 instead of 2023. It also rolled back the targeted production capacity of 2 million cars and said that it would be “flexible” about the timing – instead of reaching the goal in 2026 as previously stated. It also raised its 2023 pre-tax loss forecast for its EV business by 50% to $4.5 billion.

Auto companies delay EV investment plans

Ford would also delay its planned $12 billion investments towards building electric cars and also postpone the construction of the EV battery plant in Kentucky. Rival General Motors has also scaled back its EV plans and has delayed the production of electric trucks at the Orion assembly plant until late 2025.

Coming back to NIO, the stock is up sharply today as markets cheer its narrower-than-expected loss as was the confirmation that it is buying manufacturing assets from JAC. However, despite the rise today, NIO stock is in the red this year and is underperforming Chinese EV peers as well as Tesla.