The Stock of Nio Drops as Losses Grew Wider Than Forecast and Sales Were Below Expectations

Shares of Nio Inc. took a significant hit on Wednesday following the release of the company's first-quarter results, which fell short of expectations amidst growing competition in the electric vehicle (EV) market. However, Nio provided a positive outlook for the current quarter.

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The company highlighted its continued efforts to develop its "chargeable, swappable, upgradeable" ecosystem, which has been instrumental in increasing deliveries.

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In premarket trading, Nio's stock (NIO) dropped by 6.6%.

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For the quarter ending March 31, Nio reported net losses of RMB5.25 billion ($727.2 million), or RMB2.57 per American depositary share (ADS), compared to net losses of RMB4.86 billion, or RMB2.91 per share, in the same period last year. While net losses increased, the per-ADS losses decreased because the number of ADS used in per-share calculations rose by 24% to 2.04 billion.

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Excluding one-time items, the adjusted per-ADS losses were RMB2.39, which was greater than the FactSet consensus estimate of RMB2.20.

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Nio's gross margin improved to 4.9% from 1.5% a year earlier, with vehicle margins increasing to 9.2% from 5.1%, supported by reduced material costs per EV.

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Total revenue dropped by 7.2% to RMB9.91 billion ($1.37 billion), falling short of the FactSet consensus of RMB10.43 billion, as vehicle sales decreased by 9.1% to RMB8.38 billion, missing expectations of RMB8.93 billion.

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First-quarter deliveries declined by 3.2% to 30,053 units, as previously reported.

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For the second quarter, Nio projects total revenue to be between RMB16.59 billion and RMB17.14 billion, significantly exceeding the current FactSet consensus of RMB14.88 billion.

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The company expects deliveries to range from 54,000 to 56,000 vehicles, representing a year-over-year increase of 129.6% to 138.1%.

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Steven Wei Feng, Nio's Chief Financial Officer, emphasized the company's focus on enhancing the operational efficiency of its power and service network. "We are continuously enhancing the operational efficiency of our power and service network and aim to consistently extend our services to a wider user base,” he said. He also highlighted the establishment of strategic partnerships with seven automakers in China to promote the standardization and adoption of battery swapping technologies, reinforcing the long-term strategic value of Nio's extensive power network.

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Year to date, Nio's stock has plunged by 41.9% as of Wednesday. In contrast, the iShares MSCI China ETF (MCHI) has gained 9.3%, and the S&P 500 index (SPX) has advanced 12.3%.

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In summary, Nio's first-quarter financial performance was impacted by intensifying competition, leading to larger-than-expected losses and a decline in revenues and vehicle sales. Despite this, the company remains optimistic about the future, focusing on expanding its innovative ecosystem and forming strategic alliances to enhance battery swapping technology. Nio’s improved gross margins and ambitious second-quarter forecasts suggest potential for recovery, although the stock’s significant year-to-date decline indicates investor wariness.

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