Nio Earnings: Loss-Narrowing Trend Continues, but Volume and Margin Guidance Disappoint

Key Morningstar Metrics for Nio

• Fair Value Estimate
  : $6.00
• Morningstar Rating
  : ★★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Nio’s Earnings

Nio’s NIO second-quarter revenue jumped 69% from last year but missed the low end of previous guidance. Ongoing product mix optimization led to a 21% recovery in vehicle pricing and an 8-percentage-point improvement in vehicle margin, despite competition in the domestic market.

Why it matters: Margin improvement was further supported by operating leverage, with operating expenses declining 6%, resulting in an 86% reduction in net loss from a year earlier. While revenue and net loss broadly met our expectations, vehicle margin fell short due to rising input cost pressures.

• Nio acknowledged pressure from rising battery and memory chip prices this year. As a result, despite a product mix upshift with robust demand for the higher-priced ES8 large sport utility vehicle, Nio conservatively guided vehicle margin to stay flat at the second quarter’s level for the rest of 2026.
• We cut 2026-30 vehicle sales estimates by 2%-8% and revenue by 1%-6% to factor in softer volume guidance. Reflecting a lower vehicle margin forecast due to raw material price hikes, partly offset by lower research expense assumptions, we lift 2026 net loss by 5% and reduce 2027-30 net profit by 4%-10%.

The bottom line: We lower our fair value estimate to $6.00 per ADS (HKD 46.50 per share) from $6.50 (HKD 50.00), implying 0.7 times 2027 price/sales. Shares are undervalued. We see upside to our valuation if management can maintain the sales trend and improve profitability.

Between the lines: For the third quarter, management guided vehicle delivery to grow 24%-27% year on year to 108,000-111,000 units. The midpoint of guidance implies September delivery of 37,700 units, which we think falls below market expectations.

• Nio is confident monthly vehicle sales could reach 40,000 units in the fourth quarter, as it expects the auto market to further recover toward year-end, and guides new launches to drive 40%-50% volume growth in 2027. We believe this is too optimistic, given diminishing subsidies.