What happened
Shares of NIO (NIO 3.49%), a Chinese designer and manufacturer of premium electric vehicles (EVs), were soaring more than 60% early Monday afternoon after the struggling automaker released better-than-expected financial results for the third quarter.
So what
Deliveries jumped 35% sequentially, reaching 4,799 during the third quarter. That helped drive vehicle sales to $242.5 million during the quarter, a 22.5% increase from the second quarter and a 21.5% improvement from the prior year's third quarter. Total revenue increased 25% to $257 million versus the prior year, easily topping analysts' estimates of $234 million.
Vehicle margin checked in at a negative 6.8% during the third quarter, which was a large sequential improvement from the negative 24.1% in the second quarter, but slightly worse than the prior year's negative 4.3%. NIO's net loss was $352.8 million during the third quarter, a 23.3% decrease from the second quarter and a 10.3% decrease from the prior year's result.
"The electric vehicle sector experienced substantial softness in the second half of 2019 after the reduction of EV subsidies in China," CEO William Bin Li said in a press release. "Despite the challenges, NIO's sales improved solidly since September."
NIO's ES6 electric SUV. Image source: NIO.
Now what
Even with today's surge, it's been a bumpy ride for investors over the past year. Management reiterated confidence that the company's financial health would improve as cost-cutting efforts begin to gain traction. During its third annual NIO Day on Dec. 28, it unveiled its new EC6 model, which is expected to compete with Tesla's Model Y, giving hope that better days are ahead for sales and financial results.
While NIO's stock is up 133% over the past three months, it remains one of the riskier auto stocks in the market. Furthermore, it seems fairly clear the company needs capital, and investors should keep an eye out for possible announcements of a financing deal. If the company can secure reasonable capital, successfully accelerate sales of its EVs, and cut costs, it'll go a long way to persuading investors that 2019 was only a speed bump on its way to a bright future.
