Investors came into Nio's (NIO 0.79%) first-quarter earnings report knowing full well it was likely to be a bumpy ride thanks to the brutal price war China's electric vehicle (EV) makers are engaging in.
Things aren't likely to get any better soon. Rival BYD slashed prices on 22 vehicles by up to 34% last month, and a raft of other peers are competing for market share amid waning demand in the world's largest automotive market.
While this challenging scenario negatively impacted Nio's earnings, there was definitely a silver lining in the Q1 report.
The 10,000-foot view
Nio reported delivery and revenue growth, but a widening loss. More specifically, total revenue rose 21.5% year over year to $1.6 billion in the first quarter, but fell short of analysts' consensus estimates. Its net loss widened by a staggering 30.2% to $932 million, also worse than analysts had expected.
"In the first quarter of 2025, the Company delivered 42,094 smart electric vehicles, marking a solid year-over-year increase of 40.1%," said William Bin Li, founder, chairman, and chief executive officer, in the press release. "Since the beginning of the second quarter, we have seen a steady increase in monthly delivery volume."
Nio's Firefly brand is expected to drive deliveries higher. Image source: Nio.
Silver lining
With Chinese EV prices crashing, overall demand waning, and analysts worrying the market could implode before it rights itself, you'd think it would be challenging to find a silver lining in Nio's results. That would be incorrect, however. The company's efforts to reduce costs and bolster margins are producing meaningful results.
Vehicle margin was 10.2% during the first quarter, up from the prior-year period's 9.2% result. Nio noted that the increase was primarily attributable to decreased material costs per unit as the company focused on cutting the fat from its operations. The story was similar for gross margin, which checked in at 7.6%, a sizable improvement over the prior-year period's 4.9%.
"Since the first quarter, we have implemented a range of cost control measures, including organizational restructuring, cross-brand integration, and efficiency improvements in R&D, supply chain, sales and services," said Chief Financial Officer Stanley Yu Qu in the press release. "Starting from the second quarter, the Company aims to achieve structural improvements in overall cost efficiency, with continued progress in operational performance."
What's next
The remainder of 2025 will be huge for Nio and its investors. The company is accelerating the production and deliveries of its two newer brands, Onvo and Firefly. Moreover, in late May, it started to deliver its new ES6, EC6, ET5, and ET5T models, which are expected to contribute to second-quarter deliveries rising by around 25% to 30% year over year.
Not only are investors expecting to see top-line and vehicle sales growth, management again expressed confidence that the company could break even during the fourth quarter. Nio is aiming to achieve monthly sales of more than 50,000 units and a vehicle gross margin between 17% and 18%, and to keep cutting SG&A expenses sequentially to bring them within 10% of sales revenue by Q4.
The first quarter might have been disappointing for Nio shareholders, but the automaker could kick it into gear for an epic second half if it can execute on its goals.
