China, the world's largest automotive market, hasn't been as enjoyable for automakers foreign or domestic in recent times. A brutal electric vehicle (EV) price war driven by a long list of subsidized competitors created a race to the bottom of pricing. That scenario has eroded margins across the industry and forced many domestic automakers to ramp up their exports to Europe and other countries to support growth. Nio (NIO 5.54%), strangely enough, has been thriving while doing the opposite: still focusing on China.
Goodbye golden era
According to Nio CEO, William Li, China's automotive market has moved past its "golden era," with China's domestic car sales falling for the seventh consecutive month in April. With China's domestic auto sales spiraling lower, compounded by economic and policy concerns, competitors are now racing each other to export vehicles overseas where many are getting a foothold in Europe and other regions.
In fact, passenger car exports from China jumped 85% in April, compared to the prior year, to nearly 800,000 vehicles, per the China Association of Automobile Manufacturers (CAAM). Within the broader figure was a surge in new energy vehicles (NEVs), which include both EVs as well as plug-in hybrids. The latter jumped more than 120% in April, compared to the prior year. BYD Co. has seen more demand overseas than anticipated, and this caused management to raise its 2026 export guidance up roughly 15% to 1.5 million vehicles.
Despite surging exports to support growth, China's two top EV makers took a walloping during the first quarter. BYD Co.'s net income tumbled 55% to 4.1 billion yuan, or $605 million, and Geely's net income dropped 26% to 4.2 billion yuan, or $619 million.
NYSE: NIO
Key Data Points
Impressive results
It's the combination of surging exports, cratering domestic sales, and tumbling profits for many automakers that makes what Nio achieved during Q1 more impressive. That's because Nio hasn't followed many of its competitors overseas: Through April, Nio has sold only 217 vehicles in Europe. Nio continues to focus on its home market, and despite broader pain in the industry, Nio delivered 37,705 vehicles in May, good for a staggering 62.3% gain over the prior year. It wasn't a one-hit wonder, either, as Nio's year-to-date deliveries have surged almost 69% compared to the prior year.
Nio's impressive results go beyond deliveries with vehicle margin checking in at 18.8% during the first quarter, up strongly compared to the prior year's 10.2% level. Furthermore, Nio's vehicle sales revenue jumped 129% in Q1, far outpacing its 98% delivery growth, suggesting the company's pricing remains strong amid the industry's EV price war.
"We also maintained positive non-GAAP operating profit in the quarter, and cash reserves continued to increase," said Stanley Yu Qu, NIO's chief financial officer, in a Q1 press release. He added:
We are encouraged by the continued improvement across all key operating metrics. Looking ahead, we will further enhance cost and operational efficiency while strengthening our sustainable business capabilities.
There's even reason for investors to think the best in 2026 is yet to come, as Nio only recently launched its flagship executive SUV, the ES9, on May 27.
Nio ES9. Image source: Nio.
What it all means
Nio's Q1 results were a rare bright spot in a mostly gloomy market. Its ability to improve vehicle unit economics amid a downturn should have investors feeling optimistic about the future, especially if and when China's market eventually rebounds and the price war fades. Furthermore, while Nio's focus remains on its domestic market, it does plan on expanding its sub-brand Firefly in Europe, which would be another lever for its growth in the near term. No matter how you slice it, right now Nio appears to be separating itself as one of the top Chinese auto stocks.
