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TMTPOST -- Shares of Chinese electric-vehicle maker NIO rose Tuesday after the company reported a narrower-than-expected second-quarter operating loss, even as it navigates a fiercely competitive market and ongoing industry price pressures.
Image source | NIO official website
NIO』s American depositary receipts (ADRs) closed at $6.58, up 3.1% on the day, outperforming broader markets as the S&P 500 and Dow Jones Industrial Average fell 0.7% and 0.6%, respectively. Early trading showed a decline, but investor confidence rebounded following the company』s earnings report. In Hong Kong, NIO』s stock was down 3.6% Tuesday, after gaining 4.6% Monday on news of robust August vehicle sales.
The EV maker posted an adjusted operating loss of $567 million on $2.7 billion in revenue, beating Wall Street expectations for a $620 million loss on just over $2.7 billion in sales, according to FactSet. This compares with a $673 million loss on $2.4 billion in revenue a year ago, signaling improving operational efficiency. Gross profit margins increased to 10%, up from 9.7% in the prior-year period.
NIO delivered 72,056 vehicles in the second quarter, marking a 26% increase from the same period last year. Looking ahead, the company projects third-quarter deliveries of approximately 89,000 vehicles, up from about 62,000 in the third quarter of 2024, which would set a new quarterly record. Through July and August, NIO has already delivered 52,322 EVs, leaving roughly 37,000 expected for September.
Despite the rising delivery numbers, NIO』s projected revenue for the third quarter, around $3.1 billion, falls short of Wall Street』s $3.4 billion estimate. The discrepancy reflects the intense price competition in China』s EV market. NIO』s average selling price has declined to roughly $31,000, down from $38,000 a year ago, driven by competitive pressure across the sector.
Citi analyst Jeff Chung highlighted the company』s improving margin trajectory, writing Tuesday that he expects third-quarter and fourth-quarter free cash flow to turn positive, with steady quarter-over-quarter expansion. Chung maintains a Buy rating on NIO』s ADRs and set an $8.10 price target.
NIO』s sales in August were a bright spot, with the company delivering 31,305 vehicles, representing a 55% increase compared with the same month in 2024. The growth reflects rising demand for NIO』s lineup, including its more affordable models, even as the company adjusts pricing to remain competitive.
The results underscore a broader challenge for Chinese EV makers, which are facing one of the industry』s most aggressive price wars in recent years. While record deliveries indicate strong consumer demand, narrowing profit margins illustrate the cost of competing on price in a crowded market.
NIO』s performance also highlights the company』s strategic shift in vehicle mix. By expanding offerings in more affordable segments, NIO can increase overall volume but sacrifices revenue per unit. Analysts note this trade-off is common among Chinese EV makers, as domestic rivals such as BYD, Xpeng, and Li Auto continue to compete aggressively on pricing and technology.
For investors, the narrowing loss signals that NIO is beginning to stabilize its operations despite the market pressures. Rising deliveries, improved gross margins, and positive free cash flow projections could provide support for the stock in the coming quarters, even if revenue falls slightly short of expectations.
As NIO ramps up production and aims for record quarterly deliveries, the coming months will be critical in assessing whether the company can sustain growth while navigating the intense price war shaping China』s electric-vehicle market.
