NIO remains one of the most fascinating companies in the global electric vehicle (EV) industry. As a designer, manufacturer, and seller of premium EVs based in China, it continues to push boundaries with both its technology and product strategy. But despite all of its innovations, including some very promising growth trends, I'm still not upgrading the stock to a Buy—and in this report, I’ll explain why.
Let’s start with one of NIO’s key differentiators: battery swap technology.
Battery Swap: A Game-Changer?
One of the most innovative aspects of NIO’s platform is its battery swap stations—an alternative to traditional EV charging. Instead of waiting 20 to 40 minutes to recharge your battery (or even longer depending on charger availability), NIO owners can simply drive into a swap station, have their depleted battery automatically replaced with a fully charged one, and be back on the road in about five minutes.
This solves one of the biggest concerns among EV buyers: charging inconvenience—especially when away from home. While home charging using solar power can be convenient and cost-effective for a subset of customers, the vast majority of global consumers don't have access to home charging infrastructure, especially in dense urban areas or apartment complexes. Battery swapping gives NIO a significant edge in markets like China, where urban congestion and range anxiety are serious issues.
As of now, NIO has deployed over 2,300 battery swap stations, mostly in China, and is beginning international expansion. These stations perform more than 60,000 swaps daily, creating a unique network effect and reinforcing brand loyalty. While the tech isn't necessarily superior to ultra-fast charging in terms of long-term scalability, it offers a unique customer experience, much like fueling a traditional gas car.
Still, that’s just one part of the story. Let’s dive into the financial results and evaluate whether the fundamentals support a bullish case.
Key Highlights from NIO’s Q1 2025 Earnings Report
NIO delivered a strong performance in the first quarter of 2025, with total vehicle deliveries reaching 42,094 units, representing a 40.1% increase compared to the same period last year. This total includes 27,313 vehicles from the core NIO brand and 14,781 units from ONVO, its newer, more affordable sub-brand.
Revenue from vehicle sales came in at $1.37 billion, up 18% year over year, driven primarily by the higher delivery volume. Meanwhile, revenue from other streams—including services, parts, accessories, and energy solutions—grew 36.5% year over year to $288.8 million.
On the profitability front, gross profit surged to $126.7 million, marking an 87.7% increase from the prior-year quarter. The company’s vehicle margin improved to 10.2%, up from 9.2% in Q1 2024, thanks largely to lower material costs per vehicle. Overall gross margin also rose to 7.6%, up from 4.9% last year, bolstered by stronger sales of aftermarket services and parts.
In terms of operating expenses:
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R&D expenses totaled $438.4 million, a 10.5% increase year over year, reflecting continued investment in product development and innovation.
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Selling, general, and administrative expenses jumped 46% to $606.4 million, reflecting increased spending on brand expansion, marketing, and infrastructure for ONVO and Firefly.
As of March 31, 2025, NIO reported a cash and cash equivalents balance of $3.6 billion, with long-term debt standing at $1.28 billion, giving the company solid liquidity to fund operations and future growth initiatives.
Q1 2025 Financial Overview
On June 3rd, NIO released its financial results for the first quarter of 2025. Here are the key takeaways:
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Total vehicle deliveries: 42,100 units
27,000 from the flagship NIO brand
14,800 from the new mid-market Onvo brand (a more affordable alternative)
This marked a 40% increase in deliveries year-over-year. However, the revenue growth didn’t keep up:
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Vehicle sales revenue: up only 18.6% YoY
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Total revenue: ¥12 billion, up from ¥9.9 billion—a 21.5% increase
This disparity—40% growth in unit deliveries versus only 18.6% in vehicle sales revenue—reflects two issues:
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Lower average selling prices (ASPs) due to Onvo’s more budget-friendly positioning.
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Ongoing price wars in China’s EV market, putting downward pressure on prices across the board.
That competitive environment is a double-edged sword: while it helps drive unit growth, it can erode profitability, which brings us to margins.
Fundamental Analysis
Margins: Positive, But Not Yet Convincing
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Vehicle margin: 10.2% in Q1 2025
Up from 9.2% in Q1 2024
Down from 13.1% in Q4 2024
While NIO is one of the few EV makers globally generating a positive margin on each vehicle sold, the quarter-over-quarter decline raises concerns. The company must find a way to stabilize and improve margins if it wants to prove that growth is sustainable and not merely being purchased through discounting.
Tesla remains the benchmark globally for EV margins, particularly in the U.S., but even Tesla has had to cut prices repeatedly to maintain sales growth. That’s the new reality in the EV space: growth is now tied to price flexibility, not just innovation.
Risks and Challenges
Bottom-Line Losses: Still the Achilles’ Heel
And now we get to the heart of the issue—the one that has consistently held me back from giving NIO a Buy rating: its inability to control bottom-line losses.
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Operating loss: ¥6.4 billion
Worsened from ¥5.4 billion in Q1 2024
Despite more than ¥2 billion in added revenue
This has become a pattern with NIO: as it sells more cars, it loses more money. In other words, the company has not yet reached a point of operating leverage. While investing in growth is expected—especially for a company scaling across new brands—it becomes problematic when those investments don't translate into improving efficiency or shrinking losses over time.
To put it bluntly: you cannot scale your way to profitability if each new sale increases your losses.
Q2 2025 Outlook
Looking ahead, NIO expects continued momentum in the second quarter. The company forecasts:
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Vehicle deliveries in the range of 72,000 to 75,000 units, representing year-over-year growth of 25.5% to 30.7%
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Total revenue between $2.69 billion and $2.77 billion
If realized, these projections would mark a significant sequential and annual improvement, driven by ongoing demand across all three brands—NIO, ONVO, and the newly launched Firefly.
Guidance
Looking Forward: Momentum Is Building
Despite those concerns, Q2 looks very promising. Here’s what’s coming down the pipeline:
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April deliveries: 24,000 units
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May deliveries: 23,000 units
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Q2 delivery guidance: 72,000 to 75,000 units
Represents 25–31% sequential growth
NIO also officially launched its third brand, Firefly, which targets the compact high-end EV segment. Firefly is expected to compete with offerings from BYD and other mid-tier brands while maintaining premium styling and smart features. This marks a major step in broadening NIO’s total addressable market.
Additionally, the company began delivering updated versions of several models:
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ET9 and Firefly: gaining traction in the premium segment
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Envo L60: showing rising demand
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ES6, EC6, ET5, ET5T: upgraded and launched in late May
The company’s CEO confirmed that Q2 has seen a steady month-over-month increase in deliveries, and management expects further structural cost improvements going forward.
This part is key—because NIO must not only grow sales but do so more efficiently. The CFO stated that Q2 will mark the beginning of improved cost efficiency and better operational execution. If this forecast holds, it could finally mark a turning point in NIO’s profitability trajectory.
EV Market Trends: A Tailwind in China
Another reason to stay cautiously optimistic about NIO is the strength of the Chinese EV market.
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In the U.S., fewer than 1 in 10 vehicles sold are electric—despite government subsidies and incentives.
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In China, however, 3 to 4 out of every 10 new car buyers are choosing electric.
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China is leading the world in EV adoption, infrastructure deployment, and battery innovation.
That’s a big deal. Most global automakers are struggling with flattening EV demand. Not in China. And with China as NIO’s home base, the company is well-positioned to benefit from increasing consumer acceptance, improving infrastructure, and growing environmental mandates.
While fast charging technology continues to improve and close the speed gap with NIO's battery swap, NIO’s infrastructure is already deployed at scale—and that gives it a major head start.
Conclusion: Why NIO Is Still a Hold
To recap:
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I love the technology and vision of NIO.
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I’m encouraged by rising delivery volumes and brand expansion.
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I respect the company’s long-term ambitions and positioning in a booming Chinese EV market.
But I remain cautious on the stock. The core issue hasn’t changed: lack of profitability.
Until NIO shows that it can grow without increasing its losses, I can’t justify upgrading it to a Buy. I want to see:
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Margin improvement
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Evidence of cost control
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Progress toward operating leverage
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Stabilization of ASPs amid pricing pressure
We’re not quite there yet.
So for now, I’m maintaining my Hold rating on NIO stock. But this was definitely a step in the right direction, and I’ll be watching Q2 results closely. If the company starts demonstrating that it can scale efficiently, reduce losses, and move toward profitability, it may finally earn that elusive Buy rating.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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