Nio revenue growth stalls as margin compression intensifies

Nio, the struggling Chinese EV company, published results that missed analysts’ expectations. In a statement, the company said that its vehicle deliveries in the quarter dipped to 31,041 from 40,052 in the fourth quarter. The figure was, nonetheless, higher than the 25,766 it sold in the same quarter in 2022.

One of the glaring things in the report was the company’s margins. Vehicle margins dropped from 18.1% in Q1 of 2022 to 5.1%. This means that the company is making less money per every vehicle it sells. It attributed this decrease to a change in product mix and higher battery costs.

Nio’s revenue came in at RMB 10.6 billion or $1.5 billion, a slight increase from what it made in 2022. Gross profit dropped to just $23.6 million. Loss from operations plunged to about $744 million, a 133.6% increase from the same period in 2022. In a statement, Nio’s CFO said:

“In the face of the changing market environment, we will observe and analyze the dynamics of the operating environment and competition landscape promptly, and continue to strengthen our competitive advantages in an agile and efficient manner.”

Nio ended the quarter with about $5.5 billion in cash, which is a good figure for a company valued at over $13 billion. The company hopes to deliver between 23,000 and 25,000 vehicle in the second quarter, a decline from those it sold in Q1. It sees its revenue falling by between 15.1% and 9.0% from the same quarter in 2022.

As I wrote in my Nio earnings preview, the key concern for the company is that its forward guidance seems a bit ambitious. Therefore, I suspect that the management will downgrade its target at some point this year. Nio stock price fell by more than 1% after the earnings.