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NIO Stock: Why Are Nio Losses Growing? And what comes next?

NIO Stock - NIO Stock: Why Are Nio Losses Growing?  And what comes next?

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Shares of Nio (NYSE:NIO) shares fell more than 5% after the Chinese electric vehicle (EV) company reported its first-quarter earnings. During the quarter, Nio’s deliveries fell 3.2% year-over-year (YOY) to 30,053 vehicles. That compares with the company’s previous forecast for 30,000 vehicles, which was lowered from between 31,000 and 33,000 vehicles.

Auto sales make up the bulk of Nio’s revenue, which came in at $1.37 billion, down 7.2% year over year. Analysts expected $1.44 billion. The company’s first-quarter earnings per share loss of 36 cents also fell short of estimates for a loss of 33 cents. Net loss was $718.1 million, up 9.4% year over year.

Despite the bad print, Nio CEO William Li was optimistic:

“Despite increasing market competition, NIO’s premium brand positioning, leading technologies and innovative ‘rechargeable, interchangeable, upgradeable’ energy experience are recognized for their exceptional competitiveness, leading to solid sequential growth in vehicle deliveries in recent months.”

NIO Stock: Why Are Nio Losses Growing? And what comes next?

As Li said, electric car competition in China is extremely fierce and has resulted in price wars, reducing profit margins and profitability. China’s ongoing real estate crisis has also dampened consumer confidence, especially hurting Nio’s luxury vehicles.

In fact, analysts don’t expect the company to report its first year of positive earnings per share until 2027, when earnings per share are expected to reach 23 cents, compared to a loss of 48 cents in 2026.

Nio unveiled its new, cheaper Onvo brand in May to solve this problem. The brand’s first vehicle, the L60 SUV, will be available starting at $30,500, with deliveries expected to begin in September. Nio ultimately expects to sell at least 10,000 L60s per month, bringing total monthly deliveries to more than 20,000 vehicles.

For the second quarter, Nio has forecast revenues between $2.297 billion and $2.373 billion, implying annual growth between 89.1% and 95.3%. That exceeded analyst estimates of $2.053 billion. Deliveries are expected to be between 54,000 and 56,000 vehicles, implying growth between 129.6% and 138.1%.

Nio delivered 36,164 vehicles in April and May, meaning it needs to deliver at least 18,836 vehicles in June to meet the midpoint of its delivery guidance.

As of the date of publication, Eddie Pan had no positions (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication Guidelines.

Eddie Pan specializes in institutional investments and insider activities. He writes for InvestorPlace’s Today’s Market team, which focuses on the latest news about hot stocks.