Introduction

At least for now, NIO can finally take a breather.

The automotive sector in February was set ablaze by NIO's profit announcement. The company reported an adjusted operating profit of RMB 700 million to RMB 1.2 billion in the fourth quarter of 2025, marking its first quarterly profit in 11 years of car manufacturing.

From a full-year loss of RMB 20.718 billion in 2024 to a loss of RMB 3.48 billion in the third quarter of 2025, followed by a sudden turnaround to profitability in the fourth quarter, NIO's reversal caught many off guard. The capital markets reacted first, with NIO's U.S.-listed shares surging nearly 10% in pre-market trading. Although the stock price has fluctuated over the past three months, the news of its first profit still injected confidence into the capital markets.

This was not a mere fluke in financial numbers but the result of continuous adjustments in NIO's products, technology, and operations. It also serves as a new validation that profitability can be achieved in the high-end pure electric vehicle (EV) segment without engaging in a low-price war.

Continued Growth in the New Vehicle Market

NIO's profitability was first supported by strong sales and a favorable product mix. In 2025, NIO delivered 326,000 new vehicles, up 46.9% year-on-year. In the fourth quarter alone, the company delivered 124,800 vehicles across all brands, a 71.7% year-on-year increase, setting a new single-quarter record. This achievement was not driven by end-of-quarter inventory push, as sales continued to grow in January 2026.

Within NIO's product matrix, high-end models became the core engine of profitability. The all-new ES8, a pure electric SUV priced over RMB 400,000, performed exceptionally well since its launch in September 2025. It delivered over 10,000 units in 41 days, surpassed 30,000 units in 89 days, and exceeded 40,000 units in 100 days. In December 2025 alone, 22,256 units were delivered, with nearly 40,000 units delivered in the fourth quarter, achieving a gross margin of 20%. The ES8 precisely met the demands of consumption upgrades, becoming the cornerstone of NIO's gross profit.

The L90, positioned in the RMB 300,000 segment, and the entry-level Firefly formed a synergistic brand matrix with the ES8. In 2025, the L90 brand delivered over 100,000 units, while Firefly completed its initial layout in the lower-tier markets. The matrix of three brands and 11 key models proved highly effective, driving NIO's sales curve upward from the second half of 2025, peaking at 48,000 units in December.

If blockbuster models form the skeleton of profitability, then in-house technology development strengthens it, with self-developed chips serving as a key cost-reduction tool.

Statistics show that NIO has invested nearly RMB 70 billion, building a full-stack technology capability across 12 domains. By the end of November 2025, the company had applied for or been granted over 9,900 patents. The launch of the Shenji NX9031, the world's first 5nm automotive-grade intelligent driving chip, made it possible to achieve the performance of four external chips with just one self-developed chip. This alone reduced the cost per vehicle by approximately RMB 10,000. Not only did this reduce NIO's reliance on external chip suppliers and give it control over its supply chain, but it also directly boosted gross margins.

In addition to chips, platform-based R&D and supply chain optimizations were also implemented. The NIO ET9 received mass production (mass production) approval for steer-by-wire technology from the Ministry of Industry and Information Technology. The R&D investments made in earlier years finally paid off in 2025, enhancing both NIO's product competitiveness and cost control capabilities.

Meanwhile, NIO's operational adjustments cleared the path to profitability. The company cut inefficient projects, streamlined redundant manpower, and even slowed the expansion of its NIO Houses, which had previously seen heavy investment. It reduced large-scale product launches and shifted to targeted marketing, ensuring every dollar was spent effectively. Tighter expense control, combined with the dilution of fixed costs due to increased sales volume, led to a significant leap in operational efficiency.

Reinventing Battery Swapping

NIO's first profitability also owed much to the optimization of its asset-heavy model, particularly the operational adjustments to its battery swap system, which transformed a former cost burden into a source of confidence.

As of December 23, 2025, NIO had built over 8,400 charging and battery swap stations nationwide, with its battery swap network covering more than 1,000 districts and counties. Previously, the construction of battery swap stations represented a significant one-time capital expenditure for NIO, with infrastructure costs running into the billions, weighing heavily on its cash flow.

In the fourth quarter of 2025, NIO spun off its battery swap business into NIO Power, securing hundreds of billions in dedicated investments from partners such as Wuhan and Hefei local state-owned enterprises and CATL. This allowed the capital expenditure for battery swap stations to be borne by NIO Power, while NIO itself only needed to pay leasing fees, with revenues still belonging to the automaker.

This adjustment represented a lightweight upgrade to the asset-heavy model. The RMB 1.5 billion to RMB 2 billion previously spent on battery swap infrastructure by NIO was converted into service expenditures amortized over the next decade. This not only relieved NIO of short-term financial pressure but also provided stronger capital support for the development of its battery swap business.

As of now, NIO has completed over 100 million battery swaps. By October 26, 2025, the number had already reached 90 million, with the scale effects of the battery swap system gradually becoming apparent.

The Challenges Ahead

Achieving its first quarterly profit is a milestone for NIO, but not the finish line. William Li has already set a new goal: to achieve full-year profitability in 2026 while maintaining sales growth of 40%-50%. This goal reflects NIO's confidence in its strengths.

However, the smart EV market in 2026 will be even more competitive than in 2025, especially as Li Auto, Xiaomi, and Harmony Intelligent Mobility intensify their efforts in the large vehicle segment. NIO's high-end position will face unprecedented challenges.

To secure its profitability, NIO must first stabilize its product lineup. In 2026, NIO will enter another major product year, with three full-size pure electric SUVs in the pipeline: the ES9, all-new ES7, and L90. Among them, the ES9 has entered mass production and is set to launch in the second quarter. Priced to compete with the AITO M9, all-new Li Auto L9, and even the Mercedes-Benz GLS and BMW X7, the ES9 may offer a pleasant surprise in pricing. Li Bin stated, "We believe it will become the most successful pure electric model in its price segment." The all-new ES7 and L90 will target the larger-demand market for five-seater SUVs, aiming to capture orders in their respective price ranges and drive sales growth. Additionally, the launch of the L90 laser radar version and the globalization strategy for Firefly will further enhance NIO's product matrix.

Continued expansion of channels and energy replenishment capabilities will be crucial for NIO's profitability. After the 2026 Spring Festival, NIO will begin deploying NIO-Leapmotor-Firefly integrated stores, focusing on lower-tier markets to address the slow expansion of sink (lower-tier) channels. An additional 1,000 battery swap stations will be added, with fifth-generation stations set for mass deployment by early April, further amplifying the advantages of NIO's energy replenishment system. NIO's battery swap alliance will be a key variable for the future. Currently, eight automakers, including Changan, Geely, and Chery, have joined the alliance. If models compatible with NIO's battery swap standards are delivered at scale in 2026, battery swap stations will transition from NIO-exclusive use to public infrastructure, leading to explosive growth in marginal returns and transforming the battery swap business from a vehicle accessory into an independent energy business. On January 6, 2026, NIO also signed a five-year comprehensive strategic cooperation agreement with CATL, deepening collaboration in technology, ecosystems, and markets to strengthen its energy replenishment system and product R&D.

Of course, NIO faces several challenges. Its sub-brands, Leapmotor and Firefly, have yet to reach break-even. Based on a 15% gross margin per vehicle, Leapmotor needs to sell 15,000 to 20,000 units monthly, while Firefly requires over 20,000 units monthly to amortize costs. However, in the fourth quarter of 2025, Leapmotor averaged only 12,000 units per month, and Firefly less than 10,000 units. How to transform these sub-brands from cost centers to profit generators will be a critical task for NIO. Additionally, technological iterations in solid-state batteries pose a risk of temporal and spatial misalignment for the battery swap system. If solid-state batteries are mass-produced by the end of 2026, the depreciation pressure on battery swap station assets could increase.

Nevertheless, NIO's first profitability provides an important reference for the industry. In an increasingly price-competitive EV market, NIO has proven that adhering to a high-end positioning, deep cultivation (deepening) in-house technology development, and building an asset-heavy energy replenishment system can still lead to profitability.

Since its founding in 2014, NIO has grown over more than a decade, listing on the New York Stock Exchange in 2018 and completing listings on the Hong Kong Stock Exchange and Singapore Exchange in 2022. As of January 2026, NIO's cumulative deliveries have reached 1 million units, a testament to its continuous exploration of technology and business models. This is not a perfect victory but a precious attempt.

In 11 years of car manufacturing, NIO has grown from zero to 1 million units, taking 17 months to go from 500,000 to 1 million units, and now achieving its first profitability. While this first profitability is merely a halftime break, the full-year profitability goal for 2026 will be the true test. But at least for now, NIO can finally take a breather and continue its journey in an even more competitive market with the confidence of profitability. After all, for an automaker committed to high-end positioning, in-house development, and battery swapping, the exploration of profitability has only just begun.