Radar Finance Production | Written by Li Yihui | Edited by Shen Hai

NIO's sales hit a new high, but losses have widened.

On November 20, NIO released its third-quarter 2024 financial report, showing that revenue for the quarter was 18.674 billion yuan, lower than market expectations and a year-on-year decrease of 2.1%; net loss was 5.06 billion yuan, compared to a net loss of 4.557 billion yuan in the same period last year, with an adjusted net loss of 4.413 billion yuan, compared to 3.953 billion yuan in the same period last year.

Since 2018, the company's cumulative losses have exceeded 80 billion yuan.

In terms of sales, data shows that in the third quarter, NIO delivered a record-high 61,900 smart electric vehicles, with automotive gross margins increasing to 13.1%. Currently, in addition to the main NIO brand and the Ledao brand, NIO has also named its third brand "firefly," with the first model scheduled for delivery in the first half of 2025.

While performance has diverged from sales growth, this may be due not only to increased operating expenses but also to the continuous decline in NIO's average vehicle selling price. NIO stated that the average selling price declined due to changes in product mix, but this was partially offset by an increase in delivery volume. According to Dolphin Investment Research data, the average selling price of vehicles this quarter was 270,000 yuan, lower than the market expectation of 276,000 yuan and the implicit average price of 282,000 yuan in NIO's previous guidance.

Notably, while many automakers have announced their embrace of the extended-range route, NIO has insisted on deploying battery swapping stations and not pursuing extended-range models. However, the heavily invested battery swapping business has not yet achieved breakeven. Regarding when the 10-year-old NIO will become profitable, CEO Li Bin stated during the earnings call that losses are expected to narrow next year, with the goal of achieving profitability by 2026.

However, following this statement, Macquarie downgraded NIO Group's H-share rating to neutral with a target price of HK$38 and its ADR rating to neutral with a target price of US$4.80.

Declining average vehicle price and increasing expenses

According to Tianyancha, NIO was founded in 2014 in Shanghai and is primarily engaged in research and experimental development. The company has a registered capital of 200 million yuan, exceeding 99% of its peers in Shanghai, with a paid-in capital of 138.3961 million yuan.

On the evening of November 20, NIO released its third-quarter report, showing total revenue of 18.67 billion yuan for the quarter, a year-on-year decrease of 2.1% and a quarter-on-quarter increase of 7%.

Automotive sales for the third quarter were 16.7 billion yuan, a decrease of 4.1% from the third quarter of 2023 and an increase of 6.5% from the second quarter of 2024.

NIO stated that the slight decrease in automotive sales compared to the third quarter of 2023 was mainly due to a decline in the average selling price caused by changes in product mix, but this was partially offset by an increase in delivery volume.

Data shows that NIO delivered 61,900 vehicles in the third quarter of 2024, including 61,000 high-end smart electric vehicles under the NIO brand and 832 family smart electric vehicles under the Ledao brand.

In response, BOCOM International pointed out that NIO's average vehicle price continued to decline quarter-on-quarter to 270,000 yuan, lower than the market expectation and the previous third-quarter revenue guidance of 280,000 yuan, reflecting increased promotional efforts for the NIO brand in the third quarter.

In addition, NIO's other sales in the third quarter were 1.976 billion yuan, an increase of 19.2% from the third quarter of 2023 and 11.9% from the second quarter of 2024.

NIO stated that other sales increased compared to the third quarter of 2023, mainly due to increased income from parts, accessories sales, and vehicle after-sales services as vehicle ownership continued to rise, as well as increased income from providing energy solutions, partially offset by a decline in used car sales revenue.

According to iFinD data from Tonghuashun, NIO's cumulative revenue for the first three quarters of 2024 was 46.028 billion yuan, compared to 38.515 billion yuan for the same period last year, representing a year-on-year increase of 19.51%.

Although revenue has maintained growth, it is difficult to conceal the loss dilemma. The financial report shows that the net loss for the third quarter of 2024 was 5.06 billion yuan, an increase of 11.0% from the third quarter of 2023 and 0.3% from the second quarter of 2024.

Excluding share-based compensation expenses, the company's adjusted net loss (non-GAAP) for the third quarter of 2024 was 4.413 billion yuan, an increase of 11.6% from the third quarter of 2023 and a decrease of 2.7% from the second quarter of 2024.

With the net loss for the third quarter expanding year-on-year to 5.06 billion yuan, the company's cumulative losses for the first three quarters of this year have reached 15.29 billion yuan. Since 2018, NIO's cumulative losses have exceeded 80.7 billion yuan.

Judging from third-quarter data, among the new carmaking forces of "NIO, Xpeng, and Li Auto," NIO ranks last in profitability.

Data shows that Li Auto achieved revenue of 42.9 billion yuan in the third quarter, an increase of 23.6% year-on-year; net profit was 2.8 billion yuan, a year-on-year increase of 0.3%. During the same period, Xpeng achieved revenue of 10.1 billion yuan, a year-on-year increase of 18.4%; net loss was 1.81 billion yuan, compared to a loss of 3.89 billion yuan in the same period in 2023.

The reason for this is that while revenue declined year-on-year, NIO's various expenses increased, which is a direct cause of the widened loss for the quarter.

The financial report shows that NIO's research and development expenses for the third quarter of 2024 were 3.319 billion yuan, a year-on-year increase of 9.2% and a quarter-on-quarter increase of 3.1%. During the same period, the company's selling, general, and administrative expenses were 4.109 billion yuan, a year-on-year increase of 13.8% and a quarter-on-quarter increase of 9.3%.

NIO expects deliveries in the fourth quarter to range from 72,000 to 75,000 vehicles, representing a year-on-year increase of 43.9% to 49.9%; revenue guidance for the fourth quarter is 19.68 billion to 20.38 billion yuan, representing a year-on-year increase of 15.0% to 19.2%. BOCOM International believes that this sales guidance is slightly lower than expected.

Regarding the company's overall profit timeline, Li Bin expects, "The company aims to achieve profitability by 2026." However, considering that during the 2021 earnings call, Li Bin set the goal of achieving profitability by 2024, whether this new profitability target will be met on schedule remains to be seen.

Arrival of the Third Brand "Firefly"

"Starting next year, NIO will enter a new product cycle, with new product deliveries from the Ledao and Firefly brands, pushing the company into a faster growth phase," said Li Bin.

A significant increase in sales is undoubtedly key to NIO's turnaround from loss to profit. According to Li Bin, NIO aims to achieve a 100% sales increase in 2025, with annual sales reaching approximately 450,000 vehicles.

According to the financial report, on September 19, 2024, the first model of the Ledao brand, the family-oriented smart electric mid-size SUV L60, was officially launched. Since late September 2024, production and delivery of the Ledao L60 have steadily increased.

With the support of the new Ledao L60, NIO delivered 21,000 vehicles in October, including 16,700 vehicles from the main NIO brand and 4,319 vehicles from the Ledao brand.

As of October 31, 2024, NIO had delivered 170,300 vehicles for the year, with a cumulative delivery volume of 619,900 vehicles.

Based on the upper limit of the company's fourth-quarter delivery guidance of 75,000 vehicles, plus the 149,300 new vehicles delivered in the first three quarters, NIO's maximum annual delivery volume would be 224,300 vehicles.

To support the company's goal of doubling sales next year, the two lower-priced sub-brands need to step up their efforts. Li Bin also has high hopes for this, expecting Ledao to deliver 10,000 vehicles in December this year and 20,000 vehicles in March next year. In 2025, this sub-brand will also launch two new home SUVs.

"One is a medium to large SUV with 6 to 7 seats, and the other is a large five-seater SUV, equivalent to Li Auto's L8 and L7," said Li Bin. Compared to Li Auto's L7 and L8, Ledao's two new SUVs will be highly competitive in terms of pricing.

Furthermore, NIO's third brand will soon be launched. On November 20, Li Bin announced during the third-quarter earnings call that the third brand would be officially named "Firefly" and that the first product would share the same name as the brand.

According to introductions, Firefly is positioned in the high-end compact car market, equivalent to BMW Group's MINI brand within NIO's portfolio.

Public reports indicate that Firefly's price range will be between 100,000 and 200,000 yuan. NIO hopes to enter the low-price mass market with this brand and efficiently contribute to sales through existing sales channels.

As planned, the Firefly brand will be officially launched at NIO Day 2024 on December 21, with the first model scheduled for delivery in the first half of 2025.

However, even without considering the increasingly fierce market competition against the backdrop of slowing global auto market growth, the launch of a large number of new products will pose a significant challenge to NIO's delivery capabilities.

It is reported that the first product of the Ledao brand, the L60, which was launched in September, has received positive market feedback, but it will not achieve a production capacity of 10,000 vehicles until December. The slow ramp-up in production capacity has led to slower delivery speeds and affected subsequent new orders.

Li Bin also admitted that due to capacity issues, the Ledao L60 cannot be delivered quickly, which objectively affects orders; NIO will next accelerate the ramp-up of the entire supply chain and be more proactive in stocking up for the launch of Firefly and ET9.

Battery swapping stations have not yet achieved overall profitability

As a high-end smart electric vehicle brand, NIO has always been renowned for its "user experience first" approach. To build a high-end brand image, NIO has invested heavily, from battery swapping station construction to user community operations.

Since the launch of NIO's first battery swapping station in 2018, the company has persisted in its layout in the battery swapping sector. According to "Economy Insight" news, on November 21, at the "2024 China Auto Charging and Swapping Ecosystem Conference," NIO Senior Vice President Shen Fei revealed that NIO currently has 2,679 battery swapping stations nationwide, equipped with over 24,000 charging piles.

Media reports indicate that the construction cost of NIO's first-generation battery swapping station is approximately 3 million yuan, while the second-generation costs around 2 million yuan and the third-generation around 1.5 million yuan.

Currently, NIO has launched its fourth-generation battery swapping station in December 2023 and plans to have over 3,310 battery swapping stations by the end of 2024. Furthermore, according to its announced "County-to-County Connectivity" plan for battery swapping, by December 31, 2025, NIO will have completed the deployment of battery swapping stations in 27 provincial administrative regions and over 2,300 counties.

It is not hard to imagine the enormous cost of NIO's battery swapping stations, considering labor costs, maintenance expenses, and other factors.

In fact, NIO's battery swapping business is currently in a loss-making state. During the second-quarter earnings call, Li Bin also discussed the issue of battery swapping losses. One reason is that lifetime free battery swapping services were provided to users during the initial product deliveries, and the other is that in the past two years, NIO has recognized the significant boost that the battery swapping network provides to car sales, leading to an advanced layout of battery swapping stations.

However, from public data, actual demand is not yet sufficient for NIO's battery swapping stations to achieve breakeven. NIO CFO Qu Yuxie recently introduced that a battery swapping station can achieve breakeven if it performs battery swaps 60 to 70 times a day, while NIO's fourth-generation battery swapping stations have a capacity of up to 480 swaps per day. In Shanghai, NIO has deployed over 150 battery swapping stations, with most regions experiencing over 100 swaps per day.

However, excluding these high-usage areas, the situation is not as optimistic. According to Shen Fei, NIO's battery swapping stations currently perform approximately 90,000 to 100,000 swaps per day.

Calculating this on a per-station basis, the maximum number of swaps per day is approximately 37.3, which is close to the figure of "currently averaging 30 to 40 swaps per day per station" released by Li Bin during the second-quarter earnings call. However, there is still a significant gap from achieving the breakeven point of over 60 swaps per day per station.

To this end, NIO has taken multiple measures to develop its charging and swapping energy replenishment system, officially launching the Power Partner Plan in August to open up battery swapping and charging station cooperation to the public.

Additionally, NIO has formed battery swapping alliances with multiple enterprises. "If 100 million vehicles in China adopt battery swapping, and 60% of them use NIO's battery swapping network, I'll laugh every night," Li Bin once said.

Whether Li Bin will see the day when NIO can "profit effortlessly" remains to be seen.