NIO's Deliveries Climb, But Can It Turn the Corner on Profitability?

The electric vehicle (EV) sector is a high-stakes race where growth alone isn't enough—sustainable profitability is the finish line. NIO's May 2025 delivery figures show progress, with a 13.1% year-over-year increase to 23,231 vehicles, but the company's widening net losses and intensifying competition cast doubt on its ability to translate volume into profit. Investors must ask: Does NIO's valuation reflect a risky gamble or an undervalued play on long-term potential?

The Delivery Dilemma: Growth Amid Structural Challenges

NIO's May performance highlights uneven momentum across its three brands. While Firefly's explosive growth (3,680 units, up 1,500% from April) signals potential in the compact EV market, the core NIO brand—a pillar of its premium positioning—saw deliveries plummet 31% month-over-month to 13,270 units. This decline underscores a critical vulnerability: reliance on aging flagship models like the ES6 and ET5, which face stiff competition from rivals like Li Auto's L8 and XPeng's MONA M03.

Meanwhile, Li Auto outperformed NIO in May with 40,856 deliveries, a 16.7% year-over-year rise, while XPeng's 230% surge to 33,525 units further tightens the EV market's competitive noose. NIO's year-to-date deliveries (89,225 units) trail its 2025 target of 443,940—a stretch requiring average monthly deliveries of 37,000, nearly 14,000 more than May's result.

The Profitability Abyss: Losses Widen, but Cost Cuts Offer Hope

NIO's financials paint a bleaker picture. Q1 2025 net losses hit RMB 6.75 billion (US$930 million), a 30% year-over-year increase despite a 5% sequential improvement. The adjusted net loss rose 28% Y/Y to RMB 6.28 billion. Revenue fell short of expectations at RMB 12.03 billion, 2.6% below guidance, driven by a 43% Q/Q drop in vehicle sales revenue. Gross margin, though improved to 7.6% from 4.9% in Q1 2024, slid from 11.7% in Q4 2024 due to higher manufacturing costs from lower production volumes.

Yet NIO's Q2 guidance offers a lifeline. Deliveries are projected to hit 72,000–75,000 units (up 25.5–30.7% Y/Y), with revenue expected to grow 11.8–15.0% Y/Y. Crucially, management aims to slash R&D expenses by 15% in Q2 and 20–25% by year-end, while trimming SG&A costs to 10% of sales by Q4. If achieved, these cuts could stabilize margins: Q2 vehicle margin targets of 15% and a 20%+ goal by Q4 suggest management's resolve to fix profitability.

Battery Tech and Scale: NIO's X-Factor?

NIO's in-house chip development and SkyOS platform, featured in new models like the ES6 and ET5T, could be its差异化 advantage. By reducing reliance on third-party suppliers, these innovations aim to cut costs and enhance performance. Additionally, the upcoming third manufacturing plant—set to open in September—will boost production capacity, addressing bottlenecks that plagued Q1's margins.

However, the EV sector's price wars loom large. NIO's premium pricing strategy faces pressure as competitors like BYD's Seal and Tesla's Model 3 undercut margins. To survive, NIO must balance its luxury halo with Firefly's affordability, leveraging cross-brand synergies to spread fixed costs.

Valuation: Risk vs. Reward

NIO's current valuation—forward price-to-sales of 0.46 and a Zacks Rank #3 (Hold)—reflects investor skepticism. But at a market cap of ~US$14 billion (vs. annual revenue of ~US$30 billion projected for 2025), the stock trades at just 0.5x sales, far below peers like Tesla (2.1x) or Li Auto (0.9x). This discount could signal a buying opportunity if NIO executes its cost cuts and delivers on Q2's targets.

Conclusion: A High-Reward, High-Risk Bet

NIO is a company at a crossroads. Its May delivery growth and Q2 guidance suggest it can scale volume, but profitability remains elusive. Investors must weigh the risks of persistent losses against the potential payoff of a successful cost-reduction and tech-innovation pivot.

For bulls: Firefly's breakout, the new factory, and margin targets could position NIO to break even by late 2025. At current valuations, even a modest profit improvement could spark a rebound.

For bears: The EV sector's brutal competition, NIO's debt-laden balance sheet (negative equity as of March 2025), and the need to sustain double-digit deliveries month after month pose existential threats.

Final Call: NIO's stock offers asymmetric upside for investors willing to bet on execution. While risks are high, the current valuation leaves little room for disappointment—making it a compelling speculative play for those with a long-term horizon and tolerance for volatility.

John Gapper's analysis emphasizes strategic decisions over short-term metrics, urging investors to assess NIO's ability to transform operational discipline into sustainable growth.