NIO's Delivery Surge Masks Persistent Profit Woes: Can Growth Outpace Losses?

NIO Inc. (NIO) delivered 24,925 vehicles in June 2025, marking a 17.5% year-over-year increase and propelling its Q2 deliveries to 72,056—a 25.6% jump. This growth, driven by its three brand segments (NIO, ONVO, and FIREFLY), has fueled optimism about its market share ambitions. Yet beneath the headline numbers lies a stark reality: NIO remains deeply unprofitable, with a trailing twelve-month net loss of £2.59 billion and a negative EBITDA margin of -33.72%. The question for investors is whether this delivery momentum can eventually translate into sustainable profitability—or if NIO's valuation discount reflects a justified skepticism about its path to breakeven.

The Delivery Story: A Triple-Brand Play

NIO's June performance reflects the success of its multi-brand expansion. The premium NIO segment delivered 14,593 vehicles, while ONVO (targeting families) and FIREFLY (small-luxury EVs) added 6,400 and 3,932 units, respectively. Cumulative deliveries hit 785,714 by June 2025, underscoring a 30% year-to-date growth. This strategy has also won accolades: the ET5/ET5T and EC6 models topped J.D. Power's 2025 quality rankings in key categories.

Yet this growth comes at a cost. While ONVO and FIREFLY are scaling quickly—FIREFLY's first model began deliveries in April 2025—NIO's core brand saw Q2 deliveries fall 18% year-over-year. This raises concerns about brand cannibalization and execution risks as NIO competes in multiple EV segments.

Valuation: Growth vs. Profitability

NIO's stock trades at a price-to-sales (P/S) ratio of 0.90 and an enterprise value-to-sales (EV/Sales) of 1.21, both well below peers like Li Auto (LI) and XPeng (XPEV). But these multiples ignore the company's ongoing losses: negative return on equity (-150%) and a Piotroski F-Score of 3 (signaling financial distress). The EV/EBITDA ratio—already negative at -3.51—worsens as EBITDA margins remain stuck in negative territory (-24.17% TTM).

The disconnect is stark: while deliveries rose 40% in Q1 2025, the stock fell 20% year-to-date. Analysts project NIO will remain unprofitable through 2025, with losses widening further. This contrasts with Li Auto, which reported a 19.8% vehicle margin in Q1 2025, and XPeng, which saw margins improve to 10.5%. NIO's vehicle margin, at 10.2%, lags behind both.

The Profitability Hurdle

NIO's path to breakeven hinges on two factors: cost control and margin expansion. Management aims to reduce SG&A expenses to 10% of revenue by Q4 2025 and target a 15% gross margin for its core brand. The introduction of in-house chips (NX9031) and next-gen platforms, like the ES8 SUV, could cut costs by £10,000 per vehicle. But execution is uncertain.

Meanwhile, NIO's debt-to-equity ratio of 4.15 and negative net cash (£1.13 billion) leave little room for error. Competitors like XPeng, which delivered 94,008 vehicles in its latest quarter (vs. NIO's 72,056), are outpacing NIO in both scale and profitability.

Investment Takeaways

1. Growth vs. Valuation: NIO's delivery momentum is real, but investors must weigh its expansion against its financial fragility. The stock's low P/S ratio may reflect an undervaluation—but only if margins improve.
2. Peer Comparison: Li Auto and XPeng are outperforming on both delivery growth and profitability. NIO needs to demonstrate margin gains to justify its valuation.
3. Risk Factors: The EV market's price wars, supply chain volatility, and competition from legacy automakers pose existential risks.

Final Verdict

NIO's June delivery numbers are a positive sign, but profitability remains elusive. The stock's valuation suggests skepticism about its ability to turn losses around. While the consensus price target of £5.08 implies a 16.5% upside, investors should demand clearer signs of margin improvement before taking a position. For now, NIO's story is one of promise overshadowed by persistent losses—a risk-reward equation that favors caution until profitability materializes.

Investment recommendation: Hold for now. Monitor Q3 results for margin trends and cost-control progress. Consider dipping in only if the stock tests support levels below £4 and delivers a margin beat.