NIO's Q2 2025: Contradictions Emerge on R&D Cost Control, Breakeven Strategy, Pricing, and Vehicle Margin Targets

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 02, 2025

Financials Results

• Revenue: RMB 19.0B, up 9% YOY and 57.9% QOQ
• Gross Margin: 10.0%, compared to 9.7% in Q2 2024 and 7.6% in Q1 2025

Guidance:

• Q3 deliveries expected at 87,000–91,000 (+40.7% to +47.1% YOY)
• Q4 deliveries targeted ~150,000 (≈50,000/month) across 3 brands
• Non-GAAP quarterly breakeven targeted in Q4
• Group vehicle margin expected at ~16%–17% in Q4; L90 and ES8 at ~20%
• Q4 monthly capacity: ONVO ~25k; NIO brand ~25k; FIREFLY ~6k
• Q3/Q4 non-GAAP R&D ~RMB 2B per quarter; Q4 SG&A within 10% of revenue
• No new model launches in 2025; ONVO L80 delayed; ES9 and ES7 planned next year

Business Commentary:

* Sales and Revenue Growth: - NIO Inc reported total revenues of RMB 19 billion for Q2 2025, indicating a 9% year-over-year increase and 57.9% quarter-over-quarter growth. - The growth was mainly driven by higher deliveries and the successful launch of new models like the ONVO L90 and the all-new ES8, which boosted customer confidence and demand.

• Vehicle Margin and Cost Control:
• NIO's vehicle margin was 10.3%, facing a decline due to changes in product mix, but gross margin improved to 10% due to positive mix effects.

• Cost control and efficiency gains from the implementation of the Cell Business Unit mechanism contributed to stable vehicle margins and overall profitability.

• New Model Success and Market Demand:

• The delivery of the ONVO L90 and the all-new ES8 exceeded expectations, contributing to total deliveries of 21,017 vehicles in July and 31,305 in August.

• Strong market demand was driven by the ES8's competitive pricing and features, as well as the L90's attractive pricing and spacious design, which repositioned NIO in the large 3-row SUV market.

• Financial Stability and Efficiency:

• NIO's adjusted loss from operations narrowed by 30% quarter-over-quarter to RMB 4 billion, non-GAAP.
• The narrowing loss was supported by improved R&D efficiency and SG&A optimization, contributing to overall financial stability amidst market uncertainties.

Sentiment Analysis:

• Deliveries up 25.6% YOY; revenue up 9% YOY and 57.9% QOQ; overall gross margin improved to 10%. Management guides Q3 deliveries of 87–91k and targets non-GAAP breakeven in Q4 with vehicle margin of 16–17% and ~20% for L90/ES8. Non-GAAP operating loss narrowed >30% QOQ.

Q&A:

• Question from Jeff Chung (Citi): ES8 and L90 capacity ramp and whether December monthly run-rate can reach 55,000 units; delivery targets for the rest of the year?
  Response: L90 to reach ~15k/month capacity by October; ES8 ramping through Q4; group targeting ~50k/month average in Q4 (≈150k for the quarter).

• Question from Jeff Chung (Citi): Gross margin trajectory, non-vehicle margin trends, and potential for Q4 breakeven; L90 and ES8 margins specifically?
  Response: Group vehicle margin expected ~16%–17% in Q4; L90 and ES8 target ~20% gross margin; other sales margin volatile with tech services, otherwise around breakeven; aiming for Q4 non-GAAP breakeven.

• Question from Bin Wang (Deutsche Bank): R&D and SG&A levels for Q3/Q4 and definition of breakeven (GAAP vs non-GAAP; operating vs net)?
  Response: Breakeven targeted on a non-GAAP basis; R&D ~RMB 2B per quarter in Q3/Q4; SG&A to be within ~10% of revenue in Q4 (not breakeven in Q3 due to launches).

• Question from Tim Hsiao (Morgan Stanley): New model pipeline and whether launch schedules will adjust given capacity prioritized for L90 and ES8; implications of earlier NIO Day?
  Response: Prioritizing L90/ES8; no additional model launches in 2025—ONVO L80 delayed; next year adds ES9 and ES7; Q4 monthly capacity: ONVO ~25k, NIO brand ~25k, FIREFLY ~6k.

• Question from Tim Hsiao (Morgan Stanley): Will aggressive pricing extend to upcoming models and what is a sustainable vehicle margin next year?
  Response: Yes; enabled by in-house tech and cost structure; long-term targets: NIO brand ~20–25%, ONVO ≥15%, FIREFLY ~10% vehicle margins.

• Question from Jing Chang (CICC): Key drivers behind L90/ES8 success beyond tech/platform upgrades (e.g., supply chain, network)?
  Response: Third-gen 900V architecture, central compute/zonal design, in-house smart driving chip, lighter battery packs, sharper product definition, and tighter supplier partnerships lowered cost and improved user experience.

• Question from Ming-Hsun Lee (Bank of America): Confirm 2026 new model pipeline (ES6, ES7, ES9, L80, FIREFLY 2)?
  Response: 2026 focus on three large SUVs (including ES9 and ES7, plus ONVO L80 timing TBD); no major upgrades for ET5/ET5T/ES6/EC6 next year; no second FIREFLY model next year.

• Question from Ming-Hsun Lee (Bank of America): 2026 R&D per quarter and CapEx plans for 2025/2026?
  Response: Non-GAAP R&D expected at ~RMB 2.0–2.5B per quarter in 2026; CapEx next year similar to 2025, leveraging partners for swap network; depends on model cadence.

• Question from Paul Gong (UBS): Financial impact of standardizing 100 kWh battery on NIO brand models?
  Response: Largely neutral financially as prior launch incentives were withdrawn to offset; improves demand funnel with more leads.

• Question from Paul Gong (UBS): Cost savings per car from switching to self-developed chips at various volumes?
  Response: Savings not tied to volume; in-house chip offers cost advantage vs prior and industry flagship solutions, but no per-unit figures disclosed.

• Question from Yuqian Ding (HSBC): Risk of internal cannibalization from ES8/L90 pricing on ES6/L60 and 2026 pipeline impact?
  Response: L90 is lifting L60 orders; ES8 pricing boosts NIO brand awareness and supports 5/6 demand; BEV large 3-row segment expanding—net effect positive.

• Question from Yuqian Ding (HSBC): Further detail on OpEx optimization and targets?
  Response: 2025 targets: non-GAAP R&D within ~RMB 2B/quarter; SG&A ~10% of revenue in Q4; 2026 R&D ~RMB 2.0–2.5B/quarter with ongoing SG&A efficiency gains.

• Question from Tina Hou (Goldman Sachs): Long-term stabilized monthly volumes for L90 and ES8?
  Response: Too competitive to fix a stable level; aim to prolong momentum via a revamped sales/marketing paradigm.