NIO's Q3 2025 Earnings Call: Contradictions Emerge on Breakeven Goals, Pricing Strategy, R&D/SG&A Costs, 2026 Profitability, and R&D Expense Targets

Date of Call: November 25, 2025

Financials Results

• Revenue: RMB 21.8 billion, up 60.7% YOY and 14.7% QOQ
• Gross Margin: Overall gross margin 13.9%, compared with 10.7% in Q3 last year and 10.0% last quarter (vehicle margin 14.7% vs 13.1% LY and 10.3% prior quarter)

Guidance:

• Q4 deliveries expected 120,000–125,000 units (up ~60.1%–72% YOY), target of quarterly breakeven in Q4.
• Expect vehicle gross margin ~18% in Q4; All‑New ES8 margin >20% and substantial Q4 volume.
• Plan to reach ~50,000 monthly deliveries in H1 next year; launch cadence unchanged (two models in Q2, one in Q3).
• Target full‑year 2026 non‑GAAP profitability and vehicle gross margin ~20% driven by five large models.
• R&D run‑rate ~RMB2bn/quarter; SG&A target ~10% of revenue (Q4 ~12%).

Business Commentary:

* Sales Growth and Market Share Expansion: - NIO Inc. delivered 87,071 smart EVs in Q3 2025, representing a 40.8% year-over-year increase. - The company launched two large 3-row battery electric SUVs, leading to strong recognition and solid demand. -

- The expansion of the FIREFLY brand into various price segments and the broad market coverage contributed significantly to the sales growth.

• Financial Performance and Margin Improvement:
• The company achieved a vehicle gross margin of 14.7% in Q3, up from 13.1% in the previous quarter, and 10.3% in the prior quarter.

• This improvement resulted from decreased material costs per unit and comprehensive cost reduction efforts.

• New Model Launches and Market Niche:

• NIO introduced the ONVO L90 and the All-New ES8, which have been well-received in their respective segments.

• The strong demand for products like the All-New ES8, ES6, and L90 contributed to a high-margin product mix.

• Technological Advancements and Market Strategy:

• NIO's full-stack R&D capabilities are focused on chargeable, swappable, and upgradable batteries.
• The company's strategic expansion into overseas markets, particularly with the FIREFLY brand, aims to capitalize on diverse market segments globally.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted deliveries of 87,071 in Q3 (+40.8% YOY), Q4 delivery guide of 120k–125k and ‘confidence in achieving quarterly breakeven in Q4’; gross margin improved to 13.9% (highest in nearly 3 years) and guidance calls for vehicle margin ~18% in Q4 and ~20% in 2026.

Q&A:

• Question from Tim Hsiao (Morgan Stanley): Will the lower Q4 delivery guidance (~120k–125k vs. prior ~150k) affect the company's breakeven target and when can NIO return to a ~50k monthly run rate?
  Response: Management: Still confident in achieving Q4 quarterly breakeven despite subsidy phase‑out reducing volume; cost controls, stronger non‑vehicle sales and expected vehicle gross margin (~18%) plus ES8 (>20%) should offset impact.

• Question from Tim Hsiao (Morgan Stanley): If the 50k/month target won't be hit in Q4, when will NIO reach 50k/month and will you accelerate new‑model launches into Q1 to boost momentum?
  Response: Management: Expect >50k/month in H1 next year; will not accelerate launches — sticking to two new models in Q2 and one in Q3.

• Question from Paul Gong (UBS): With the 2026 purchase tax change (5% levy), will NIO compensate customers or adjust via the supply chain?
  Response: Management: Most customers subscribe to battery so tax base impact is limited; ES8 buyers given purchase‑tax guarantee; no blanket compensation planned—company will remain flexible based on market dynamics.

• Question from Paul Gong (UBS): Should we expect R&D to stay at ~RMB2bn/quarter and SG&A around RMB4bn/quarter going into 2026?
  Response: Management (CFO): R&D expected to remain ~RMB2bn per quarter with efficiency focus; SG&A ~RMB4bn in absolute terms (Q4 ~12% of sales) with a target to reach ~10% of revenue next year.

• Question from Y.C. Lai (JPMorgan): Given product cadence and expense control, is it fair to expect breakeven in Q2 and strong profitability in 2026?
  Response: Management: Targeting full‑year 2026 non‑GAAP profitability and expect vehicle gross margin ~20% next year driven by multiple new higher‑margin large models and continued cost optimization.

• Question from Y.C. Lai (JPMorgan): What's the long‑term strategy between insourcing (in‑house chips) versus outsourcing?
  Response: Management: Will continue in‑house chip investment (NX9031) for performance and cost advantages and pursue partnerships to commercialize the chip technology.

• Question from Bin Wang (Deutsche Bank): Q3 margin improved — how much was driven by cost reduction versus mix (L90)? Please break down drivers.
  Response: Management (CFO): Q3 margin gain mainly from supply‑chain cost reductions and higher‑margin L90 volumes; provided model margin ranges (ES8 ~20%, ET5 15–20%, ES6/EC6 >20–25%, L90 15–20%).

• Question from Bin Wang (Deutsche Bank): On the joint venture with Axera, why that partner and what's the JV business model — sales company or chip production/licensing and any license income?
  Response: Management: JV aims to commercialize and sell NIO's chip solutions via partners (non‑exclusive), leveraging partners' chip expertise and client networks to reach automotive and non‑automotive customers.

• Question from Ming Chung (Citigroup): Does Q4 ASP rise (to RMB246k) driven by ES8 and will Q1 vehicle margin stay close to Q4 levels given mix?
  Response: Management (CFO): Q4 ASP rises due to ES8 (c.40k FY volume concentrated in Q4); Q1 is seasonally weaker so margin should fall from Q4 but remain above last year's Q1, helped by ES8 backlog mitigating seasonality.

• Question from Ming‑Hsun Lee (BofA): What is NIO's overseas expansion strategy for the next few years?
  Response: Management: Moving from direct sales to partner‑led expansion; FIREFLY will lead international rollout with partners already identified in 10+ countries across Europe, Asia, Middle East and South America.

• Question from Ming‑Hsun Lee (BofA): Will ONVO launch more mass‑market products and pursue price points at or below RMB200k?
  Response: Management: ONVO is positioned for families with a price band RMB100k–300k, will expand lineup including a new platform targeting

• Question from Jing Chang (CICC): With R&D spending down, how do you allocate limited R&D between short‑term efficiency and long‑term AI/intelligence goals?
  Response: Management: Using the Cell Business Unit (CBU) and ROI reviews to prioritize R&D, maintain core full‑stack capabilities while improving efficiency so long‑term competitiveness isn't compromised.

• Question from Yuqian Ding (HSBC): What cost benefits occur once volume thresholds are hit — e.g., battery and other BOM items?
  Response: Management (CFO): Scale enables stronger supplier bargaining and manufacturing efficiency, reducing per‑unit costs and contributing to next‑year margin improvement toward the ~20% vehicle margin target.

• Question from Yuqian Ding (HSBC): With new large models (and some lower‑priced ONVO models), will mix dilute margins or will ONVO scale outweigh dilution?
  Response: Management (CFO): The three new large SUVs are higher‑end and will benefit from ES8/L90 cost synergies; combined five large models are expected to lift overall vehicle margin to around 20%.

Contradiction Point 1

Breakeven Target and Financial Performance

It involves differing expectations regarding the company's financial performance and breakeven targets, which are crucial for investor confidence and strategic planning.

Why is NIO's fourth-quarter delivery guidance lower than the previous target? - Tim Hsiao (Morgan Stanley)

2025Q3: Q4 breakeven target remains achievable. Vehicle gross margin in Q4 expected to be around 18%. - Bin Li(CEO)

What are Q3 and Q4 R&D and SG&A expenses, and is breakeven GAAP or non-GAAP based? - Bin Wang (Deutsche Bank)

2025Q2: The break-even target is non-GAAP, aiming to improve operational efficiency without compromising major R&D activities or product planning. - Bin Li(CEO)

Contradiction Point 2

Pricing Strategy and Margins

It pertains to the company's pricing strategy and margin expectations, which are critical for revenue growth and profitability.

What are the Q4 ASP and gross profit outlook, and how do they relate to Q1 2026? - Ming Chung (Citigroup Inc.)

2025Q3: The average selling price will increase in Q4 due to high-margin ES8 sales. - Stanley Qu(CFO)

Will the new model pipeline be adjusted due to demand for L90 and ES8, and what is the company's pricing strategy for upcoming models? - Tim Hsiao (Morgan Stanley)

2025Q2: The long-term product margin target is 20% for the group, with 25% for the new brand and 15% for ONVO, supported by competitive pricing and cost structure. - Bin Li(CEO)

Contradiction Point 3

R&D and SG&A Expense Management

It involves the management of R&D and SG&A expenses, which are key to operational efficiency and long-term competitiveness.

Why is NIO's Q4 delivery guidance lower than the previous target? - Tim Hsiao (Morgan Stanley)

2025Q3: R&D expenses will remain flat at around RMB 2 billion per quarter, focusing on efficiency. - Stanley Qu(CFO)

What are Q3 and Q4 R&D and SG&A expenses, and what is the breakeven definition in GAAP or non-GAAP terms? - Bin Wang (Deutsche Bank)

2025Q2: R&D expenses will be non-GAAP RMB 2 billion per quarter, and SG&A expenses will be within 10% of sales revenue in Q4. - Bin Li(CEO)

Contradiction Point 4

2026 Profitability Targets

It involves changes in financial forecasts, specifically regarding profitability targets, which are critical indicators for investors.

What is the long-term strategy for in-house vs. outsourcing, given the Axera partnership? - Y.C. Lai (JPMorgan Chase & Co)

2025Q3: Full-year 2026 profitability on a non-GAAP basis is a target, driven by strong product competitiveness and margin improvements from large models. - Bin Li(CEO)

How will NIO achieve its 30,000 monthly sales target by year-end, and when will cost reductions meaningfully contribute? - Tim Hsiao (Morgan Stanley)

2025Q1: We expect to achieve non-GAAP profitability for the year. - Yu Qu(CFO)

Contradiction Point 5

R&D Expense Targets

It involves changes in operational targets, specifically regarding R&D expenses, which are crucial for understanding the company's investment in innovation and competitiveness.

Will the lower cost structure become the new normal for 2026, with R&D at approximately RMB 2 billion quarterly? - Paul Gong (UBS Investment Bank)

2025Q3: R&D expenses will remain flat at around RMB 2 billion per quarter, focusing on efficiency. - Stanley Qu(CFO)

How will NIO achieve its 30,000 monthly sales target by year-end given moderate sales growth? When will cost reductions yield meaningful results? - Tim Hsiao (Morgan Stanley)

2025Q1: We expect to reduce R&D expenses by approximately 15% in the second quarter and by 20% to 25% year-over-year in the fourth quarter. - Yu Qu(CFO)