Nio's Record December: A Catalyst for a Premium EV Re-rating?

The core event is a delivery surge that capped a stellar quarter. Nio delivered a record 48,135 vehicles in December 2025, a 54.6% year-on-year increase and a 32.7% month-on-month jump. This capped a quarter of explosive growth, with the company achieving 124,807 deliveries in Q4, up 71.7% year-over-year and 43.3% sequentially. The momentum extended to its flagship model, the ES8, which surpassed 40,000 cumulative deliveries in December, setting a record for BEVs above RMB400,000 in China.

The immediate investment question is whether this surge is a sustainable inflection or a temporary spike. The numbers are undeniably strong, with Q4 growth outpacing the full-year rate of 46.9%. Yet the pattern of monthly deliveries shows volatility, with December's record coming after a dip in November. The key will be whether this December peak is the new normal or a one-off fueled by seasonal demand or specific model launches. For now, the record-breaking quarter provides a powerful narrative of growth, but the sustainability of that growth is the critical test.

The Mechanics: Growth Drivers and Supply Chain Realignment

The delivery surge is not a single-brand story. Nio's record December volume of 48,135 vehicles was powered by all three of its brands, with the premium NIO brand leading the charge. This broad-based expansion, which drove a 71.7% year-on-year increase in Q4, shows the company's strategy of capturing different market segments is working. Yet the operational story behind this growth reveals a critical pivot in its supply chain.

Facing tight battery capacity, Nio is reversing its multi-supplier strategy. The company has halted battery cooperation with BYD's FinDreams for its ONVO L60 model, citing insufficient orders to justify multiple suppliers. More significantly, it is consolidating key battery supply with CATL. For the 100-kWh battery used in the NIO brand, the supplier has switched from CALB to CATL. For the 85-kWh battery in the ONVO L90, CATL is now the primary supplier. This shift is a direct response to production needs, as CATL prioritized resources from its Luoyang and Liyang facilities to support Nio's new vehicle deliveries.

The partnership is now a strategic necessity. CATL's support goes beyond just cells; it has invested in Nio's power network and battery assets to alleviate funding pressures. This deep integration is critical, as Nio's annual battery procurement could be worth over RMB 10 billion. The bottom line is that Nio's growth engine is now more dependent on a single, albeit powerful, partner. The company's ability to sustain its delivery momentum hinges on maintaining this crucial relationship, especially as it navigates capacity constraints and rising costs.

The Valuation Setup: Outperformance vs. The Sector

Nio's stock performance in 2025 has been a story of strong execution versus a turbulent sector. The company's vehicle deliveries rose more than 45% for the year, a figure that outpaced Li Auto's sharp decline and matched XPeng's robust growth. This operational strength translated into a 26% gain YTD for Nio's shares, a clear outperformance against Li Auto's ~28% drop. However, the stock still underperformed XPeng's spectacular 80% surge, highlighting the extreme divergence in sentiment and results across the U.S.-listed Chinese EV group.

The valuation setup now hinges on whether this relative outperformance is sustainable or if it has already priced in the good news. The recent upgrade to 'Buy' by Freedom Capital, which raised its price target to $7, reflects a view that Nio's accelerating delivery growth is a near-term catalyst. The analyst expects rising shipments to push revenue to new records. Yet, the median price target of $7 suggests the Street sees room for further upside, implying the current price does not fully capture the momentum.

This creates a tactical tension. Nio is beating its peers on growth, but it is not leading the pack on stock returns. The sector's broader context is one of sharp contrasts, with XPeng's explosive rally and Li Auto's collapse setting extreme benchmarks. For Nio, the risk is that its solid but not spectacular performance fails to excite investors chasing the next big winner. The stock's recent gains have been driven by delivery milestones, including a record 124,807 vehicles delivered in Q4, but the market will now demand proof that this growth trajectory can continue into 2026.

Catalysts and Risks: What to Watch Next

The immediate test for the sector's momentum is the Q4 sales report, which will determine if the recent optimism is justified. For Nio, the key near-term catalyst is its own performance. CEO William Li has publicly targeted vehicle sales above 30 billion yuan (around $4.3 billion) for the quarter. This ambitious figure, which would represent a 65% to 72% year-over-year increase, is a direct challenge to the sector's slowing growth trajectory. The market has already rewarded this bold outlook, with Nio's stock gaining 10% over the past five days. The execution of this sales target will be the primary driver for the stock in the coming weeks.

However, a major risk looms in the premium EV segment where Nio operates. Despite its record deliveries, the company faces intense competitive pressure. This rivalry is a key reason why investors are scrutinizing its ability to convert high volume into improved profitability. The company's recent move to consolidate its battery supply chain underscores this challenge. Nio has suspended cooperation with BYD's FinDreams for its Onvo L60 model, citing insufficient orders to support multiple suppliers. At the same time, it has increased reliance on CATL for other batteries. This reversal of a multi-year strategy to diversify suppliers highlights the operational and financial pressures of scaling rapidly in a crowded market.

The bottom line is a binary setup for Nio. The stock's rally is built on the promise of hitting its $4.3 billion sales target. The critical uncertainty is whether the company can achieve this volume while managing the intense competition that is already forcing it to streamline its supply chain. For the broader sector, the path to a sustained recovery depends on whether other players can match or exceed Nio's ambitious Q4 guidance, proving that the December momentum is not a fleeting event but the start of a new, more profitable growth phase.