China-based electric vehicle maker Nio (NIO) gave an optimistic EV delivery outlook Thursday after first-quarter earnings and revenue fell more sharply than expected amid the price war. Nio stock dived, with rival startup Zeekr (ZK) near a late-May post-IPO low.
"Despite the intensifying market competition, Nio's premium brand positioning, industry-leading technologies... (led) to solid sequential growth in vehicle deliveries in recent months," Nio CEO William Bin Li said in the Nio earnings release Thursday. In May and April, Nio's deliveries improved month over month after a weak start to the year.
In a note to clients Thursday, Deutsche Bank analyst Edison Yu wrote: "Nio reported generally solid Q1 results and provided a better-than-expected Q2 volume outlook." But analyst Aaron Ho of CFRA Research called Q2 delivery guidance "weaker than expected as momentum from new launches tapers."
Ho said that he expects Nio to be loss-making in 2024-2025. He warned of higher R&D spending on battery swap stations, autonomous driving and the upcoming Onvo branded mass-market cars. He also cited startup costs tied to Nio's expansion in the European market. The analyst kept a hold rating and $5.50 price target on Nio stock, "reflecting our cautious view on vehicle sales and projected longer break-even time."
Meanwhile, Yu pointed out that Nio's implied average selling prices were roughly flat sequentially, "suggesting aggressive promotional activity in Q2."
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Nio Earnings And Outlook
Estimates: Analysts expected Nio to narrow losses to 30 cents per share from a loss of 35 cents a year earlier. Analysts forecast sales would be down 3% to $1.447 billion, according to FactSet.
Nio trades in the U.S. via American depositary receipts.
Results: Nio lost 33 cents a share. Revenue fell nearly 12%, year over year, to $1.372 billion, the Nio earnings release showed. The startup tied the revenue decline to lower EV deliveries and lower average selling prices during the March-end quarter.
Vehicle gross margin reached 9.2% in Q1 vs. 5.1% in the year-ago quarter. Cash reserves stood at $6.3 billion at the end of March.
Deutsche Bank's Yu tied Nio's lower average selling prices to promotional activity. He said margins were better than his firm expected.
Outlook: Nio forecast Q2 deliveries of 54,000-56,000 electric vehicles, up 130%-138% vs. a year earlier, and also up at least 80% from Q1. The forecast easily beat Deutsche Bank's expectations for 47,500.
With Nio already reporting April deliveries of 15,620 and May's record 20,544 deliveries, that implies June deliveries of 17,836-19,836, down vs. the record May.
Nio guided Q2 revenue of $2.297 billion-$2.373 billion. Analysts had projected revenue of $2.064 billion for the current second quarter, increasing 72% as Nio laps easy year-ago comparisons.
Rival startup Li Auto (LI) gave tepid guidance for the current second quarter in May.
Nio Stock, Zeekr Stock, Other EV Stocks
Shares tumbled 6.9% to 4.91 in big volume on the stock market today. But Nio stock found support at the 50-day moving average. The EV stock remains well below the 200-day line, a sign of longer-term woes.
Zeekr stock slid 7.1% on Wednesday and rallied 0.9% Thursday. ZK stock has been consolidating below a mid-May high after its $5.5 billion initial public offering earlier in May. Chinese auto giant Geely founded the Zeekr brand in 2021 to fend off Nio, Tesla and others.
Among other China EV stocks, Li Auto and BYD (BYDDF)fell on Thursday. But XPeng (XPEV) edged higher.
Tesla stock rose 1.7% Thursday, just above the 50-day average but below the 200-day line.
Nio's EV Sales Improve, Tailwinds Ahead
Premium EV startup Nio had already reported 30,053 EV deliveries in the first quarter, far behind Li Auto but ahead of XPeng (XPEV).
Overall China EV sales also recovered in May from softness in the first four months of the year. But constant price cuts in a cutthroat market will weigh on industrywide profitability, market watchers say.
Meanwhile, competition is only growing, with new players like Xiaomi and Huawei entering the market.
Still, experts see several sales tailwinds for Nio ahead, including these:
- The new Nio Onvo L60 is set to launch in September. It's seen as a Tesla (TSLA) Model Y rival and is poised to undercut that model in price. The new Onvo brand marks Nio's push into the Chinese mass market for cars. Nio has traditionally targeted the higher-end EV segment.
- Further, Nio's main brand has several new and refreshed models with the latest technology.
- Sources told Reuters on Wednesday that Nio has won approval for a third factory in China, which would increase its total capacity to 1 million vehicles, almost on par with Tesla's Shanghai plant.
- Nio's improved BaaS (battery as a service) continues to juice sales. It gives customers the option to buy a car without a battery and rent the EV battery instead. Reduced costs for the BaaS service could weigh on profit margins.
As EV sales improve, Nio stock has rebounded from April's multiyear lows. After Thursday's slide, it's down 46% year to date.
Zeekr is yet to make its first earnings report as a publicly traded company. Zeekr stock is now up 14% from its IPO price of $21, after surrendering most of its big first-day pop.
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