Nio Lost Almost $1 Billion In a Single Quarter… Here’s Why It Might Be Worth Believing In

It’s been a while since we checked in on Nio… the Chinese EV company known for letting drivers “swap” a dead battery for a fully charged one in just five minutes. It’s a clever idea, kind of like a Formula 1 pit stop but for commuters.

But behind that slick battery swap magic is a company that probably wishes it could swap earnings reports with, well, literally anyone else (maybe even Bed Bath & Beyond, RIP). Recently, Nio reported its fourth-quarter results… and let’s just say, investors weren’t exactly charging toward the buy button (cue dad joke groan).

Nio reported a net loss of $984 million for Q4, a big jump from its $771 million loss in the same quarter a year earlier. Analysts were hoping for just a $640 million miss. Instead, Nio went above and beyond… just not in the way shareholders wanted.

On a per-share basis, Nio lost $0.44, compared to Wall Street’s expectations of a $0.34 loss (that’s a huge miss).

The company pulled in $2.7 billion in revenue, which sounds good with no context (until you realize the expectation was $3.2 billion). That’s nearly a half-billion-dollar shortfall. Most of that revenue came from vehicle sales (duh), which reached about $2.4 billion… up 13% year over year but still a losing effort.

Nio delivered 72,689 vehicles in the quarter, a 45% increase from Q4 2023. That growth would normally be worth celebrating, but Wall Street was looking for 73,207. That’s a small miss, but in a market this competitive, every vehicle counts.

Even though deliveries were up, average selling prices were down… thanks to China’s “how low can you go” EV price war. Everyone from BYD to XPeng is lowering sticker prices to win market share, and Nio looks like they were affected more than anyone else.

On the bright side, Nio’s vehicle margin improved to 13.1%, up from 11.9% a year earlier. Gross margin rose to 11.7%, compared to 7.5% in Q4 2023. While that’s progress… but it’s not enough to close the gap on competitors. XPeng posted a 14.4% margin, and Li Auto came in at 20.3% (pretty impressive for the EV world).

If you were hoping Q1 guidance would restore some confidence, you’re going to want to look away. Nio expects to deliver between 41,000 and 43,000 vehicles… well below the 65,000+ that analysts were hoping for.

Despite the mess, Nio’s not giving up the fight. CEO William Li highlighted record 2024 deliveries of 221,970 vehicles and claimed a 40% market share in China’s premium BEV segment (EVs priced over $41,000).

They’ve also got new models coming, including the Onvo L60, an affordable SUV aimed directly at the Tesla Model Y, starting at around $20,600. There’s also the Firefly, a compact EV hatchback targeting budget-conscious younger buyers. It’s expected to launch in Europe later this year, potentially dodging EU tariffs by localizing production.

And speaking of Europe, Nio continues to expand its presence overseas. With tensions over Chinese EV tariffs growing, the company is exploring ways to localize production and reduce dependency on exports. It’s a smart move… assuming they can pull it off without destroying margins.

Nio hasn’t abandoned its big gamble on battery swapping. In fact, the company is doubling down, planning to build over 1,000 new battery swap stations in 2024. They’ve also formed a partnership with Geely (Volvo’s parent company) to scale the tech beyond Nio-branded vehicles. It’s still a niche strategy, but it gives Nio a differentiator in a sea of lookalike EVs… especially if battery-as-a-service (BaaS) starts to catch on.

Nio’s stock is now trading around $5, well below its $6.26 IPO price and light-years away from its $62 peak during the 2021 EV hype cycle. With about $6 billion in cash and the continued backing of the Chinese government, it’s not going bankrupt tomorrow.

On top of that, Analysts expect 30% compound annual revenue growth through 2026. But all of that’s based on If the company can steady its margins and stop losing a billion dollars a quarter.

Two big ifs. But even with all the uncertainty, if you believe in the battery swap model as the future of EVs, it might be worth taking a flier.

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Stock.News does not have positions in companies mentioned.