NIO’s ET5 is on display at the Central China International Auto Show in Wuhan, China, on May 25, 2023.
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Nioh The company reported on Tuesday that its third-quarter losses narrowed, but gave a revenue forecast that was lower than market expectations.
According to the London Stock Exchange’s consensus forecast, NIO’s performance in the third quarter is as follows:
- income: 19.1 billion yuan ($2.7 billion), compared with expectations of 19.4 billion yuan.
- loss per share: Loss per share was 2.67 yuan, expected loss was 2.91 yuan. This was lower than the loss per share of 3.7 yuan in the second quarter of this year.
Revenue increased by 47% year-on-year.
NIO shares rose about 4% in U.S. pre-market trading, reversing early losses after the earnings report was released.
Investors are watching the Chinese electric car maker’s ability to be more disciplined with spending as it charts a path to profitability.
NIO CEO Li Bin reiterated the company’s focus on improving efficiency.
“We have identified opportunities to optimize our organization, reduce costs and improve efficiency,” Li said on Tuesday.
Some of these efforts are already bearing fruit. NIO’s net loss in the third quarter was 4.6 billion yuan, a decrease of 24.8% from the second quarter of 2023, but still higher than the same period in 2022.
The company also laid off 10% of its workforce last month, citing “intense competition.”
China’s electric vehicle market is extremely competitive, and NIO faces pressure from other startups such as Xpeng and ideal carand giants like Tesla BYD.
On top of that, Chinese consumers remain cautious about spending, which could affect Nio’s strategy to attract the high end of the local EV market.
The company said fourth-quarter revenue will be between 16.1 billion yuan and 16.7 billion yuan, an annual increase of 0.1% to 4.0%. Analysts expect fourth-quarter revenue of 22.4 billion yuan.
NIO also expects to deliver 47,000 to 49,000 vehicles in the fourth quarter, with annual growth of approximately 17.3% to 22.3%.
Focus on efficiency
This year, China’s electric vehicle market has entered the stage of price war Teslaforcing automakers to cut vehicle prices and putting pressure on profit margins.
NIO’s gross profit margin in the third quarter was 8%, down from 13.3% in the same period last year.
As NIO has yet to turn a profit since its founding in 2014, the company is trying to show investors it can balance investment needs while being more stringent on costs.
Li said on Tuesday that NIO would postpone or terminate any projects that fail to make financial contributions in the next three years. He added that the company would ensure it did not “dilute” investments in core areas such as technology and its sales and service network as it prepared for “more intense competition over the next two years”.
As part of this move, Nio announced on Tuesday that it had reached an agreement to acquire certain manufacturing equipment and assets of Anhui Jianghuai Automobile Group Co. (JAC) for 3.16 billion yuan. JAC currently produces NIO.
Li said that bringing manufacturing completely in-house can reduce the cost of such operations by 10%, but the company will exclude in-house drafting of battery manufacturing because the measure will not improve gross margins.
NIO Chief Financial Officer Feng Wei said the company’s automotive profit margin rose from 11% in the third quarter to 15% in the fourth quarter, thanks to lower material and parts costs and improved manufacturing capabilities.
The company’s goal is to achieve vehicle profit margins of 15% to 18% by 2024, the chief financial officer said.
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