Nio (3Q25 Minutes): Expects 20% vehicle gross margin in 2026, achieving full-year Non-GAAP profitability
The following is organized by Dolphin Research$Nio (NIO.US)2025 Q3 Earnings Call Minutes. For earnings interpretation, please refer to《Nio: Cost Reduction and Efficiency Improvement Effective, but Is It a True 'Turnaround'?》
1. Review of Core Financial Information
Performance Overview:
- Delivery Data:
Q3 Deliveries: 87,071 units, up 40.8% year-on-year; October Deliveries: 40,397 units, up 92.6% year-on-year, setting a new delivery record for three consecutive months.
- Financial Performance:
Total Revenue: RMB 21.8 billion, up 60.7% year-on-year, up 14.7% quarter-on-quarter.
Automotive Revenue: RMB 19.2 billion, up 15% year-on-year, up 19% quarter-on-quarter.
Automotive Gross Margin: 14.7%, the highest in nearly three years; Comprehensive Gross Margin: 13.9%, both year-on-year and quarter-on-quarter increases.
Cash Flow: Operating cash flow and free cash flow both turned positive in the third quarter; ending cash and equivalents totaled RMB 36.7 billion.
- Narrowing Losses:
Operating Loss: RMB 3.5 billion, narrowed by 32.8% year-on-year, 28.3% quarter-on-quarter.
Adjusted Operating Loss: RMB 2.8 billion, narrowed by 39.5% year-on-year, 31.3% quarter-on-quarter.
2. Detailed Information from the Call
2.1 Key Information from Executive Statements
1. Business and Product Progress
Nio Brand:
The new ES8 delivered over 10,000 units within 41 days of launch, setting the fastest delivery record for vehicles priced above RMB 400,000.
The ES6 has accumulated deliveries of 300,000 units, maintaining its position as the top-selling model above RMB 300,000 in China.
The ET9 Horizon Edition launched with three exclusive color options.
Le Tao Brand:
The L90 delivered over 33,000 units within three months of launch, leading the large pure electric SUV market for three consecutive months.
The L60 ranked second in sales for pure electric SUVs priced above RMB 200,000 in the first three quarters.
Firefly:
Continues to lead the high-end small electric vehicle sales chart; plans to expand to more markets in Europe and Asia.
2. Technology Strategy and Planning
Battery System: Committed to full-stack self-research, creating a rechargeable, swappable, and upgradeable battery technology system.
Intelligent Driving: The Nio World Model (NWM) will push upgrades to vehicles equipped with NX-931 and NVIDIA chips, enhancing city/highway NOA, parking, and safety performance, and supporting OpenSat command execution.
Plans to release a new version of the ONVO intelligent driving system by the end of the year, upgrading the end-to-end solution.
3. Infrastructure and Network
Sales Network: 172 NIO Houses, 395 NIO Spaces, and 422 ONVO stores.
Battery Swap Network: 3,641 battery swap stations globally, with over 92 million swaps completed.
Charging Network: Over 27,000 charging piles built.
4. Financing: Completed USD 1.16 billion equity financing in September to strengthen the balance sheet and support long-term investment.
5. Outlook and Guidance
Expected Q4 deliveries to reach 120,000 to 125,000 units.
Marks the company's entry into a new phase of rapid growth, with continued operational efficiency optimization through mechanisms like the battery division.
2.2 Q&A Session
Q: The Q4 delivery guidance is about 20% lower than the previous target. Will this affect the company's goal of achieving breakeven in Q4? Considering demand and market uncertainty, when can the target of 50,000 monthly deliveries be achieved?
A: We are confident in achieving quarterly breakeven in Q4, which remains our financial goal. The mid-October phase-out and termination of the trade-in subsidy policy indeed affected the entire industry, and Q4 may not see the year-end sales peak as in previous years. Automakers, including Nio, have provided users with the assurance of next year's purchase tax reduction, but cannot guarantee the trade-in subsidy, thus affecting market demand, especially for models like the Le Tao L60 and L90, which are more sensitive to policy changes due to their lower prices.
Nevertheless, we remain confident in achieving breakeven for the following reasons: strong demand for high-margin products, with new high-end products like the ES8 still having order reserves and new order inflows. Although Le Tao orders are affected by the subsidy cancellation, the impact on overall gross margin is limited.
Gross Margin Improvement: Q3 automotive gross margin reached 14.7%, exceeding expectations. Through supply chain cost reductions and commercial negotiations, Q4 automotive gross margin is expected to rise to about 18%. The ES8's gross margin will exceed 20%, with its sales and deliveries significantly increasing in Q4.
Non-Automotive Business Performance: Revenue and gross margin from non-automotive sales are expected to continue improving in Q4.
Cost and Expense Control: Since the beginning of the year, we have taken a series of measures to improve operational efficiency and expense utilization efficiency, which have shown results in Q3, and will continue to control sales, general and administrative expenses, and R&D expenses in Q4, with no large-scale marketing activities.
Q: Considering macro uncertainties, when can the company achieve the target of 50,000 monthly deliveries? Will the launch plan for new models be advanced to boost next year's sales?
A: Based on the current product line and release rhythm, we expect to achieve the target of 50,000 monthly deliveries in the first half of next year. This is mainly based on the release of three large new models next year, as well as the continuous improvement of our sales capabilities and marketing efficiency. Our new car release rhythm will not be arbitrarily adjusted due to short-term policy changes, and will maintain the original plan: two new models will be launched in the second quarter of next year, and one new model will be launched in the third quarter.
Q: Regarding the policy change of a 5% purchase tax on electric vehicles in 2026, what preparations does the company have? Will the company compensate customers, absorb it through supply chain and cost control, or will it mainly be borne by consumers?
A: The policy impact is relatively limited for us. Since 80%-90% of users choose the battery leasing scheme, the battery price is not included in the tax base, and our tax advantage remains superior to other companies and non-swappable models. For popular products like the new ES8 with long delivery wait times, we have taken the lead in providing users with next year's purchase tax guarantee. Other models do not currently have a guarantee policy due to shorter wait times. Specific measures for next year's purchase tax changes will highly depend on market dynamics, competitive landscape, and peer practices, and we remain flexible, with no very specific plans at present. Meanwhile, the industry is gradually digesting the impact of policy withdrawal, and the intelligent electric vehicle industry is now less policy-driven, with user experience and cost advantages becoming more apparent and attractive to users.
Q: Regarding cost control, R&D and other expenses have decreased in Q3, and efficiency is expected to improve further in Q4. Looking ahead to 2026, will the cost structure remain at a new lower normal? For example, will quarterly R&D expenses remain around RMB 2 billion, and will sales and management expenses remain at RMB 4 billion or lower?
A: R&D Expenses: Based on non-GAAP, Q3 R&D expenses were about RMB 2 billion. It is expected that quarterly R&D expenses will remain stable at about RMB 2 billion per quarter in Q4 and next year. The company currently has no plans to cut R&D expenses but will focus on improving R&D efficiency through mechanisms like the battery business unit, and has established a return on investment evaluation and project review closed-loop management mechanism to ensure that this quarterly RMB 2 billion investment can maintain the development of existing products and key technologies without compromising the company's competitiveness.
Sales and Management Expenses (SG&A): Based on the Q4 delivery guidance, the proportion of SG&A to total revenue was originally targeted at 10%, currently about 12%, and will maintain this level in Q4. In the context of achieving Q4 breakeven, its absolute amount is about RMB 4 billion per quarter. Next year, the company will strive to improve sales and overall operational efficiency, and reducing the proportion of SG&A to total revenue to 10% remains a reasonable effort goal.
Q: Based on new car releases and cost control, can the company achieve full-year profitability in the second quarter of 2026? And with relatively strong profitability, how should we assess the possibility for 2026?
A: Our business goal is to achieve profitability under non-GAAP for the full year of 2026. The confidence mainly comes from:
Market Trends: The penetration rate of the high-end pure electric market is rapidly increasing. In the high-end market above RMB 300,000, the pure electric penetration rate increased from 12% for the whole of last year to 18% in Q3 this year. In the large-size SUV segment, pure electric sales ranked first for the first time in September and continued the momentum.
Product Planning: Next year, five large new models will be launched (from Nio and ONVO brands), covering mid-to-large and large SUVs, these segments with still low but rapidly growing pure electric penetration rates.
Gross Margin: Thanks to the contribution of high-margin large new models and continuous cost optimization, the vehicle gross margin is expected to increase to about 20% next year.
Cost Control: Through mechanisms like the battery business unit, the company will continue to strictly control R&D and sales and management expenses.
Combining product gross margin improvement and cost control, achieving full-year profitability under non-GAAP in 2026 is a reasonable goal.
Q: What is the company's long-term strategy between self-research and outsourcing for key components like chips? What are the main considerations for decision-making?
A: Our self-developed intelligent driving chip NX9031 uses a 5-nanometer process, with its mass production and full-function deployment earlier than industry competitors with comparable performance. Self-developed chips contribute to performance improvement and cost structure optimization, so in the long term, we will continue to invest in chip-related technologies. At the same time, we have announced plans to open our self-developed chip solutions and technologies to more partners in the automotive and non-automotive industries, as we see good application potential for this high-computing-power chip in different types of equipment like robots, and we will explore more use cases and application scenarios with partners.
Q: The automotive gross margin significantly improved in Q3, what were the main driving factors? Can you specifically analyze the contributions of product mix (such as L90 deliveries exceeding 20,000 units) and cost reduction?
A: The improvement in Q3 automotive gross margin mainly came from two factors: Supply chain cost reduction - thanks to the scale effect brought by sales growth; High-margin product deliveries: ONVO L90, as a high-margin product, began deliveries in Q3, with deliveries exceeding 20,000 units, contributing a better gross margin than the L60 in previous quarters.
Regarding the specific gross margin performance of each model: Nio ES8: Vehicle gross margin is 20%, but it only began deliveries at the end of Q3, contributing little to quarterly sales. ET5/ET5T: Vehicle gross margin is between 15% and 20%. ES6/EC6: Vehicle gross margin exceeds 20%, even reaching 25%, as it has passed the new car high launch period.
Le Tao L90: Vehicle gross margin is about 15% to 20%. Overall, new models and ONVO L90 have achieved good gross margin performance. Specific breakdown data will be provided offline later.
Q: Regarding the chip joint venture with Chongqing partners, why choose this partner? What is the first model? Is the joint venture only a sales company? Has any licensing fee been obtained from it?
A: Through cooperation with this chip joint venture partner, we sell our chip and IC design capabilities to other customers and potential users. This is not an exclusive partnership, and we can still independently sell chip solutions to other partners and companies. The partner will act as a tier-one supplier, using its resources to provide the solution to other automakers or customers.
At the same time, we also see application opportunities for this chip in non-automotive industries. Our partner has mature experience, technology, customers, and network connections in the chip design industry, and has some chip products that can complement our chips in different scenarios. Therefore, this is a win-win partnership.
Q: What is the reason for the increase in average selling price (ASP) in Q4? What is the outlook for vehicle gross margin in Q1 next year?
A: Q4 ASP: The increase in average selling price is mainly driven by the sales of high-margin products like the ES8. The full-year delivery guidance for the ES8 is about 40,000 units, with most sales expected to be realized in Q4.
Q1 Gross Margin Outlook: Q1 is usually the off-season for the automotive industry, with overall sales expected to be lower than Q4 this year. However, since Q4 this year did not see the seasonal and subsidy-driven sales peak of previous years, the quarter-on-quarter decline from Q4 to Q1 will be smaller than in previous years. Meanwhile, the order reserve for the ES8 will extend into Q1 next year, helping to offset some seasonal impacts.
In summary, the vehicle gross margin in Q1 next year is expected to be lower than the Q4 outlook (about 18%), but better than the level of Q1 last year.
Q: What is the overseas expansion strategy for the coming years?
A: Our overseas strategy is undergoing significant adjustments; Business model shift: From the previous direct sales model to a business model mainly supported by local partners. We have identified quality partners in more than 10 countries and regions. Brand launch sequence: Contrary to the domestic launch of the Nio brand first, the overseas market will first launch the FIREFLY brand, followed by Le Tao, and finally the Nio brand.
In terms of product planning, FIREFLY: Will be the first brand to be launched overseas, with its European version and right-hand drive version developed, entering the European, Asian, Middle Eastern, and South American markets. Nio brand: Positioned in the high-end market, it requires patience and time to build brand recognition, so its overseas expansion will adopt a more long-term and patient strategy.
Q: Will the Le Tao brand launch more products in the future to capture market opportunities in the price range of RMB 200,000 or below?
A: The ONVO brand is positioned as a family brand for the mass market. In the long term, we need to establish a wide product bandwidth like Toyota and Volkswagen to cover more needs and price ranges. The long-term price bandwidth of the Le Tao brand will cover RMB 100,000 to RMB 300,000. We have covered the RMB 200,000 to RMB 300,000 price range with the L60, L90, and the L80 to be launched next year. Meanwhile, we are developing a new product platform targeting the price range below RMB 200,000. We believe that with a diverse product lineup and a more mature battery swap network, we can gain a reasonable market share in the RMB 100,000 to RMB 300,000 price range, the largest single price range in the Chinese passenger car market (annual scale of 15 million units).
Q: In the context of increased investment in the smart and AI fields in the industry, how does the company allocate limited R&D expenses and balance efficient R&D efficiency with long-term R&D goals?
A: This year, the focus of our R&D activities is on improving efficiency and prioritizing different R&D activities and projects. The battery business unit (CBU) mechanism has played an important role in fully utilizing R&D investment and expenses, while ensuring not to lose long-term competitiveness, which is an insurmountable bottom line. Under the CBU mechanism, despite reducing R&D expenses in recent quarters, we have maintained R&D capabilities and competitiveness in full-stack technology for intelligent electric vehicles. In recent years, we have made significant investments in the underlying technologies of core electric products such as chips, operating systems, intelligent chassis, and 900-volt high-voltage architecture, laying the foundation for future products and technology platforms, and subsequent iterative development will not consume as much as laying the foundation, with higher resource utilization efficiency.
For intelligent driving, NOMI, and other AI technologies and applications, we will continue to maintain R&D intensity but in a more efficient manner. In terms of algorithms and data utilization, we have found some more efficient and higher return on investment methods than simply stacking computing power or data performance. We believe that without investing huge computing resources like peers, we can achieve excellent computing performance by leveraging the collective intelligence and data processing capabilities deployed on vehicles. In summary, we focus more on return on investment evaluation and project prioritization in R&D.
Q: When sales reach a certain scale threshold, what cost benefits can we gain in batteries and other key components with a high proportion of the bill of materials (BOM)?
A: Economies of scale mainly improve financial performance in two aspects: enhanced bargaining power in the supply chain, which helps improve the vehicle cost structure, as seen in our Q3 and Q4 vehicle gross margin guidance. The target of a 20% vehicle gross margin next year will be partly driven by economies of scale on the supply side.
The second is improved manufacturing efficiency and cost optimization. As sales increase, the allocated manufacturing cost per vehicle will gradually optimize, which also helps improve the cost structure of our products.
Q: What is the impact of the larger scale and product mix of new models next year? The Le Tao L80 is expected to be priced lower than the L90, will this dilute the gross margin, or will the scale effect of Le Tao dominate?
A: The three large SUV new models to be launched next year are all positioned in the high-end price range of their respective segments. Although the prices have not been finalized, we expect these three models to contribute significant gross margins. More importantly, they can generate further synergy in cost structure with the existing ES8 and L90. The cost optimization and cost reduction opportunities we achieved this year on the ES8 and L90 can be extended to these three new models. Therefore, this combination of five large models is expected to jointly deliver good product performance and drive the achievement of the 20% vehicle gross margin target.
