Chinese EV stocks gain after NIO reports strong sales, margin improvement

NIO (NYSE:NIO) reported revenue rose 98.9% in FQ2 to $2.4 billion. During the quarter that ended on June 30, better vehicle margin was offset by higher operating expenses. Gross margin was 9.7% in FQ2, compared with 1.0% a year ago and 4.9% in FQ1 of 2024. Notably, NIO (NIO) narrowed its net loss compared to a year ago due to the higher level of sales.

The Chinese electric vehicle maker said it expects to rack up deliveries of between 61,000 and 63,000 units in FQ3.

CFO update: “We will continue to focus on efficient R&D and infrastructure investment, leverage the growth potential in the mass market, adopt flexible market strategies and continuously optimize our product portfolio. We are confident that these efforts will result in steady improvements in gross profit and cost efficiency in the future.”

On Wall Street, Morgan Stanley analyst Tim Hsiao said all eyes are on the L60 price and order conversion, as well as second-half gross margin trajectory. Third Bridge Capital analyst Rosalie Chen said the greatest challenge NIO now faces is that, despite strong sales figures, investors still cannot see a clear path to profitability for the company. “The future profitability of battery swap stations also faces limitations, as it currently seems that other car manufacturers find it difficult to accept the potential limitations brought by sharing batteries with NIO,” highlighted Chen. Looking ahead, Onvo is expected to positively impact NIO’s sales, but Chen warned that the extent of the impact is difficult to assess.

Shares of NIO (NIO) rose 3.55% in premarket trading, while Li Auto (LI) and XPeng (XPEV) were up just under 1%. ZEEKR Intelligent Technology (ZK) jumped 5.25% in the early session.