Why Nio Investors Should Be Optimistic After Q2 Earnings

Key Points

• Nio currently faces a brutal price war in China.

• The company is working diligently to reduce costs from its operations.

• Nio expects record deliveries during the third quarter.

• 10 stocks we like better than Nio ›

Investors who follow the Chinese automotive industry focused on Nio's (NYSE: NIO) second-quarter results that were released Tuesday, initially sending the stock lower. It wasn't a bad quarter, but it became more clear that the intense price war in China isn't letting up, and may not anytime soon.

Let's check out some of Nio's second-quarter highlights, and where it's going from here.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

What have you done for me lately?

Nio reported an adjusted operating loss of $564 million on sales of $2.7 billion. Wall Street estimates were looking for a loss of $620 million on sales of just over $2.7 billion, per FactSet. It was an improvement over the prior year's second quarter, when Nio posted a loss of $673 million on sales of $2.4 billion.

Stanley Yu Qu, Nio's chief financial officer, said in a press release:

Starting from the second quarter, our comprehensive cost reduction and efficiency improvement initiatives have started to yield results. Excluding organizational optimization charges, our non-GAAP (generally accepted accounting principles) operating loss improved by over 30% sequentially. We are now approaching a structural inflection point in our financials, with positive momentum building toward a sustainable virtuous cycle and continued performance improvements.

Nio's delivery momentum also continued during the second quarter, with the automaker delivering 72,056 electric vehicles (EVs), which was a healthy 25.6% increase over the prior year. It was also a strong 71.2% increase from the first quarter of 2025. There are also signs of promise within Nio's two newer brands, Onvo and Firefly, which delivered 17,081 and 7,843 vehicles of the total, respectively.

Image source: Nio.

Help on the way

Helping drive deliveries higher was the recently launched Onvo L90, a large-space flagship SUV that hit the roads in late July. Nio also unveiled a flagship premium SUV, the all-new ES8, with deliveries expected to start in September.

Nio's delivery momentum helped push total revenues to $2.65 billion, a 9% increase over the prior year. However, vehicle sales generated $2.25 billion, which was only a 2.9% increase over the prior year due to the ongoing price war that's resulted in lower average selling prices almost across the board.

In fact, Nio's average selling price checked in at roughly $31,000, down from about $38,000 one year ago. Nio also felt some of the price war pressure on its margins: Vehicle margins checked in at 10.3% during the second quarter, down from the prior year's 12.2%.

Nio isn't alone in feeling the heat from China's brutal price war. One of its primary competitors, BYD, posted its first quarterly profit drop in more than three years, due in part to the government's campaign against the industry's price war. More specifically, BYD's net profit reached $894 million during the second quarter, a hefty 30% drop from the prior year.

What it all means

Looking at the road ahead, Nio expects deliveries to continue accelerating and totaling roughly 89,000 vehicles during the third quarter, up from about 62,000 delivered during the prior year's third quarter -- a record for any Nio quarter. On the downside, Nio expects third quarter sales to check in around $3.1 billion, up from the prior year's $2.6 billion, but still below Wall Street's $3.4 billion forecast.

While Nio's stock traded lower after the markets digested its second-quarter results, the company is trying to mitigate the ongoing price war and support margins by removing costs from its operations. Investors would be wise to assume the price war will only continue in 2025, but once it eventually fades, with overcapacity and too many competitors, the industry will be in a much healthier environment and should provide a solid boost to the company's margins.

Long term, Nio still looks like a well positioned and viable Chinese EV maker, even if the near term is a little bumpy.

Should you invest $1,000 in Nio right now?

Before you buy stock in Nio, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nio wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $678,148!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,052,193!*

Now, it’s worth noting Stock Advisor’s total average return is 1,065% — a market-crushing outperformance compared to 186% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.