NIO Doubles Deliveries and Lifts Margins

NIO(NYSE:NIO) reported second quarter 2025 earnings on June 25, 2025, delivering 72,056 vehicles (up 25.6% year over year) and total revenue of RMB19 billion (up 9% YoY, 57.9% QoQ). Management set ambitious production and margin targets for the remainder of 2025, highlighted technology-driven cost advantages, and provided explicit guidance for Q3 and Q4 deliveries, vehicle margin, and non-GAAP profitability. The following insights capture the most significant strategic and operational developments shaping the long-term investment outlook.

Production ramp targets double NIO deliveries

Recent monthly deliveries reached 21,017 in July and 31,305 in August, reflecting rapid sequential growth as new launches gather demand momentum. Management noted that supply chain constraints are easing as capacity for the Envoy L90 and ES8 scales, supporting a new quarterly group delivery target of 150,000 units for Q4 2025.

"Our target is that in October the full supply chain capacity for the Envoy L90 can achieve and reach 15,000 units a month. And for the ES8 as the ramp up of production takes slightly longer, we hope that the full supply chain capacity can achieve 150,000 units in December. With that by looking at both the demand and the supply availabilities and capacity, our Q4 target is to achieve an average of 50,000 units deliveries per month for all three brands, which means that in Q4 our quarterly delivery target combining all three brands is 150,000 units."
-- William Li, Founder, Chairman, and CEO

If achieved, this capacity ramp would roughly double group-wide deliveries compared to Q2 2025, positioning NIO for significant market share gains in the electric vehicle segment.

NIO margin guidance signals financial inflection

Vehicle gross margin (GAAP) stood at 10.3% in Q2, with overall gross margin at 10% (GAAP), while adjusted net loss narrowed by 34.3% quarter over quarter to RMB4.1 billion. Management is targeting a sharp vehicle margin improvement in Q4, driven by the full-cycle impact of new high-margin models such as L90 and ES8, and ongoing product cost optimization.

"With that, we expect the Q4 vehicle gross margin to be around 16% to 17% for the entire group to be able to achieve breakeven. As based on the decade long battery bus tech innovation, the in house developed of core parts and components as well as the continuous efforts in the cost of control and the savings on the supply side as well as the product cost structure, We achieved not only competitive product performance for the L90 and beyond ES8, but also a very competitive cost structure and the pricing point. With that in Q4 our gross margin target for the L90 and ES8 is 20%."
-- William Li, Founder, Chairman, and CEO

The planned margin uplift and non-GAAP breakeven in Q4 2025 would mark a strategic financial turning point, supporting NIO's ability to self-fund growth and invest in future innovation.

In-house technology drives cost and quality edge

The upcoming full-scale deployment of NIO's proprietary smart driving chip (NX9031), introduced in ET9 and 2025 model upgrades, provides a potential edge in technology differentiation and bill-of-materials (BOM) cost rationalization. Management also reported that J.D. Power quality rankings for ET5 and ET5T topped their segments, while EC6 and ES6 ranked among the top two in their segments, reflecting product execution gains.

"Of course, we've made the major upfront investment in the chip development, but the performance of our in house developed smart driving chip NX9031 can achieve the performance that is on par with four flagship chips in the industry. So R and D wise we made investment upfront yet BOM cost wise this smart driving chip can also achieve savings."
-- William Li, Founder, Chairman, and CEO

Sustained cost-outs via localization of software and hardware intellectual property can buffer gross margins from price wars and enable more aggressive, defensible pricing, reinforcing NIO's position as an innovation-focused volume player.

Looking Ahead

Management guided for Q3 2025 deliveries of 87,000 to 91,000 units, tracking 40.7% to 47.1% YoY growth, with a Q4 2025 target of 150,000 units. Non-GAAP R&D expense per quarter is forecast at RMB2 billion for Q3 and Q4, and RMB2 billion to RMB2.5 billion per quarter (non-GAAP) in 2026. Group vehicle gross margin (non-GAAP) for Q4 2025 is expected at 16%-17%, and quarterly breakeven is explicitly targeted on a non-GAAP basis in Q4 2025. No new model launches will occur before 2026, as capacity prioritization is given to existing backlogged products.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,049%* — a market-crushing outperformance compared to 185% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of August 25, 2025

This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.