Why did NIO suffer a loss of $581.11 million last quarter?


Chinese electric vehicle (EV) manufacturer NIO (NYSE: NIO) released its unaudited third-quarter 2022 results on November 10, which reported mixed developments for the company.

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Although NIO posted record vehicle deliveries and significant top-line revenue growth, its net loss increased 392.1% year-over-year (yoy) and 49.1% quarter-over-quarter (quarter).

Driving these losses was a higher cost of sales base, weakened margins and inflated operating expenses.

Let’s cover the highlights of the report.

What did NIO announce?

  • Vehicle deliveries rose 174.3% year-on-year to 10,059
  • Vehicle sales increased 38.2% yoy to RMB 11,932.7 million
  • Total revenue increased 32.6% yoy to RMB 13,002.1 million
  • Gross profit fell 12.9% yoy to RMB 1,735.1 million
  • Gross margin fell 700 basis points year-on-year to 13.3%
  • Net loss increased 392.1% yoy to RMB 4,110.8 million
  • Adjusted net loss increased 514.2% yoy to RMB 3,498.9 million

Cost of sales increased 44.2% yoy during the reported period. The report indicated that delivery volumes and higher battery costs per vehicle contributed to the expansion.

The contraction in the company’s gross margin was said to be due to lower auto regulatory credit sales, lower vehicle margin and lower other sales margins. It was also mentioned that increased capital expenditures on its power and utility network led to the decline.

Despite these losses, NIO has a fair amount of cash and cash equivalents on its RMB 51.4 billion balance sheet, buying it some runway to reach profitability.

What else did NIO announce?

NIO’s research and development (R&D) expenses increased significantly during the reporting period. R&D rose 146.8% yoy to RMB 2,944.5 million. The funds went towards research and development staff, as well as the search for additional products in its portfolio.

Meanwhile, selling, general and administrative (SG&A) expenses also worsened as they inflated 48.6% yoy to RMB 2,712.5 million. Most of the increase in its selling, general, and administrative expenses can be attributed to the increase in the company’s sales staff and marketing activities.

What did management say?

NIO CEO William Bin Li said:

“Following the delivery of our new product line based on NIO Technology 2.0 that caters to different market segments, we have witnessed strong growth momentum in user demand and strong foot traffic, especially after the debut of ET5. in stores beginning in September, and we expect the delivery of ET5 will support a substantial acceleration of our overall revenue growth in Q4 2022. To meet growing user demand and shorten lead time, we have been working on close collaboration with supply chain partners to speed up production and delivery.”

Whats Next?

NIO gave guidance for the fourth quarter of 2022. It expects its total vehicle deliveries to rise between 71.8% and 91.7%. This should come to a number of 43,000 to 48,000 vehicles.

Meanwhile, total revenue is also expected to increase by 75.4-94.2%, to reach RMB17.368 million to RMB19,225.

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