Nio Inc. shares fell sharply in Hong Kong trading after the Chinese electric vehicle maker issued a weaker-than-expected outlook for the fourth quarter, heightening investor concerns about its ability to reach a long-promised break-even goal amid intensifying competition in the domestic EV industry.
The Hong Kong-listed stock declined 7.13% on Wednesday, reflecting growing market caution around Nio’s trajectory heading into 2025.
Weak Q4 forecast dampens sentiment
Nio projected fourth-quarter revenue of up to 34.04 billion yuan ($4.8 billion), missing market expectations of 34.7 billion yuan.
Delivery guidance of 120,000 to 125,000 vehicles also fell short of analyst forecasts and lagged the company’s earlier target of 150,000 units.
The subdued outlook overshadowed what was otherwise a comparatively stronger third quarter.
Nio reported narrower net losses and improved gross margin, helped by reduced costs and deliveries of higher-margin models, including the Onvo L90.
The company expects vehicle gross margin to potentially reach around 20% next year, signaling confidence in product profitability if cost efficiencies continue.
However, analysts warn that execution risk remains high.
Bloomberg Intelligence’s Joanna Chen said Nio will need “greater cost discipline, especially in sales and marketing, to come close to its aggressive fourth quarter target,” adding that the margin expansion goal may be difficult to achieve in the current pricing environment.
Break-even ambitions in focus
The company has stated a clear goal of reaching break-even in the fourth quarter, a milestone that investors are closely watching.
CEO William Li reiterated confidence in this objective, and analysts at Bernstein noted that an adjusted profit breakeven remains achievable in the near term.
Still, Bernstein cautioned that sustaining profitability into 2026 could be more challenging.
The firm expressed concern that potential cost-cutting efforts, particularly in research and development, may weaken Nio’s competitiveness over time — especially as technology innovation remains a defining factor in the EV sector.
Nomura analysts echoed the tempered sentiment, noting that while Q4 sales guidance implies moderate sequential growth, it still sits below prior expectations.
They added that the reduction highlights the strain of softer demand as industry subsidies wind down and pricing pressure persists.
Competition intensifies in China’s EV sector
Nio’s results highlight broader industry pressures as China’s EV market faces slowing growth and rising competition.
Newer entrants like Nio and Xpeng are contending not only with established automakers but also with regulatory and pricing shifts that are reshaping the landscape.
Xpeng shares fell last week after delivering a similarly disappointing Q4 outlook, signaling strain across the segment.
This year, Chinese authorities have worked to rein in aggressive discounting practices that previously helped fuel rapid EV expansion.
With state support easing, producers must rely more heavily on cost discipline, differentiating technology, and scale efficiency to maintain growth.
Nio has attempted to distinguish itself through battery-swapping technology, which offers faster energy replenishment than traditional charging.
Yet, while this approach can improve user convenience and network efficiency, it requires heavier upfront infrastructure investment — adding complexity to the company’s path toward sustained profitability.
As Nio heads into the fourth quarter, investors will be watching closely to see whether the automaker can balance delivery growth, cost control, and technology investment well enough to meet and maintain its long-awaited breakeven goal.
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