Chinese EV Manufacturer Nio Rallies On Q3 Earnings, Sales Beat

Editor's note: A previous version of this story reported a GAAP earnings figure. Nio's third-quarter non-GAAP EPS loss of 33 cents beat the consensus estimate by 1 cent. 

Benzinga · 12/30/2019 13:05

Editor's note: A previous version of this story reported a GAAP earnings figure. Nio's third-quarter non-GAAP EPS loss of 33 cents beat the consensus estimate by 1 cent. 

Chinese electric vehicle manufacturer Nio Inc – ADR (NYSE: NIO) reported strong third-quarter results and issued upbeat guidance Monday, sending its stock notably higher despite an earnings miss. 

The company posted revenue of 1,836.8 million yuan ($257 million), a 25% year-over-year increase. Revenue was up 21.8% on a sequential basis.

The top-line results exceeded the $230.08-million consensus estimate.

The net loss narrowed 22.9% from the previous quarter and 77.3% from the year-ago quarter to $357.3 million. On a non-GAAP basis, the net loss is $342.9 million.

A third-quarter non-GAAP loss of 33 cents per share beat the consensus estimate by a penny. 

Nio shares fell about 30% Sept. 24, when it reported a wider loss for its second quarter and announced plans to eliminate 21% of its global workforce.

The company's third-quarter vehicle margin and gross margin, although remaining negative, improved notably from the prior quarter. 

Cash and cash equivalents, restricted cash and short-term investments were $274.3 million as of September, according to Nio. 

Nio Delivery Numbers 

The electric vehicle maker's picture improved at the end of the third quarter. 

After troughing at 837 vehicles in July, deliveries improved to 1,943 in August. Nio followed up with a strong September, when it delivered 2,019 vehicles, taking the total deliveries for the quarter to 4,799 vehicles: 4,196 ES6s and 603 ES8s. The third-quarter deliveries represent a 35.1% increase from the previous quarter.

"Our strong performance was attributable to the competitiveness of our products and services, the recognition and strong support from our user community, and our sales network expansion strategy as we continue to launch more efficient NIO Spaces," CEO William Li said in a statement. 

In October, deliveries improved 25.1% month-over-month to 2,526 vehicles before plauteauing at 2,528 vehicles in November.

See also: Tesla Gets $1.6B Loan From Chinese Banks For Shanghai Gigafactory

Softening Chinese EV Market

The Chinese EV market is going through a rough patch. EV insurance registrations slumped 35% year-over-year in October, adding to the 31% drop in September and the 25% decline in August, Bank of America Merrill Lynch said in a note.

Both battery EV and plug-in-hybrid EV sales remained soft.

November wasn't any better, with EV sales tumbling 43.7%, according to data from the China Association of Automobile manufacturers. 

Reductions in EV subsidies, softening domestic macroeconomic conditions and the U.S.-China trade impasse are among the factors that have contributed to the decline, Nio has said. 

Nio's Competitive Dynamics

Apart from fundamental and macroeconomic weaknesses, Nio is facing a competitive threat from Tesla Inc (NASDAQ: TSLA).

Telsa has started delivering Chinese-made Model 3 vehicles from its Shanghai Gigafactory 3.

The U.S. company is expected to make a big push into the Chinese market, given that about half of the world's EVs are sold here.

Other legacy global automakers are also beginning to increasingly focus on the Chinese EV market.

Recently, Nio struck a partnership with domestic rival Xpeng Motors with the aim of perking up domestic demand.

Latest Developments At Nio

In late October, the company brought in a former analyst who was covering the stock as its CFO. Nio's cash position is precarious to the point of some analysts questioning its ability to function as a going concern.

CEO Li has soothed nerves by suggesting further cost cuts could be coming in the first quarter of 2020, according to Bloomberg. 

The net results of the comprehensive cost control measures enacted across the organization to improve operational efficiency were 18.1% and 21.3% sequential reductions in third quarter SG&A and R&D, respectively, said CFO Wei Feng.

In November, Nio signed an agreement with Intel Corporation (NASDAQ: INTC)'s Mobileye to develop driverless consumer cars.

On Friday, Nio launched Hycan 007, a mass market hybrid. 

The vehicle, which is the result of a collaboration with Chinese OEM Guangdong Automotive Group, is priced at 260,000 yuan for a base model. Deliveries are set to begin in April 2020.

A day later, Nio announced EC6, a smart premium electric coupe SUV and its third model. Deliveries are expected to begin in the second half of 2020. 

Nio's Guidance 

Looking ahead, Nio said it expects to deliver 8,000 vehicles in the fourth quarter, which would be nearly double the company's second-quarter numbers. This would also represent record quarterly performance and take total aggregate deliveries in 2019 to over 20,300.

"Facing a continuous soft auto market, we strongly believe the smart premium EV sector will outperform the industry in its growth rate in the foreseeable future," the company said in a statement. 

Nio guided to fourth-quarter revenue of $393.2 million against a $289.19-million consensus estimate.

Nio Stock

Nio ADRs have fared badly in 2019, losing about 68% even as the broader market recorded a stellar gain. Competitor Tesla is trading off its all-time high.

The stock was surging 13.22% to $2.74 in Monday's premarket session at the time of publication. 

Related Links: Nio CEO Confident Following Rebound In Deliveries: 'Spring For Electric Vehicles Is Near'

Photo courtesy of Nio.