NIO Stock: Nio Cruises Toward Profitability

A relatively small player in a cut-throat domestic market, Shanghai-based electric vehicle (EV) maker Nio [NIO] is best known for its battery swap and smart driving solutions. It manufactures and sells a range of vehicles under the ONVO and Firefly brands. 

While still a pre-profit company, promising sales figures have company executives projecting a turn to profitability by the end of 2025. As Nio moves into new markets to escape the pressure of ongoing price wars in China, OPTO investigates the investment case for this dynamic EV stock. 

Driving Deliveries

As with many EV brands, Nio’s story is in its delivery numbers. The launch of the low-cost, compact Firefly brand in December 2024 — marketed as a competitor to Mercedes Benz’s [MBGAF] Smart and BMW’s [BAMXF] Mini — has helped boost sales in the first half of the year by 31% year-over-year, with 114,150 units delivered. 

Strong figures, despite fierce competition in the domestic market, have executives predicting Nio will hit its profitability target in Q4 2025. “The momentum is clearly building,” said Nio CEO William Li in response to the delivery numbers. “The teams are executing better, the product mix is improving, and the cost structure is getting more efficient.”

Indeed, the EV brand seems to be strategically targeting expansion in the coming months. In June, Nio announced it would expand its presence in Europe, marketing five models across its two brands in collaboration with national general distributors in 2025 and 2026. This marks a pivot from the direct-sales model, with local partners playing a greater role in the marketing and sales of Nio vehicles. 

The EV brand is also expected to launch three new models in the second half of 2025, including the L90 SUV. 

That said, NIO stock has had a less than stellar run in the past 12 months, slumping over 50% from its 52-week high of $7.71 set on September 30, 2024. The stock fell as low as $3.02 in early April on the back of wider tariff-fueled market turmoil, only to recover to trade over the $4.00 mark for most of May. Despite positive delivery numbers, NIO stock slid in June, closing at $3.50 on July 8. 

NIO stock is down 19.72% in the year to date, and down 24.24% in the past 12 months. 

LI vs NIO vs XPEV: Price Point Competition

The crowded Chinese battery EV market offers a number of competitors for Nio, including Li Auto [LI] and XPeng [XPEV].

While it is pre-profit and smaller than the majority of its competitors, Nio has managed to carve out a market niche for itself. Vehicle sales have risen steadily on a year-over-year basis in recent quarters, with 42,094 units delivered in Q1 2025, versus 30,053 in Q1 2024. The company recorded revenue of RMB12.03bn, up 21.5% year-over-year but down 38.9% on the previous quarter, coming in below analyst estimates. Q2 deliveries are expected to be in the 72,000–75,000 range, with revenue projected at RMB19.51bn–20.07bn.

Li Auto, which announced Q1 2025 earnings at the end of May, came in above analyst estimates with quarterly revenues of RMB25.9bn and 92,864 vehicles delivered, representing year-over-year increases of 1.1% and 15.5%, respectively. The EV maker projected deliveries totaling 123,000–128,000 units and revenues of RMB32.5bn–RMB33.8bn in Q2 of the year. 

XPeng also beat analyst estimates on revenue and EPS in the most recent quarter, with 94,008 deliveries in Q1 2025 earning revenues of RMB15.81bn, representing a 141.5% increase year-over-year but a marginal 1.8% decrease from the previous quarter. The company, which continues to operate at a loss, expects to swing to profit in Q4. Deliveries for Q2 are expected to be in the 102,000–108,000 range, with revenue projected at RMB17.5bn–RMB18.7bn. 

Source: Yahoo Finance

The smallest of the three stocks, NIO is also the cheapest. It offers attractive growth prospects over the next two years, although not at the level of XPeng. It is important to note that, of the three, only Li Auto is profitable as of the first half of 2025, making both NIO and XPEV inherently risky plays. 

NIO Stock: The Investment Case

The Bull Case for Nio

With an expanding presence in a number of European markets and new models in the pipeline, Nio offers healthy growth prospects for the coming years. It is trading at a steep discount in comparison to its closest competitors, and improving delivery numbers could suggest a turnaround for an otherwise lackluster stock price. If the company is able to achieve profitability as expected in Q4, NIO stock could see a surge. 

Of the 27 analysts surveyed by Yahoo Finance in July, five rated it a ‘strong buy’, while eight rated it a ‘buy’. The average target price of $4.73 represented an upside of 35.14% from the July 8 close.

The Bear Case for Nio

Much is riding on a move to profitability for Nio. The EV maker’s shares have underperformed those of its peers over the past 12 months, with muted sales of its family-oriented ONVO brand and high operating expenses weighing on margins. 

Macroeconomic factors could also weigh on the stock’s prospects, with competition between EV brands in China at a fever pitch despite pressures on consumer spending. With more Chinese brands expanding into Europe, these notorious price wars could make the jump into other key global markets. Additionally, in mid-June China suspended trade-in subsidies for EVs in major cities, which could put downward pressure on auto sales. 

Of the 27 analysts surveyed by Yahoo Finance in July, 13 rated the stock a ‘hold’, while one rated it a ‘sell’. The low target of $3.00 represents a downside of 14.29% from the July 8 close.

Conclusion

As delivery numbers and revenue grow, Nio is targeting profitability for Q4 2025. Its growth prospects are likely to be further buoyed by new models and an ongoing expansion into Europe. If the company misses its profitability target, however, financial pressure and macroeconomic headwinds pose key risks to this pre-profit automaker.