Chinese EV maker NIO Inc. NIO has made noticeable progress in improving its vehicle margins despite China’s fierce EV price war. In 2024, the company’s vehicle margin rose to 12.3%, up from 9.5% in 2023. This was driven by stronger production volumes and cost optimization across its supply chain.
Quarterly results also displayed steady improvement. Margins were 9.2% in Q1 2024, 12.2% in Q2 and 13.1% in Q3 amid lower material costs per unit, which were a key driver. While Q4 vehicle margin was flat compared with Q3, it was still not too bad, given the brutal price war in China. NIO targets a 20% vehicle margin for its namesake brand and 15% for its mass-market ONVO line in 2025.
Yet, NIO is having a rough time on the bourses, with shares down 28% year to date.
Image Source: Zacks Investment Research
Despite margin progress, NIO is still burning cash. It had only $2.6 billion in cash as of 2024 end, with $1.56 billion in long-term debt. Its high debt-to-capitalization ratio of 76% points to financial pressure. And let’s not forget NIO is still unprofitable.
NIO is also spending heavily on its battery-swap network—a costly endeavor—while competitors focus on simpler charging models. Additionally, vehicle deliveries slipped to 42,094 units in Q1 2025 from 72,689 units in Q4 2024.
Investors are seemingly waiting for more than just cost cuts. NIO needs to refresh its lineup, launch new models and boost revenues without relying on price cuts. Its overseas push, especially in Europe, also faces challenges, including tariffs.
Until NIO proves it can grow profitably in this intensely competitive environment, the stock may continue to lag. While it is aiming for breakeven by the fourth quarter of 2025, it wouldn’t be an easy task.
NIO’s closest competitors are LI Auto LI and XPeng Inc. XPEV.
Li Auto’s deliveries are way higher than NIO’s. LI delivered 92,864 units in the first quarter of 2025, up 15.5% year over year. Looking at the vehicle margins, the metric for Li Auto was 19.8% in 2024, down from 21.5% in 2023 but still better than NIO. Last year, Li Auto generated an operating profit of $961 million and a net income of $1.5 billion, underlining its status as a profitable EV maker.
Coming to XPeng, the company delivered 94,008 smart EVs in Q1 2025, which rose 331% from the corresponding quarter of last year. XPeng’s vehicle margin was 8.3% in 2024, compared with negative 1.6% in the prior year. XPeng’s cost reduction efforts resulted in a massive improvement. While the vehicle margins are lower than NIO, the improvement is huge.