NIO narrowed its loss by 90% in the first half of the year. Is William Li finally about to get out of the tough period?

After market close on September 1, NIO released its first-half performance report.

According to the financial report, in the first half of this year, the company's revenue surged 85.8% year-on-year to 57.67 billion yuan; the net loss attributable to shareholders was 1.218 billion yuan, narrowing 89.9% year-on-year; the adjusted net profit reached 70 million yuan, turning from loss to profit year-on-year.

However, like many other automakers, NIO is also facing the pressure of continuously rising costs. In addition, data from Tonghuashun iFinD shows that by the end of the first half of the year, NIO's asset-liability ratio still remained at a high level of 89.52%.

It is worth noting that NIO has taken frequent actions in the battery swapping and chip businesses this year. With the transition of the battery swapping business from heavy-asset self-construction to light-asset operation, and the support of independent financing obtained by the chip business, NIO's financial pressure may be relieved to a certain extent.

From September 1 to 3, NIO's Hong Kong stock price fell by 6.39%, 3.35% and 1.07% respectively. As of the close on September 3, NIO closed at HK$30.02 per share, with a total market value of HK$74.543 billion.

Revenue Surges, Losses Narrow

According to the latest financial report disclosed by NIO, in the first half of this year, the company achieved revenue of 57.67 billion yuan, a year-on-year increase of 85.8%; gross profit was about 10.766 billion yuan, a year-on-year increase of 282.2%; the net loss attributable to shareholders was 1.218 billion yuan, narrowing 89.9% year-on-year.

Under the non-GAAP standard (excluding the impact of equity incentives and other factors), NIO's adjusted operating profit in the first half of the year was 274 million yuan, compared with a loss of 9.988 billion yuan in the same period last year; the adjusted net profit was 70 million yuan, compared with a net loss of 10.406 billion yuan in the same period last year.

As early as the Q3 2024 earnings call, Li Bin, founder, chairman and CEO of NIO, stated that the company's goal is to achieve profitability in 2026.

After achieving quarterly profitability for the first time in the fourth quarter of last year, NIO CFO Qu Yu emphasized again that "NIO will strive to achieve full-year Non-GAAP profitability in 2026".

Now, NIO has achieved non-GAAP profitability for three consecutive quarters. From the fourth quarter of last year to the second quarter of this year, the company's adjusted net profit (Non-GAAP) was 727 million yuan, 44 million yuan and 26 million yuan respectively.

Looking at the second quarter alone, NIO achieved revenue of 32.137 billion yuan, up 69.1% year-on-year and 25.9% quarter-on-quarter; among which, automotive sales revenue was 29.058 billion yuan, up 80.1% year-on-year and 27.5% quarter-on-quarter.

The year-on-year revenue growth of NIO in the second quarter was mainly driven by the growth of vehicle deliveries, as the company delivered 107,700 vehicles in this quarter, up 49.4% year-on-year and 29% quarter-on-quarter.

In the same period, NIO's operating loss was 347 million yuan, narrowing 92.9% year-on-year, and the adjusted operating profit was 207 million yuan; it recorded a net loss of 528 million yuan, narrowing 89.4% year-on-year, and the adjusted net profit was 26 million yuan.

The substantial improvement in gross margin is also a major highlight of NIO's financial report. In the second quarter, the company's comprehensive gross margin was 18.4%, compared with only 10% in the same period last year; the automotive gross margin was 18.5%, compared with 10.3% in the same period last year.

However, compared with the first quarter of this year, the two aforementioned gross margin indicators of NIO both decreased slightly, down by 0.6 percentage points and 0.3 percentage points respectively.

In fact, the year-on-year increase in NIO's gross margin in this quarter benefited from the hot sales of high-gross-margin models and the optimization of cost structure. Among them, the gross margin of ES8 and ES9 both exceeded 20%, which is an important support for the overall profitability.

The slight quarter-on-quarter decline in gross margin was mainly due to the gross margin of vehicle sales, energy solutions, parts and accessories sales, and vehicle after-sales services.

It is worth noting that in the second half of the year, NIO's delivery growth momentum remains strong. In July and August this year, the company delivered 35,900 and 35,800 vehicles respectively, up 71% and 14.5% year-on-year respectively.

As of August 31, NIO's cumulative deliveries in the year reached 262,900 units, up 57.9% year-on-year, and its historical cumulative deliveries exceeded 1.26 million units.

NIO expects that the vehicle deliveries in the third quarter will be 108,000 to 111,000 units, up about 24% to 27.5% year-on-year; the total revenue will be 33.285 billion yuan to 34.051 billion yuan, up about 52.7% to 56.2% year-on-year.

Rising Cost Pressure, Asset-Liability Ratio Close to 90%

Like many other peers, NIO is also troubled by the rising costs of upstream raw materials and chips.

At the Q2 earnings call, NIO CFO Qu Yu stated that cost pressure is still rising. The unit vehicle cost in the second quarter has increased by about 14,000 yuan compared with the fourth quarter of last year, mainly from storage chips, batteries and other bulk materials; it is expected to increase by another 2,000 to 3,000 yuan in the second half of the year.

Despite facing severe cost challenges, NIO stabilized its automotive gross margin at 18.5% in the second quarter through supply chain optimization, business negotiation and product portfolio management, and plans to maintain this level in the third and fourth quarters.

According to the financial report, NIO's R&D expenses in the second quarter were 2.145 billion yuan, down 28.7% year-on-year and up 13.8% quarter-on-quarter.

NIO stated that the year-on-year decrease in R&D expenses is mainly due to the reduction of R&D personnel costs brought by organizational optimization, and the reduction of design and development expenses brought by different development stages and the improvement of operational efficiency.

The quarter-on-quarter increase in R&D expenses is mainly due to the growth of design and development expenses brought by new products and new technologies, as well as the growth of R&D personnel costs.

In the same period, NIO's sales, general and administrative expenses were 4.425 billion yuan, up 11.6% year-on-year and 22.5% quarter-on-quarter.

The year-on-year increase of this expense is mainly due to the increase in sales and marketing activities related to the launch of new products; the quarter-on-quarter increase reflects the increase in relevant sales and marketing activities, the increase in marketing personnel and related costs, and the increase in equity incentives for general corporate functions.

As of the end of the first half of the year, NIO's inventory increased by 30% to 11.09 billion yuan compared with the end of last year; trade payables and notes payable reached 60.385 billion yuan, up 13.3% compared with the end of last year; short-term borrowings surged 74% to 8.165 billion yuan from 4.692 billion yuan at the end of last year.

The aforementioned data reflects NIO's layout in stock preparation and supply chain to a certain extent, but also keeps the company's asset-liability ratio at a high level of 89.5%.

However, NIO's cash flow status is relatively healthy at present, and it has achieved positive operating cash flow for four consecutive quarters.

As of the end of the second quarter, NIO's cash and cash equivalents, restricted cash, short-term investments and long-term time deposits totaled 56.7 billion yuan, an increase of 10.8 billion yuan over the end of last year.

Battery Swapping "Reduces Burden", Chips Obtain Independent Financing

It is worth noting that before releasing the latest performance report, NIO has also carried out two key layouts this year — one is related to battery swapping, and the other is related to chips.

In August, Wuhan NIO Energy Co., Ltd. (hereinafter referred to as "NIO Energy") and Wuhan Optics Valley Transportation Investment Group Co., Ltd. (hereinafter referred to as "Optics Valley Transportation") completed the asset delivery of the first batch of 36 cooperative charging and swapping stations.

It is reported that this cooperation adopts the mode of "state-owned capital partner holding assets, NIO providing professional operation", that is, the assets of relevant charging and swapping stations are held by Optics Valley Transportation, and NIO Energy is responsible for operation.

After the completion of this delivery, all existing battery swapping station assets in Wuhan are held by state-owned capital partners. According to the plan, the two parties will continue to give full play to their respective advantages in accordance with this cooperation mode, and further promote the subsequent batches of station cooperation in Hubei Province and across the country.

Some views hold that the construction of charging and swapping facilities features high cost and long cycle. With this mode, NIO's battery swapping business can shift from heavy-asset self-construction to light-asset operation.

Under this mode, NIO's charging and swapping stations are held by state-owned capital platforms, the company no longer bears the cost of station construction and ownership. Moreover, NIO realizes light-asset operation with the help of state-owned capital to take over assets, which can optimize its financial structure and ease the financial pressure under continuous heavy-asset investment.

According to information from NIO's official website obtained by Leida Finance, as of September 3, NIO has built more than 4,000 NIO battery swapping stations and more than 30,000 NIO charging piles, and has accessed more than 1.76 million third-party charging piles.

In fact, the battery swapping network is a typical heavy-asset infrastructure. According to previous media reports, the construction cost of a single NIO battery swapping station ranges from 1.5 million yuan to 3 million yuan. Even roughly estimated at the lowest cost, NIO's investment in the battery swapping business has exceeded 6 billion yuan at least.

If this "Wuhan Model" can be replicated in batches across the country in the future, NIO's capital pressure will undoubtedly be greatly reduced.

Public information shows that at present, NIO Energy has carried out practical cooperation with more than 40 local state-owned capital platforms and financial institution partners in 25 provinces, municipalities and regions, and jointly built and put into operation more than 800 battery swapping stations.

Similar to the battery swapping business which is a cash flow "black hole" for NIO, the company's self-developed chip business has also seen frequent actions from NIO recently.

In June last year, NIO established its chip subsidiary Anhui Shenji Technology Co., Ltd. (hereinafter referred to as "Shenji Technology"). In February this year, Shenji Technology completed the first round of financing of 2.257 billion yuan, with the post-investment valuation approaching 10 billion yuan.

The latest financial report released by NIO shows that in June and August, Shenji Technology entered into two rounds of final agreements with domestic investors, and the investors subscribed for the newly issued shares of Shenji Technology with a total of 493 million yuan in cash, and its post-investment valuation further climbed to 12.25 billion yuan.

According to NIO's disclosure, after the two rounds of financing, NIO still holds about 59.95% of the controlling equity interest in Shenji Technology.

In fact, the Shenji project has been established inside NIO for a long time, focusing on the field of high-end automotive-grade chips. As early as 2024, its first product Shenji NX9031 has been successfully taped out, with cumulative shipments exceeding 300,000 units as of July this year.

At present, Shenji's products are not limited to the in-vehicle infotainment track. It has built a complete product matrix consisting of NX9031X, NX9031U, NX9031C and other chips, covering three cutting-edge AI tracks: intelligent assisted driving, embodied intelligence and Agent reasoning.

Some analysts believe that NIO's spin-off of the chip business from the vehicle system and independent financing can not only optimize the financial statements, but also effectively ease the company's cash flow pressure, and allow Shenji to enjoy the corresponding valuation dividend.

Leida Finance will continue to pay attention to the subsequent development of NIO.

This article is from the WeChat Official Account "Leida Finance", Author: Ding Yu, Editor: Meng Shuai, published with authorization from 36Kr.