Expand target market by 2 to 3 times! NIO bets on "big cars" to achieve full-year profitability

Founded 11 years ago, NIO finally reaches an inflection point for profitability.

On the evening of March 10, NIO Inc. (hereinafter referred to as “NIO”) released its Q4 and full-year 2025 earnings report.

This is a milestone financial report, as NIO achieved its first quarterly profit, ending a long-standing loss since its founding.

NIO’s founder, Chairman, and CEO Li Bin stated: “In the fourth quarter, from any perspective, we have already achieved profitability.”

Data shows that in the fourth quarter of last year, NIO’s total revenue was approximately 34.65 billion yuan, a year-over-year increase of 75.9%, with an operating profit of 1.25 billion yuan, and a GAAP profit of 810 million yuan. Meanwhile, the company’s cash reserves reached 45.9 billion yuan, an increase of nearly 10 billion yuan compared to the end of Q3.

The performance directly boosted the stock price. On the same evening, NIO’s U.S. stocks opened higher and continued to rise, with an early surge of over 8%. During the trading session, the gains expanded multiple times, ultimately closing at $5.70, up 15.38%. The capital market transmission continues. On March 11, NIO’s Hong Kong stocks opened at HKD 43.86 and closed at HKD 43.50, up 14.05%, returning to a market capitalization of over 124.8k yuan for the first time in more than a year.

Gross margin hits a new high of 18.1%

Compared to market enthusiasm, Chairman and CEO Li Bin appeared more calm. He emphasized that NIO will remain a startup for a considerable period and will not set standards based on mature companies. Therefore, the focus will be on sales volume, user numbers, and revenue growth rather than deliberately maximizing profits.

He viewed the performance within the industry, noting that a 1.5% sales share and a 2.5% revenue share are still “nobody” in his eyes. The quarterly profit indicates that “NIO has made certain breakthroughs in management, found some methods, and is working hard to close the business model loop, but it still takes time, and a complete system has not yet been formed.”

The increase in delivery volume and gross margin were key drivers of NIO’s profitability in Q4.

In Q4 2025, NIO delivered approximately 124.8k new vehicles, a year-over-year increase of 71.7%, and a quarter-over-quarter increase of 43.3%. At the same time, the hot sales of high-priced models like the ES8 also boosted the company’s profitability. During the earnings call, NIO CFO Qu Yuxi introduced that the new NIO ES8’s gross margin approached 25%. Coupled with technological cost reductions and scale effects, as deliveries exceeded 320k units, manufacturing and supply chain costs per vehicle were effectively reduced. As a result, NIO’s vehicle gross margin reached 18.1% in the quarter, a three-year high; the overall gross margin was 17.5%, also the highest since 2022.

Cost control efforts are also reflected in the financial report.

In Q4 2025, NIO’s sales costs were 320k yuan, up 64.3% year-over-year, but the growth rate was lower than the 80.9% increase in vehicle sales revenue. The difference between cost growth and revenue growth further supported the gross margin improvement. For the full year, sales costs totaled 28.58B yuan, up 27.6%, lower than the 33.1% annual revenue growth.

Expenses on R&D and sales & admin are also being controlled. R&D expenses in Q4 fell to 75.57B yuan, down 44.3% year-over-year, and full-year R&D expenses were 2.03B yuan, down 18.7%. Sales and administrative expenses were 3.54B yuan, down 27.5%, with an annual growth rate of only 2.2%, far below revenue growth. Qu Yuxi stated during the conference that through organizational optimization and the implementation of the CBU (Core Business Unit) mechanism, operational efficiency has significantly improved, and both cost savings and revenue expansion contributed to the profitability breakthrough. Li Bin admitted during the communication session that the company has “grown its capabilities” through transformation, shifting from “large investments” to now enjoying cost reduction and efficiency improvements, with “accounting as a source of fun.”

According to Qu Yuxi, NIO will maintain R&D investments of 2 to 2.5 billion yuan per quarter this year, continuously improving R&D efficiency. The company will also dynamically adjust its R&D pace and investments based on operational conditions to ensure key product and core technology investments. Despite profitability in Q4, NIO’s full-year operating loss was 14.04 billion yuan, narrowing by 35.8% compared to the previous year.

Aim for full-year profitability in 2026

Li Bin believes that the profitability in Q4 is the result of multiple factors working together, and these core elements of profitability are unlikely to change significantly in the fundamentals of 2026, making the profit path sustainable.

Regarding the plan to achieve full-year profitability in 2026, Li Bin revealed that this year NIO will launch three new models, including the flagship SUV ES9, and two large five-seat SUVs—Ledo L80 and a model based on the new ES8 platform. These three new vehicles will form a strong SUV product matrix with the Ledo L90 and the ES8, covering a broader user base and market space. “Last year, the L90 and ES8 helped shift the trend in the pure electric three-row market. This year, these three new cars will continue that success. The target market range we cover will be 2 to 3 times larger than last year.”

He acknowledged that current raw material prices, such as copper and aluminum, as well as rising storage chip costs, pose significant cost pressures. “But NIO’s existing pricing system for its three major brands is sufficient to support these cost increases, and the company has fully considered raw material price hikes when setting its 2026 full-year profitability target,” emphasizing that the company does not plan to pass these costs onto consumers for now.

Targeting profitability, NIO previously set a goal of maintaining 40%–50% sales growth in 2026. Based on this, annual sales volume would be around 450k to 480k units.

In Q1, NIO’s delivery guidance is 80k–83k units, a year-over-year increase of 90.1% to 97.2%. As of the end of February, NIO’s total sales this year were about 48k units, meaning that March’s delivery volume needs to reach 32k–35k units to meet the guidance. Li Bin said that Q1 is a low season, but the company has provided high growth year-over-year figures, “The normal annual sales estimate in the industry is Q1 multiplied by 6.”

Charging and swapping are not mutually exclusive

Recently, BYD (002594) announced its second-generation Blade Battery and fast-charging technology, which has raised concerns among some industry insiders about NIO’s battery swapping model. Li Bin directly stated that swapping and fast charging are not mutually exclusive but are complementary solutions to meet different scenarios.

By the end of 2025, NIO had built over 28k supercharging stations and destination charging stations, and maintained more than 3,815 battery swap stations, forming a system of “charge, swap, and upgrade.”

From a financial perspective, the battery swap-related business has gradually achieved scale effects. In 2025, service and community revenue exceeded 10 billion yuan. Although the early deployment of 1,000 swap stations per year still results in short-term operational losses, profits from other business segments are enough to cover these losses.

Li Bin said that the core value of battery swapping far exceeds “refueling speed.” It can solve the mismatch between a 15-year lifespan for private cars and an 8-year warranty for batteries, by unified management and maintenance to improve battery safety and lifespan, reducing long-term costs for users. Additionally, swap stations as distributed energy storage facilities can participate in grid interaction and green energy absorption, with operational efficiency 6% higher than typical energy storage, offering long-term commercial value.

Earlier, NIO, along with investors like Hubei KeTuo and CATL (300750), completed hundreds of millions of yuan in equity financing and recently successfully issued the world’s first green battery asset REITs product worth 500 million yuan, demonstrating financial institutions’ recognition of the swap business model.

In January this year, NIO announced that its sales network would focus on sinking markets, planning to open integrated stores (SKY stores) that combine NIO, Ledo, and Firefly brands in regions with existing sales, achieving “front-end integration and back-end connectivity.” President Qin Lihong also introduced the progress of SKY store deployment, with the first stores opening around the Spring Festival, and overall progress going smoothly. He revealed that over 170 locations have been selected and entered into project pipelines nationwide, with the peak opening period expected between June and October this year.

Li Bin, optimistic about the future, still sees multiple challenges ahead.

First, the Chinese passenger car market will cease rapid growth, with the total market volume expected to decline slightly, and he emphasized “no complacency.” Second, technological iteration is accelerating; no company can maintain long-term technological leadership, as new technologies are often caught up within six months to a year. Third, the paradigm shift in vehicle marketing is fundamental—“the death valley of new car effects” has become a common industry pattern, with pulse marketing causing sales to plummet after initial launch, making it difficult to avoid.

Market contraction, rapid tech iteration, and marketing paradigm shifts raise the bar for sustained success. Li Bin believes that “the core of future industry competition is the ability to build systems and manage operations.” He describes it as a “marathon on a muddy road,” testing the company’s long-term strength.