- Chinese electric vehicles maker Nio is expected to post a deeper Q3 loss early on Nov. 10.
- October vehicle deliveries were down from September despite the launch of European sales and leasing.
- Nio cited "operation challenges" at its plants and supply chain snags amid China's tight COVID-19 restrictions.
- Nio's share price is down 75% over the last year and 65% in 2022.
Upstart Chinese electric vehicles maker Nio Inc. (NIO) is expected to report a wider third-quarter loss on Nov. 10, before the U.S. market open, as China's COVID-19 restrictions and economic malaise slow sales growth.
Nio, whose luxury EV models compete against high-end offerings from Tesla Inc. (TSLA) and other other Western automakers, will probably post an adjusted loss of 1.02 yuan (14 cents) per share, compared with a loss of 0.36 yuan a year earlier, based on the average estimate of analysts tracked by Visible Alpha. Revenue probably rose 36%. Nio already said vehicle deliveries rose 29% in the quarter to 31,607.
October deliveries fell 7.5% from September despite the inclusion of vehicles delivered last month to the company's European leasing partner when Nio began sales in Germany, the Netherlands, Denmark, and Sweden. October's production and deliveries "were constrained by operation challenges in our plants as well as supply chain volatilities due to the COVID-19 situations in certain regions in China," the company said.
China's restrictions under the government's "zero-COVID" policy remain among the world's tightest and have slowed economic growth to about 3% this year, down from 8.1% in 2021. The policy was affirmed at the recent Communist Party congress, and subsequent market speculation about a potential loosening of restrictions has so far produced little evidence of a policy shift.
In the meantime, Chinese auto inventories have increased, prompting analysts at one Chinese brokerage firm to predict that softening demand at home will crimp growth in EV sales and their profitability next year.
Nio's U.S.-traded American depositary receipts (ADRs) fell 65% in 2022. Over the last year, Nio's share price is down 75%, compared with a 19% decline for the Standard & Poor's (S&P) 500 index (see chart below).
Sales and delivery outlooks for the fourth quarter and for next year will be in focus on the Nov. 10 earnings conference call, along with information about European sales. Nio executives may also face questions about their strategy for sourcing and producing their own microchips amid tightened U.S. restrictions on semiconductor technology transfers to Chinese entities.
In August, Nio announced the "substantial completion" of an internal probe into a research report alleging the company had inflated revenue and profits by selling EV batteries to another firm in which Nio holds a minority stake, and which then leased the batteries to buyers of Nio vehicles. The investigation, conducted by an independent committee of Nio's board with the assistance of outside experts, didn't substantiate the allegations, according to the company.
Nio Earnings History
Nio's results for Q2 FY 2022, reported on Sept. 7, showed a wider loss per share than analysts expected, while revenue topped estimates. The stock gained more than 5% that day.
On June 9, Nio's share price fell 7.7% after its Q1 2022 results sparked investor concerns about the decline in the gross margin. Founder and CEO William Li blamed higher commodity costs, adding that gross margin would start recovering in the third quarter after cost cuts.
Nio Key Stats
|Estimate for Q3 FY 2022||Q3 FY 2021||Q3 FY 2020|
|Adjusted Earnings Per Share (Yuan)||-1.02||-0.36||-0.82|
|Revenue (Yuan Billion)||13.4||9.8||4.5|
|Vehicles Delivered||31,607 (actual)||24,439||12,206|
Source: Visible Alpha
The Key Metric
Nio's monthly reports on vehicle deliveries allow investors to track demand for its autos and also reflect how well the company has coped with any production challenges, supply chain upsets, and governmental COVID-19 restrictions.
The monthly tally for October represented deliveries for direct sales to users as well as to Nio's leasing partner in Europe but not the autos deployed in Europe for Nio's subscription service, according to the company.
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International Monetary Fund. "Asia Sails Into Headwinds From Rate Hikes, War, and China Slowdown."
Grizzly Research. "We Believe NIO Plays Valeant-esque Accounting Games to Inflate