On September 17, Nio announced it had completed an equity financing round worth USD 1.16 billion. Notably, the company exercised its overallotment option, raising more than market watchers had expected.
Like other growth-stage firms, Nio faces heavy financial pressure from intensive R&D spending and a capital-heavy business model. It has yet to reach self-sufficiency. By the end of the second quarter, cash reserves stood at about RMB 27 billion (USD 3.8 billion), while quarterly net losses were nearly RMB 5 billion (USD 700 million).
Against this backdrop, the new financing acts as a lifeline, stabilizing Nio’s balance sheet, strengthening its position ahead of product launches, and sending a reassuring signal to the market. Investors responded quickly: on the day of the announcement, Nio’s Hong Kong-listed shares closed up more than 11%, while its US stock rose over 6%. Between September 11–17, Nio shares gained more than 20% in Hong Kong and nearly 30% in the US.
This raises two questions: why do investors keep backing Nio despite persistent losses, and can the company deliver a turnaround this year?
A favored player
Nio’s fundamentals remain challenging. Its losses neared RMB 10 billion (USD 1.4 billion) in the first half of 2025, and since listing, it has accumulated net losses exceeding RMB 100 billion (USD 14 billion). As of the second quarter of 2025, cash reserves totaled RMB 27 billion (USD 3.8 billion), with just RMB 7 billion (USD 1 billion) in cash and equivalents.
Yet Nio has attracted more financing than any other Chinese electric vehicle maker, both in frequency and total value. Facing tighter finances this year, it accelerated fundraising, drawing a mix of domestic and global backers. Repeat support came from Anhui State-owned Financial Capital and Investment Management, alongside large injections from the Abu Dhabi Investment Authority and commitments from international investment banks.
Why do institutions keep investing? The answer may lie in Nio’s scarcity value.
Part of that stems from its premium brand positioning. Targeting China’s high-end EV market—with vehicles priced above RMB 300,000 (USD 42,000)—Nio has built a full lineup known for quality and advanced features. Monthly sales average around 20,000 units, supported by strong customer reviews.
The company has also cultivated a loyal user community through Nio House, Nio Space, and the Nio App. This focus on exclusivity and customer experience has reinforced its premium identity.
Another differentiator is Nio’s battery-as-a-service (BaaS) model, which separates battery ownership from vehicle sales. BaaS lowers upfront costs and eases concerns about degradation and range anxiety.
For example, the ES8 executive six-seat version is priced from RMB 416,800 (USD 58,352). With BaaS, the starting price drops to RMB 308,800 (USD 43,232). For a company that avoids direct price cuts, this model expands its customer base while supporting residual values. According to a report from the China Automobile Dealers Association and Jingzhengu, the Nio ES6 with a 75-kilowatt-hour battery plus BaaS retained 74.5% of its value after one year, higher than Tesla’s Model Y over the same period.
Can Nio turn a profit in Q4?
Investors are also betting on signs of improvement this year. For those entering now, Nio may represent a relatively low-valuation play with upside if profitability improves.
The company’s biggest challenge remains narrowing losses as China’s EV market shifts to a stock-competition phase. At an internal meeting in late August, CEO William Li reiterated Nio’s goal of turning a quarterly profit by Q4 2025, stressing urgency.
Cost-cutting measures are underway. Through self-developed chips and greater platform standardization, Nio has lowered per-unit costs. On its NT3.0 platform, the in-house Shenji NX9031 autonomous driving chip replaces four Nvidia Orin X chips, cutting about RMB 10,000 (USD 1,400) per car. The Onvo L90, which shares the NT3.0 platform, improves parts commonality and boosts bargaining power with suppliers.
According to its earnings report, Nio’s per-vehicle cost fell to RMB 201,000 (USD 28,140) in Q2 2025, down from RMB 212,000 (USD 29,680) a year earlier.
The company has also streamlined operations. Under its CBU (company business unit) system, Nio calculates investment returns more precisely, helping reduce R&D, administrative, and sales costs. In Q2 2025, R&D expenses fell to 15.8% of revenue, down 2.6 percentage points quarter-on-quarter and 10.6 points year-on-year. SG&A (selling, general, and administrative) expenses accounted for 20.9% of revenue, down 0.7 points quarter-on-quarter and 15.7 points year-on-year.
Looking ahead, Nio guided Q3 deliveries at 87,000–91,000 units and revenue at RMB 21.8–22.9 billion (USD 3.1–3.2 billion), or about RMB 251,000 (USD 35,140) per car. For Q4, it projects deliveries of over 150,000 units with a gross margin of 16–17%. Assuming similar per-unit revenue, that implies quarterly revenue of about RMB 37.7 billion (USD 5.3 billion).
Nio also aims to cap Q4 non-GAAP R&D spending at RMB 2 billion (USD 280 million) and keep SG&A below 10% of revenue, or about RMB 3.8 billion (USD 532 million). On paper, that points to a net profit margin of around 0.7%, suggesting breakeven is within reach—but only if it sustains deliveries above 50,000 units per month, maintains gross margins of at least 16%, and keeps costs tightly controlled.
Following in Xpeng’s footsteps?
Even if Nio turns a profit, investors may focus more on whether it can sustain margins over time. Xpeng’s rebound offers a comparison.
Xpeng’s recovery combined efficiency gains with strong product launches and aggressive pricing. In 2024, the Mona M03 and P7+ became breakout hits, and discounts spurred sales, boosting economies of scale and gross margins. Though still unprofitable, its long-term outlook improved, lifting its stock.
For Nio, scale is even more critical. Heavy R&D, marketing costs, and investments in battery swapping and Nio Houses make higher volumes essential. Larger fleets also improve utilization of its swapping network.
Meanwhile, its multi-brand strategy is starting to deliver. The Onvo L90 exceeded 10,000 deliveries in its first full month, helping the group surpass 30,000 in August. The ES8, supported by BaaS-based pricing, also shows potential as a high-volume model.
This suggests Nio may be entering a stronger product cycle, combining lower entry prices through BaaS with new launches. The challenge is sustaining that momentum. The company plans to release the Onvo L80, Nio ES9, and Nio ES7 in 2026, but its rollout pace lags rivals, a cautious approach that could hinder growth in a crowded EV market.
For investors, the question is not just whether Nio can post a profit this quarter, but whether it can chart a sustainable path forward. Scale, margins, and consistent product cycles will matter more than a single profitable quarter.
To secure a lasting position, Nio must grow volumes, lift margins, and sustain momentum. In the end, proving it can build a durable business will count more than short-term profitability.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ding Mao for 36Kr.