NIO released its first-half earnings report after the market close on September 1st. The financials show that the company's revenue surged 85.8% year-over-year to RMB 57.67 billion in the first half of the year, while the net loss attributable to shareholders narrowed by 89.9% to RMB 1.218 billion, and the adjusted net profit turned positive at RMB 70 million.

However, like many automakers, NIO is also under pressure from rising costs. Meanwhile, data from Flush iFinD shows that as of the end of the first half, NIO's debt-to-asset ratio remained high at 89.52%.

Notably, NIO has been actively expanding its battery swap and chip businesses this year. With the transition of its battery swap operations from a heavy-asset self-build model to a light-asset operation, and the independent financing secured for its chip business, NIO's financial pressure may be somewhat alleviated.

From September 1st to 3rd, NIO's Hong Kong-listed shares fell by 6.39%, 3.35%, and 1.07% respectively. By the close of trading on September 3rd, NIO was priced at HKD 30.02 per share, giving it a total market capitalization of HKD 74.543 billion.

Revenue Surges, Loss Narrows

According to NIO's latest financial report, the company generated revenue of RMB 57.67 billion in the first half, up 85.8% year-over-year. Gross profit reached approximately RMB 10.766 billion, up 282.2%, and the net loss attributable to shareholders narrowed by 89.9% to RMB 1.218 billion.

Under non-GAAP accounting (which excludes items like share-based compensation), NIO's adjusted operating profit for the first half was RMB 274 million, compared to a loss of RMB 9.988 billion in the same period last year. The adjusted net profit was RMB 70 million, versus a net loss of RMB 10.406 billion a year earlier.

Back in the third-quarter 2024 earnings call, NIO's founder, chairman, and CEO, William Li, stated that the company's goal was to achieve profitability in 2026. After achieving its first quarterly profit in the fourth quarter of last year, NIO's CFO, Stanley Qu, reiterated, "In 2026, NIO will strive to achieve full-year non-GAAP profitability."

Now, NIO has been profitable on a non-GAAP basis for three consecutive quarters. From the fourth quarter of last year to the second quarter of this year, the company's adjusted net profits (non-GAAP) were RMB 727 million, RMB 44 million, and RMB 26 million, respectively.

Looking at the second quarter alone, NIO achieved revenue of RMB 32.137 billion, up 69.1% year-over-year and 25.9% quarter-over-quarter. Vehicle sales contributed RMB 29.058 billion, up 80.1% year-over-year and 27.5% quarter-over-quarter.

NIO's second-quarter revenue growth was primarily driven by an increase in vehicle deliveries. The company delivered 107,700 vehicles in the quarter, up 49.4% year-over-year and 29% sequentially.

During the same period, NIO's operating loss narrowed by 92.9% year-over-year to RMB 347 million, with an adjusted operating profit of RMB 207 million. The company recorded a net loss of RMB 528 million, a 89.4% improvement, and an adjusted net profit of RMB 26 million.

A significant improvement in gross margin was another highlight of this report. In the second quarter, the company's overall gross margin was 18.4%, up from just 10% in the same period last year. The vehicle gross margin also rose to 18.5% from 10.3%. However, both margins saw slight sequential declines of 0.6 and 0.3 percentage points compared to the first quarter of this year.

The year-over-year improvement in gross margin was attributed to strong sales of high-margin models and cost structure optimization. Notably, the gross margins for the ES8 and ES9 models both exceeded 20%, providing strong support for overall profitability. The slight sequential dip was mainly due to margins in vehicle sales, energy solutions, and the sales of parts, accessories, and vehicle servicing.

Entering the second half of the year, NIO's delivery momentum has continued. In July and August, the company delivered 35,900 and 35,800 vehicles respectively, up 71% and 14.5% year-over-year. As of August 31st, NIO's cumulative deliveries for the year reached 262,900 units, a 57.9% increase, with total historical deliveries surpassing 1.26 million units.

NIO expects its third-quarter vehicle deliveries to be between 108,000 and 111,000 units, representing a year-over-year growth of approximately 24% to 27.5%. The company also projects total revenue in the range of RMB 33.285 billion to RMB 34.051 billion, up about 52.7% to 56.2% year-over-year.

Rising Cost Pressures, Debt-to-Asset Ratio Near 90%

Like many of its peers, NIO is also grappling with rising costs for upstream raw materials and chips. During the second-quarter earnings call, CFO Stanley Qu noted that cost pressures were still increasing, with per-vehicle costs in the second quarter having risen by approximately RMB 14,000 compared to the fourth quarter of last year, primarily due to memory chips, batteries, and other bulk materials. He added that costs are expected to increase by another RMB 2,000 to RMB 3,000 in the second half of the year.

Despite these severe cost challenges, NIO managed to stabilize its second-quarter vehicle gross margin at 18.5% through supply chain optimization, commercial negotiations, and product portfolio management. The company plans to maintain this level in the third and fourth quarters.

The financial report shows NIO's second-quarter R&D expenses were RMB 2.145 billion, down 28.7% year-over-year but up 13.8% quarter-over-quarter. NIO attributed the yearly decrease to lower personnel costs from organizational optimization and reduced design and development expenses due to different development stages and improved operational efficiency. The sequential increase was due to higher design and development costs for new products and technologies, as well as increased R&D personnel costs.

In the same period, NIO's selling, general, and administrative expenses rose 11.6% year-over-year and 22.5% sequentially to RMB 4.425 billion. The yearly growth was primarily driven by increased sales and marketing activities related to new product launches, while the sequential increase reflected higher sales and marketing activities, increased marketing personnel and related costs, and higher share-based compensation for general corporate functions.

As of the end of the first half, NIO's inventory increased 30% to RMB 11.09 billion compared to the end of last year. Trade payables and notes payable stood at RMB 60.385 billion, up 13.3% from the end of last year. Short-term borrowings surged 74% to RMB 8.165 billion from RMB 4.692 billion.

While these figures reflect NIO's investment in inventory and supply chain, they have also kept the company's debt-to-asset ratio at a high level of 89.5%. However, NIO's current cash flow situation is relatively healthy, having achieved positive operating cash flow for four consecutive quarters. As of the end of the second quarter, NIO held a total of RMB 56.7 billion in cash, cash equivalents, restricted cash, short-term investments, and long-term time deposits, an increase of RMB 10.8 billion from the end of last year.

Battery Swap "Debt Relief" and Independent Chip Financing

Notably, before releasing its latest results, NIO also undertook two key strategic initiatives this year — one related to battery swapping and the other to chips.

In August, Wuhan NIO Energy Co., Ltd. and Wuhan Optics Valley Transportation Investment Group Co., Ltd. completed the asset transfer for the first batch of 36 cooperative battery swap and charging stations. The partnership uses a model where "state-owned capital partners hold the assets, while NIO handles professional operations," meaning the charging and swap station assets are owned by Optics Valley Transportation, with NIO Energy responsible for operations.

Following this transaction, all existing battery swap station assets in Wuhan are now held by state-owned partners. According to the plan, both parties will continue to leverage their respective strengths under this cooperation model to promote subsequent batches of station cooperation across Hubei Province and nationwide.

Some analysts believe that since building charging and swapping infrastructure is costly and time-consuming, this model allows NIO's battery swap business to shift from heavy-asset self-construction to light-asset operations. Under this arrangement, state-owned platforms hold the stations, freeing NIO from construction and holding costs. By leveraging state capital to absorb assets, NIO can optimize its financial structure and ease the financial pressure of continuous heavy-asset investment.

As of September 3rd, NIO had built over 4,000 battery swap stations and over 30,000 charging piles, while integrating access to over 1.76 million third-party charging piles. The battery swap network is a typical heavy-asset infrastructure, with single station construction costs reportedly ranging from RMB 1.5 million to RMB 3 million. Even using the lowest cost estimate, NIO's total investment in battery swapping exceeds RMB 6 billion.

If this "Wuhan model" can be replicated across the country in batches, NIO's financial strain would undoubtedly be greatly reduced. Currently, NIO Energy has established practical cooperation with over 40 local state-owned capital platforms and financial institution partners across 25 provinces and regions, jointly building and operating more than 800 battery swap stations.

Alongside battery swapping, NIO's in-house chip development has also been a significant cash outlay, but the company has recently made several strategic moves here as well. In June of last year, NIO established its chip subsidiary, Anhui Shenji Technology Co., Ltd. In February of this year, Shenji Technology completed its first financing round of RMB 2.257 billion, with a post-investment valuation approaching RMB 10 billion.

NIO's latest financial report reveals that in June and August, Shenji Technology entered into two final agreements with domestic investors, who subscribed for newly issued shares with a total cash injection of RMB 493 million, raising its post-investment valuation to RMB 12.25 billion. After these two rounds, NIO still holds approximately a 59.95% controlling stake in Shenji Technology.

The Shenji project, which focuses on high-end automotive-grade chips, was initiated internally at NIO some time ago. Its first product, the Shenji NX9031, successfully completed tape-out back in 2024, and cumulative shipments have exceeded 300,000 units as of July this year. Shenji's product line has expanded beyond the automotive sector, building a complete product matrix with multiple chip models covering three cutting-edge AI fields: intelligent assisted driving, embodied intelligence, and agent inference.

Analysts suggest that by spinning off its chip business from the vehicle business and securing independent financing, NIO can both optimize its financial statements and effectively alleviate its cash flow pressure, while also allowing Shenji to enjoy the corresponding valuation benefits. Future developments regarding NIO will continue to be closely monitored.