After a single quarter of profit, NIO set a new "future" for itself

NIO, established for over 11 years, has finally welcomed its first profitable quarter.

On the evening of March 10, NIO released its financial report for the fourth quarter and the full year of 2025, showing a significant reduction in losses and its first positive operating profit in a single quarter. Industry benchmark Tesla took about 10 years from its founding to its first quarterly profit, making NIO’s breakthrough highly noteworthy.

The news of profitability quickly ignited enthusiasm in the capital markets. On March 11, NIO’s Hong Kong stock opened high at HKD 43.86 per share, up 15%.

NIO’s Chief Financial Officer, Qu Yu, further proposed a new target during the earnings call, stating that the company aims to achieve full-year profitability on a non-GAAP basis (excluding certain non-recurring and non-core operating items) in 2026.

Can NIO successfully bridge the gap from single-quarter profitability to full-year profitability?

Rising delivery volume and gross margin

“The continuous improvement in systematic capabilities and operational efficiency lays a solid foundation for long-term sustainable development. The company has officially entered its third phase, starting a new round of rapid growth,” said Li Bin, founder, chairman, and CEO of NIO, during the earnings call. The quarterly profit confirms the company’s core competitiveness in technology, products, and business model.

According to the financial report, NIO’s non-GAAP operating profit for the fourth quarter of 2025 was RMB 1.25 billion, with revenue of RMB 34.65 billion and deliveries of 124,807 vehicles, representing year-on-year increases of 75.9% and 71.7%, setting a new quarterly record.

The improvement in gross margin is a key highlight. NIO’s comprehensive gross margin for the fourth quarter of 2025 rose to 17.5%, an increase of 5.8 percentage points year-on-year, while the gross margin for complete vehicles reached 18.1%, up 5.0 percentage points year-on-year, marking a recent peak, which indicates an improvement in profit quality.

This change is mainly attributed to the strong performance of NIO’s high-end, large-size pure electric SUVs, with the newly launched ES8 and ET7 quickly ramping up production. The increase in the proportion of high-end models directly drove the overall improvement in gross margin structure.

Li Bin noted that since September 2025, the sales of pure electric large three-row SUVs have led the market for five consecutive months, with a year-on-year growth of over 350% in the second half of the year, while the range-extended models saw a year-on-year decline of 6%. “NIO has precisely hit the sweet spot in this niche market.”

Automotive analyst Ling Ran believes that NIO’s quarterly profit and narrowed annual losses have broken the market’s entrenched impression of “high investment, difficult profitability.” However, whether profitability can be sustained still requires further observation. Car companies traditionally experience strong seasonal fluctuations; how to break free from quarterly losses and achieve stable profitability remains NIO’s biggest challenge.

Three new large-size SUVs to be launched

Achieving profitability in the fourth quarter of 2025 was a promise made by Li Bin on March 23, 2025. NIO has delivered on that promise.

Regarding the new target for 2026, Qu Yu stated during the earnings call that the company will strive to achieve full-year non-GAAP profitability in 2026. This goal is supported by NIO’s systematic layout in products, channels, and research and development.

Li Bin believes that the growth momentum for pure electric models remains strong, stating, “Last year’s growth in new energy vehicles was driven by pure electric models, and this trend will continue this year. Importantly, the market penetration rate for high-end pure electric vehicles priced over RMB 300,000 has doubled year-on-year, increasing by 58%, while range-extended models have seen a slight decline. This aligns closely with NIO’s product layout, providing a favorable environment for market expansion.”

On the product side, in addition to the already launched ET7 and new ES8, NIO will launch three new large-size high-end SUVs in 2026, namely the ES9, ET8, and a new five-seat SUV built on the ES8 platform.

In terms of channels, NIO will deepen its efforts in lower-tier markets through a joint layout with ET and firefly, covering more prefecture-level cities. NIO will focus on the high-end market, ET will target family user groups, and firefly will take the lead in overseas markets.

In terms of R&D, NIO will maintain a quarterly investment of RMB 2 billion to 2.5 billion in 2026, focusing on three major areas: the second advanced intelligent chip from Shenji Company, aimed at a broader customer base, has successfully completed tape-out and entered the mass production stage, which will be used in autonomous driving and embodied intelligence; the driver assistance business will increase computing power investment, with two major version updates expected within the year; and the charging and swapping network will continue to expand, with an expected addition of 1,000 swapping stations in a year.

However, NIO also faces significant challenges: uncertainty in the ramp-up of new models, intensified competition in the high-end market potentially suppressing gross margins, and increasing difficulty in managing three brand channels, all of which could affect the achievement of the annual profitability target.

Commitment to battery “chargeable, swappable, and upgradeable” development

The potential impact of ultra-fast charging on the value of battery swapping has also become a focal point during the earnings call.

Li Bin proposed two angles of consideration: first, that the battery swapping network has distributed energy storage value and can systematically address battery lifespan degradation issues; second, that NIO insists on a development direction that is “chargeable, swappable, and upgradeable.”

He emphasized that NIO’s battery swapping stations have formed a distributed energy storage network with approximately 6-7 GWh capacity, with single stations capable of storing several megawatt-hours, providing a 60% economic advantage over traditional energy storage, transforming the battery swapping network from a “heavy asset cost center” to a “high-value profit carrier.”

Additionally, he stated, “I am pleased to see more car companies participating in the construction of charging and swapping networks, which is very beneficial for promoting the penetration rate of pure electric models and accelerating the transition from gasoline vehicles, range-extended, and plug-in hybrids to pure electric.” It is reported that NIO has also launched a 640 kW liquid-cooled ultra-fast charging pile.

Ling Ran believes that the uniqueness of battery swapping is diminishing, but its distinct value in battery lifespan management, energy storage monetization, and user experience remains. Whether the battery swapping network can truly transition from a cost center to a continuously profitable business segment will directly affect NIO’s long-term competitiveness and profit quality.