Nio (NIO) released its Q1 2025 earnings earlier this week, which showed that the company’s losses were wider than what analysts were expecting. 

While Nio’s deliveries have been decent over the last few months, its losses have continued to grow. In this article, we’ll look at the key highlights of Nio’s Q1 earnings and analyze whether there is light at the end of the tunnel for the company that some analysts once dubbed the “Tesla of China,” but is now a penny stock.

Nio’s Losses Widened in Q1

Nio’s Q1 deliveries rose 40.1% year-over-year to 42,094. The company’s revenues rose 21.2% over the period to $1.66 billion, which trailed analysts’ estimates. It posted a gross profit margin of 7.6% in Q1, which, although higher than the 4.9% margin in Q1 2024, was significantly below the 11.7% gross margin that the company posted in Q4 2024.

Nio reported a net loss of $930.2 million in the March quarter. Even after adjusting for share-based compensation, the company posted an adjusted net loss of $865.3 million, which is over half of its sales during the quarter. The company’s losses are still quite high, despite its efforts to implement cost cuts over the last many quarters.

While Chinese rival Xpeng Motors (XPEV) has been reporting strong growth in deliveries alongside double-digit gross margins and positive free cash flows, Nio’s performance on profitability metrics has failed to impress.

Nio Stock Forecast

Nio has faced a flurry of downgrades over the last six months, and Goldman Sachs, HSBC, Macquarie, and JPMorgan Chase are among the brokerages that have downgraded the stock since November. After Nio’s disappointing Q1 2025 earnings report, Barclays lowered its target price from $4 to $3 while Mizuho cut its target from $4 to $3.5.

Of the 16 analysts covering Nio, only two rate it as a “Strong Buy” and three as a “Moderate Buy.” Nine analysts rate the Chinese EV startup as a “Hold,” while two rate it as a “Strong Sell.” The stock’s mean target price is $4.42, which is 22% higher than the June 5 closing price.

Analysts’ pessimism toward Nio is not hard to comprehend, as the company has disappointed with its execution. While rival Xpeng Motors has achieved significant scale on the back of the success of its Mona M03 model and its deliveries have topped 30,000 for seven consecutive months, Nio’s new launches haven’t been as successful.

The company continues to be a cash guzzler and has had to raise cash at regular intervals. In April, it raised around $513 million through a share offering in Hong Kong. Given its falling stock price, subsequent capital raises have invariably happened at lower levels, leading to dilution.

To make matters worse, the price war in the Chinese EV industry has also intensified after market leader BYD’s (BYDDY) price cuts. While BYD spared its premium models (where Nio has presence) from the price cuts, there is always a risk of contagion given the massive overcapacity in the Chinese EV industry.

Can Nio Turn the Tide?

Nio expects its deliveries to be between 72,000-75,000 units in Q2, which could mark a record high for the company. During the Q1 earnings call, Nio said that it expects deliveries to rise further in the back half of the year. Higher deliveries would lead to economies of scale, and Nio expects to reach breakeven in the final quarter of the year. The company also sees “the possibility of achieving positive free cash flow” in the full year if its plans come to fruition.

That said, Nio has failed to live up to the hype, which is evident in its price action. The stock peaked in early 2021 when its market cap rose above $100 billion. It has since been sliding and has closed in the red for four consecutive years. 2025 is looking no different, and Nio is already down almost 17% as of June 5.

Investors have been wary of EV companies that fail to show meaningful progress toward profitability and have punished their stock prices. At the same time, companies that have achieved a mix of the two have been rewarded with stellar gains, as we see with Xpeng Motors.

With the Chinese EV market getting more competitive by the day, Nio management has a tough task at hand, balancing growth on both the top line and bottom line. If the company can deliver with solid execution, investors should see better days ahead. 

If not, the stock will continue to remain out of favor with investors and could be on track for its fifth consecutive losing year.