Nio picks tricky time for mass-market push

Li Auto

28/07/2025 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.

By Katrina Hamlin

HONG KONG, July 28 (Reuters Breakingviews) - Nio 9866.HK is rolling out a new roadmap at a tricky time. The Chinese electric-car maker’s stock has gained roughly 40% this month as the company diversifies a mostly premium portfolio with cheaper models. Success is crucial as the unprofitable marque tries to turn its fortunes around. But Beijing’s efforts to subdue a price war could put a dampener on demand.

The $10 billion company is struggling. Its net loss widened by 30% to 6.8 billion yuan ($930 million) in the first quarter, from a year earlier, even though revenue from vehicle sales grew 19%.

But founder William Li is moving away from his original strategy by expanding into more affordable segments with its fledgling Onvo and Firefly brands. There are signs that they are gaining traction. The new badges, which hit the market less than a year ago, accounted for more than 40% of the 25,000 cars it sold in June. Deliveries of the next Onvo model, the L90, kick off in August.

Li has also vowed to cut costs. Management last month reiterated its target of reporting an adjusted operating profit in the fourth quarter, citing a plan to shrink selling, general and administrative spending to under 10% of revenue, from around 24% last year. The commitments help stoke confidence that he can reduce cash burn while selling more cars.

Investors see potential. Its New York-listed stock rose 41% this month. It now trades at just under two-thirds of forecast revenue for 2026. That's just over half Xpeng 9868.HK and Li Auto’s 2015.HK level, reflecting the fact that annual net profit is still some way off. Li Auto is already earning money, while Xpeng could reach that landmark next year, per forecasts.

Analysts don’t expect Nio to post a full year of positive earnings until 2029, according to Visible Alpha, leaving the company dependent on its $3.6 billion cash in the meantime.

There’s a wildcard to consider, too. Li is making his strategic shift as Beijing cracks down on aggressive discounting and marketing. Trying to promote products without dropping the price or offering free services and other perks that have become almost standard during a two-year price war could dampen demand, warns Steve Dyer of consultancy Alix Partners. It also leaves Nio with fewer tools to tout new brands.

While Nio’s new direction is promising, Li’s not out of the woods.

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CONTEXT NEWS

Nio’s New York and Hong Kong-listed shares have risen by 41% and 39%, respectively, since their close on June 30.

On July 10, Nio held a launch event and began accepting pre-orders for its L90 model, part of its new Onvo brand. Prices start from 279,900 yuan ($39,000), or 193,900 yuan ($27,000) for buyers opting for a battery subscription. That price compares to the roughly 250,000 yuan sticker price for a Tesla Model Y.

Nio's share price has rallied in July https://www.reuters.com/graphics/BRV-BRV/mypmxakxxvr/chart.png

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))