NIO Posts First-Ever Quarterly Profit as China’s EV Price War Intensifies

NIO Inc. has turned a profit for the first time in its history, reaching a long-promised milestone in the middle of one of the toughest periods China’s electric-vehicle industry has faced.

The Shanghai-based automaker on March 10 reported net income of 282.7 million yuan, or about $40 million, for the fourth quarter of 2025, reversing a loss of 7.11 billion yuan a year earlier. Revenue jumped 75.9% from a year earlier to 34.65 billion yuan as deliveries and margins rose across its expanding lineup of electric SUVs and sedans.

It was NIO’s first quarterly net profit and first profit from operations since the company was founded in 2014, marking a notable turn for a brand that has burned through billions of dollars to fund premium vehicles and a vast network of battery-swap stations.

“The achievement of quarterly profitability fully validates the core competitiveness of NIO’s technology roadmap, products and business model,” founder, chairman and Chief Executive William Bin Li said in the company’s earnings release. He said the quarter “reflects the continuous improvement of NIO’s systematic capabilities and operational efficiency, laying a solid foundation for the company’s long-term development.”

NIO’s earnings come as China’s EV market grapples with overcapacity, intensifying price competition, and the gradual rollback of subsidies that helped fuel years of breakneck growth. Average retail prices for electric cars in China have fallen sharply in the last two years as manufacturers including Tesla and BYD Co. have cut prices repeatedly to defend market share.

Against that backdrop, NIO’s ability to post a profit while raising, rather than cutting, its average selling price has drawn attention from investors and analysts trying to gauge which Chinese brands can survive a looming shakeout.

Profit on thin ice

The quarterly profit masks a still-challenging picture for the full year. For 2025, NIO reported a net loss of 14.94 billion yuan, an improvement of about one-third from 2024 but still sizable. Total revenue for the year rose 33.1% to 87.49 billion yuan, while the company’s gross margin increased to 13.6% from 9.9%.

NIO’s balance sheet also remains stretched. The company ended 2025 with total liabilities of about 111.7 billion yuan and shareholders’ equity of roughly 4.1 billion yuan. In its filing, NIO said current liabilities exceeded current assets and acknowledged that continued operations depend on revenue growth, working-capital management and ongoing access to bank credit and capital markets.

Chief Financial Officer Stanley Yu Qu highlighted improvements in cash generation, saying NIO produced positive operating cash flow for 2025 and positive free cash flow in both the third and fourth quarters.

“We have seen meaningful operating leverage as deliveries ramped up and our cost structure became more efficient,” Qu said on the company’s earnings call. He added that NIO is targeting full-year non-GAAP operating breakeven in 2026.

SUVs, scale and spending cuts

Three drivers underpin the turnaround in the fourth quarter: higher volumes, a richer product mix and aggressive cuts in operating expenses.

NIO delivered 124,807 vehicles in the quarter, up 71.7% from a year earlier and 43.3% from the third quarter. For all of 2025, deliveries rose 46.9% to 326,028 vehicles across its three brands: the premium NIO marque, the family-focused ONVO/LeDao line and the smaller Firefly brand.

More important than raw volume was what NIO sold. The company benefited from strong demand for its high-end ES8 sport-utility vehicle, priced above 400,000 yuan, and for the ONVO/LeDao L90, a three-row SUV aimed at families in the 200,000- to 300,000-yuan segment.

Analysts estimate NIO’s average selling price in the quarter at around 253,000 yuan per vehicle, up 15% from the third quarter and 5% from a year earlier. Li said on the call that NIO’s vehicle margin climbed to 18.1% in the fourth quarter, from 13.1% a year ago, while the margin on other sales, which include services and energy offerings, reached 11.9%.

“The improvements in vehicle margin and other sales margin were mainly driven by strong delivery and revenue growth, a higher mix of high-margin models, and continued vehicle cost optimization,” Li said.

The ES8 alone became a major profit contributor. Company executives said the model accounted for roughly one-third of NIO-brand sales in the quarter and close to half of December deliveries, with a gross margin approaching 25%. The L90, meanwhile, became one of China’s best-selling large battery-electric SUVs, according to industry data.

At the same time, NIO pulled back sharply on spending. Research and development expenses fell about 44% from a year earlier in the fourth quarter, while selling, general and administrative costs dropped around 28%, according to analyst estimates. Qu said NIO intends to hold R&D between 2 billion and 2.5 billion yuan per quarter in 2026 and to keep SG&A at roughly 10% of revenue, even as sales increase.

Some analysts have cautioned that cutting R&D so steeply could pose risks in a market where rivals are racing to improve autonomous driving, software and in-house chips. NIO is investing via its Shenji semiconductor unit, which designs intelligent-driving chips and recently raised more than 2.2 billion yuan from outside investors, but still faces competition from global and domestic technology suppliers.

Battery swapping’s long bet

Central to NIO’s strategy is a capital-intensive bet few other automakers have taken at scale: battery swapping. Instead of relying solely on fast charging, NIO has built a dedicated network where drivers can exchange depleted battery packs for charged ones in a matter of minutes.

By the end of 2025, NIO had 3,737 battery-swap stations and 4,877 charging stations worldwide. The company says it has invested more than 18 billion yuan in its swap infrastructure over 11 years. During China’s Spring Festival travel period in 2026, NIO reported 3.27 million charging and swapping services, including 2.07 million swaps.

The network underpins NIO’s battery-as-a-service offering, which lets customers buy vehicles without the battery pack and pay a monthly fee instead. That lowers upfront sticker prices and creates recurring revenue streams, but it has also added to NIO’s capital needs.

Li argued the fourth-quarter results show the model is working. “We have proven the commercial value of our charging and swapping network,” he said on the call, pointing to rising margins in services and energy businesses. Still, one profitable quarter does not resolve questions about whether the infrastructure will generate adequate returns over a full cycle.

Shares climb, doubts linger

Investors reacted positively to the earnings. NIO’s American depositary receipts surged about 15% in New York trading the day after the results, closing around $5.70. Shares of its Hong Kong and Singapore listings also posted double-digit percentage gains.

Even so, the stock remains below its 2018 U.S. IPO price of $6.28 and far beneath its peak during the global EV boom in 2021. Several banks raised price targets modestly or reiterated neutral stances following the results, noting the milestone while pointing to ongoing balance-sheet pressure and industry headwinds.

Brokerages including Macquarie and Nomura upgraded the stock’s rating, citing better execution and improved vehicle margins. Others, such as Bernstein, maintained more cautious views, saying the profit was encouraging but warning that sustained cuts to R&D could erode NIO’s competitive position.

NIO’s board, for its part, has tied a large portion of Li’s future compensation to profitability and market performance. On March 6, directors approved a 2026 share incentive plan that grants the CEO more than 248 million restricted stock units in tranches linked to net profit and market capitalization milestones, along with continued service.

Outlook in a crowded field

Looking ahead, NIO forecast that first-quarter 2026 deliveries will reach 80,000 to 83,000 vehicles, up roughly 90% to 97% from a year earlier. It projected revenue of 24.5 billion to 25.2 billion yuan for the period, implying growth of more than 100%.

The company plans to launch a new flagship SUV, the ES9, in the second quarter of 2026 and to expand the ONVO lineup with the L80, aiming to replicate the success of the ES8 and L90. It is also preparing for stricter overseas trade conditions as the United States and European Union consider or implement higher tariffs on Chinese-made electric vehicles and as China rolls out an export-permit regime for EV manufacturers.

For China’s crowded EV sector, NIO’s breakthrough offers a signal that at least some newer entrants may be able to reach profitability by moving upmarket and tightening costs, rather than joining an industry-wide race to the bottom on price. Whether NIO can turn a single profitable quarter into a consistent track record will depend on its ability to keep selling higher-margin models, maintain technological pace and navigate a market that is still shifting under its wheels.