Mohit Oberoi
NIO (NYSE: NIO) is trading lower in US premarket price action today after reporting its earnings for the second quarter of 2022. The price action is similar to that of Xpeng Motors (NYSE: XPEV) and Li Auto (NYSE: LI), both of which had also fallen following their Q2 earnings release.
NIO reported revenues of $1.54 billion in the quarter which was 21.8% higher YoY and was ahead of what analysts were expecting. NIO delivered 25,059 cars in the quarter which was 14.4% higher than the corresponding quarter last year.
While its deliveries fell in April and May due to the lockdowns in China, they rebounded in June to an all-time high. NIO delivered 10,677 cars in August, which was 81.6% higher YoY. It delivered 71,556 vehicles in the first eight months of the year which took its cumulative deliveries to 238,626.
Notably, while NIO’s deliveries rose on a monthly basis in August, both Xpeng Motors and Li Auto reported a month-on-month fall in deliveries. In Li Auto’s case, August deliveries fell more than 50% YoY also.
NIO Reported Wider Than Expected Loss in Q2
While NIO’s sales were better than expected in the second quarter, its net loss in the quarter was wider than what analysts were expecting. The company’s operating loss in the quarter increased 273% YoY and reached $425 million.
Commenting on the earnings, NIO’s CFO Steven Wei Feng said, “We achieved solid financial results for the second quarter of 2022 in spite of the tremendous challenges and cost volatilities.”
He also sounded upbeat about the company’s international expansion. Feng said, “With the ET7 setting sail to Europe in August, users in more countries will experience our new products and services later this year. To meet the growing EV demand of the global market, we have been working closely with our partners to ramp up the production and deliveries of our new products.”
Deutsche Bank analyst Edison Yu, who has a buy rating on NIO stock, is also bullish on the company’s international expansion plans. He also believes that eventually, NIO would enter the US market, which is the world’s most profitable automotive market.
NIO Spooked Markets with Its Guidance
Along with the wider-than-expected loss, NIO spooked markets with its guidance. It expects to sell between 33,000-35,000 vehicles in the third quarter of 2022 and expects its revenues to be between $1.92-$2.03 billion in the quarter. The revenue guidance fell well short of what analysts were expecting.
Xpeng Motors had also provided soft guidance for the third quarter and expects to ship between 29,000-31,000 cars in the third quarter of 2022. While Xpeng outsold NIO for the last few months, NIO is now catching up. In terms of cumulative deliveries also, Xpeng Motors trails NIO.
Chinese EV Companies Have a Big Cash Pile
NIO had a total cash pile of $8.1 billion at the end of June. In contrast, Li Auto had $8 billion while Xpeng Motors had $6.1 billion. Li Auto also raised cash through an at-the-money stock offering in the quarter which boosted its cash pile.
Chinese companies listed risked delisting under The Holding Foreign Companies Accountable Act. However, regulators in the two countries reached a deal to avert delisting. That said, the deepening slowdown in China has not helped matters for Chinese EV companies.
China’s economy is slowing. Both Alibaba and Tencent reported their first revenue decline in history in the June quarter while JD.com posted its slowest growth on record. However, after the crash, some analysts see Alibaba stock as a buy.
The country’s economic activity was hit by the COVID-19 lockdowns in April and May. It also took a toll on automotive production. Tesla, which was the largest EV seller globally lost the title to BYD Motors after the production disruption in China.
Recently, Wolfe Research upgraded Tesla stock to a buy and said that the company would benefit from the passage of the Inflation Reduction Act of 2022 which enhances the federal tax credit for electric cars.
Rising inflation has been a big worry for President Joe Biden ahead of the upcoming midterm elections in the country.
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This article was written for Business 2 Community by Mohit Oberoi.
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