Written by Cláudio Afonso | LinkedIn | X
Nio Group reported its fourth-quarter earnings on Friday, posting wider net losses despite improved vehicle margins and a lower average selling price, partly due to the inclusion of sales from its lower-priced sub-brand Onvo in the final two months of the quarter.
According to founder and CEO William Li, the company will plan its fundraising needs and activities based on operational requirements and market conditions.
The EV maker reported a balance of cash and cash equivalents, restricted cash, short-term investment and long-term time deposits of 41.9 billion ($5.7 billion) as of the end of 2024, down 27% year on year and 7% sequentially.
“We have been incurring loss since inception,” Nio said in the earnings report. “We incurred operating cash outflow for the year ended December 31, 2024 and our current liabilities exceeded current assets as of December 31, 2024.”
The Shanghai-based Group said it believes its financial resources “will be sufficient to support our continuous operations in the ordinary course of business for the next twelve months.”
“Based on our going concern and liquidity assessment, which considers our business plan including revenue growth, working capital management and the ability to raise funds from banks under available credit quotas when needed, we believe that our financial resources, including our available cash and cash equivalents, restricted cash and short-term investments, cash generated from operating activities and funds from available credit quotas will be sufficient to support our continuous operations in the ordinary course of business for the next twelve months,” Nio stated.
When asked by the Morgan Stanley analyst Tim Hsiao at the conference call on “how much of cost saving would management expect to achieve” and when those results would be reflected, William Li reminded that the cost cutting measures started already last year.
“Regarding the cost reductions, actually, since last year, we have already started the cost of mining initiatives,” he said. “And for the 2024 full year, we were also on track for the cost reduction initiatives.”
“As you can see in our vehicle margin, for Q4, it has fulfilled our expectations” Li said while guarenteeing that Nio Group will “continue such cost reduction actions this year from multiple aspects, including the supply chain, R&D, and in that case, we foresee that our vehicle margin will also continue to grow starting Q2.”
The launch of the first sub-brand Onvo, which occured last September, naturally required new investments in the workforce, marketing campaings, and sales/ service network.
“And in terms of expenses, actually, in Q4 last year, as we launched the new brand Onvo together with its product, we started to make investments and expenses in developing its sales and service networks, as well as in the brand-related activities,” he said before warning that the first quarter of 2025 is also seeing those investments as the company prepares to launch the other sub-brand Firefly.
“And such activities and expenses will continue in Q1 this year including the new brand and also the sales and service networks,” William Li stated. “But in the meantime, starting Q1 this year, we have started an all-employee comprehensive cost reduction initiative covering R&D, supply chain, sales and also service teams: we call it CBU or cell business unit.”
As recently reported, the EV maker has recently scaled up its cost cutting measures and the controls in each project both in China and in its international markets.
“Basically, we ask all the teams and employees to take ownership and accountabilities of the company’s operational targets,” Li explained. “We already have seen some good results and actions taken voluntarily by the R&D teams, by the sales and service teams in reducing the cost and improving the efficiency.”
“The results of such actions will be reflected in our balance sheet in the coming quarters starting in the second quarter as we continue to strengthen our cost control and also expenses management in the second half of this year, together with improvements in the sales volumes in the vehicle margin as well as in the expense control,” Li stated before reaffirming the goal of achieving single quarter profitabily in the last quarter of this year.
“We are confident that we are going to achieve our breakeven target in Q4,” the CEO stated.
Later in the call, the chief executive was asked direclty about the company’s cash reserves and revealed that the Group will “see major improvement in the operating cash flow” starting from the second quarter.
“In Q1, as we see the decrease in the sales volume quarter over quarter, we did experience an operating cash outflow,” Li stated. “Yet, as we have introduced that this year will be a pivotal year for our product launch as we witness the rebound starting Q2, we will also see major improvement in the operating cash flow.”
Li reminded that the company “conducted a series of adjustments and also streamlining activities” which are expected to be “reflected in our performance, financial performance starting Q2.”
In conclusion, the Group’s chief said it “will be prudent with our cash flow management to make sure that our resources can sustain our continuous growth and development.”
Commenting on future possible fundraising, Li said Nio “will be planning our fundraising requirements and activities according to the operations of the company as well as the changes in the market.”
“Regarding your second question on the fundraising, we have various options. We have a various fundraising channels for the capital market, for the US capital market, RMB capital market, public or private, we will be planning our fundraising requirements and activities according to the operations of the company as well as the changes in the market.
In the prepared remarks, the founder and chief executive William Li said the company will strengthen its product lineup starting in the second quarter with the launch of refreshed versions of the ET5, ET5 Touring, ES6, and EC6, while also beginning deliveries in April of its most expensive model, the ET9, and its most affordable model to date, the Firefly.
In total, the Group will launch 9 models across three brands, according to Li.
Prior to the earnings conference call, Morgan Stanley analyst Tim Hsiao reiterated an Overweight rating and a $5.90 price target on Nio, implying a 31% upside from the current $4.50 share price.
Based on the full-quarter forecast, Nio Group expects to deliver between 13,945 and 15,945 vehicles in March—well below previously communicated targets of 20,000 deliveries in March for the Onvo sub-brand alone.
