Source: Company Financials, Leverage Shares analysis

While the company’s trends in number of vehicles delivered is paring off from the massive upticks seen in 2020 through 2021, there have been no downturns. In Fiscal Year (FY) 2023, the company delivered a little over 160,000 vehicles and offers guidance that Q1 2024 sales will be 31,000-33,000 vehicles. Considering that 10,055 vehicles were delivered in January this year and 8,132 in February, this implies that the company hopes to deliver somewhere around 12,000-15,000 vehicles in March. Given the ongoing crush on household expenditures and the downtrend seen in February, this is a rather interesting assertion.

Despite gross profit being positive over the past few years, first-order trends indicate that this is under some pressure which the company explains (at least in this past year) as primarily being due to the decrease in gross margin from the provision of power solutions as a result of an expanded power network across China. The company also states that it has begun to attract a relatively higher vehicle margin (11.9%) which isn’t altogether surprising; NIO’s models generally aren’t known to be deficient in quality.

Perhaps the most interesting trend to be seen are those in net income and Earnings Per ADS (American Depositary Share): over the past two years, the former has shown a fairly strong uptrend while the latter has had a pretty strong uptrend for the past three years. While earnings per ADS have been 36% lower than in the previous year at a loss of $1.75, it is a far cry from the loss of $10.21 in 2018. Overall, this impact on the bottom line is a par for the course for the company: it is known to aggressively push for greater automation and other forms of production floor upgrades, as well as substantial R&D effort. It is entirely likely that the earnings breakeven which was expected to happen in 2024 would be deferred by at least a year.

Going over vehicle sales, et al relative to vehicles delivered for that year might not be wholly meaningful for any given year since most buyers of higher-end vehicles typically wait a period of time to collect their orders after making payment. Nonetheless, overall trends are rather telling. The ratio of vehicles sales to vehicles delivered has substantially flattened from a little over $62,000 per delivery in 2018 to around $43,000 (i.e. roughly the price of an ET5, the cheapest model) in 2023, thus suggesting that buyer expectations are largely set and a relative “size of the market” is largely determinable by the company. This is also borne out by strong trends in “other sales” relative to the volume of vehicles sold. The relative downtrends in gross profit and the rising increase in net losses also suggests an increasingly-clear addressable segment, which implies that the company’s battle with other carmakers (such as BYD) catering to that same segment.

As described in the recent Baidu earnings article² as well as others over the years, it isn’t entirely possible for most global investors to own an interest via stock ownership; instead the “American Depositary Share” (ADS) format followed by most Chinese companies traded in American bourses act as a form of a promissory note that offers a defined portion of the profits of the company instead.

NIO’s ADS has always been equivalent to one Chinese share. There are a number of differences in market player participation, as exemplified in performance logged over the past one year.