NIO clearly beat expectations in Q1 and issued strong Q2 guidance; product mix improvement supports a target price increase, but R&D cuts create medium-term risks

Overview

This report is Bernstein's commentary on NIO's first-quarter results and second-quarter guidance. It argues that NIO's Q1 performance was meaningfully better than expected, driven mainly by product mix improvement from the higher ES8 share, higher ASP, and better gross margin. Q2 delivery guidance is strong, and the new ES9 and ONVO L80 are expected to continue supporting orders and showroom traffic. At the same time, the report emphasizes that the sharp decline in R&D spending and headcount may weaken long-term product innovation and intelligent driving competitiveness, while rising lithium and storage costs will begin to pressure industry margins from Q2 onward.

Core views

The core view is "near-term sales and margin improvement, but long-term R&D and cost risks still need to be watched." Bernstein acknowledges NIO's strong product cycle, competitiveness in the premium market, improved supply-chain efficiency, and expense control, and therefore raises its 2026/2027 revenue and EBIT forecasts and target price. However, because the rating remains Market-Perform, the report is not turning strongly bullish; instead, it believes the current improvement must be balanced against future R&D investment, product iteration, and cost inflation risks.

Analysis framework

The report mainly uses earnings decomposition, delivery and product-mix analysis, expense and margin analysis, model-cycle assessment, and an EV/Sales valuation framework. It focuses on revenue, deliveries, ASP, gross margin, operating profit, R&D expenses, market share, and battery-swapping station utilization, and combines these with management's Q2 guidance and cost changes to assess future earnings leverage.

Methodology notes

• Valuation methodsOne-year forward EV/Sales multiple

  0.5x one-year forward EV/Sales

  Bernstein uses 0.5x one-year forward EV/Sales as its primary valuation method and also references EV valuations of electric-vehicle peers and the company's long-term profitability potential.

• Earnings forecastVolume, product mix, and expense forecast

  Raised revenue and EBIT forecasts

  The report raises its 2026/2027 revenue forecasts by 12%/10%, reflecting the new model cycle, competitiveness in the premium market, supply-chain efficiency improvements, and expense control.

• Rating definitionMarket-Perform

  Relative performance close to benchmark

  Bernstein's Market-Perform usually means the stock is expected to perform within plus or minus 15 percentage points of the relevant market index over the next 12 months.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NIO.US

  Core coverage name, U.S. ADS

  Strengths

  The ES8 lifted the product mix, and Q1 revenue, deliveries, ASP, and gross margin all improved significantly; Q2 delivery guidance is strong.

  Weaknesses

  GAAP net profit is negative, and operating profit remains negative; the sharp decline in R&D expenses and headcount may hurt long-term technological competitiveness.

  Comparison

  Valuation uses 0.5x one-year forward EV/Sales and references EV valuations of electric-vehicle peers.

  Risks

  Lower-than-expected sales momentum, cost inflation, product quality issues or recalls, retail network expansion execution risk, and future product and technology development risks.

• 09866.HK

  Hong Kong-listed security of the same company

  Strengths

  Benefiting from the same product cycle, sales improvement, and target price upgrade logic as NIO.US.

  Weaknesses

  Likewise exposed to NIO's earnings volatility, R&D cuts, and cost pressure.

  Comparison

  Target price was raised from HK$43.00 to HK$47.00.

  Risks

  Hong Kong liquidity, market risk appetite, and company-specific fundamentals all affect performance.

• China new energy vehicle supply chain

  Industry backdrop and peer comparison set

  Strengths

  Demand for premium new-energy vehicles and the new model cycle support sales recovery for some automakers.

  Weaknesses

  From Q2 onward, the industry may face pressure from rising battery and storage costs.

  Comparison

  The report notes that many OEM results in Q1 were better than expected, but cost inflation will begin to weigh on the industry.

  Risks

  Lithium prices, storage prices, price competition, and demand volatility.

Key data

• Q1 revenueRMB 25.5 billionUp 112% year over year, down 26% quarter over quarter.
• Q1 deliveries83,000 unitsUp 98% year over year, down 33% quarter over quarter.
• Q1 ASPRMB 273,000Up 16% year over year and 8% quarter over quarter, supported by the higher ES8 mix.
• ES8 product mix54%Up from 32% in the previous quarter; starting price was RMB 406,800.
• Q1 gross margin19.0%Vehicle gross margin was 18.8%, higher than 18.1% in the previous quarter.
• Q1 adjusted net profitRMB 44 millionNon-GAAP remained positive; GAAP net loss was RMB 332 million.
• R&D expensesRMB 1.9 billionEqual to 7.4% of revenue, down 41% year over year and 7% quarter over quarter.
• Q2 delivery guidance110,000 to 115,000 unitsImplies monthly deliveries of about 41,000 to 43,000 units in May and June.
• Per-vehicle BOM cost changeMore than RMB 10,000 per vehicleRising lithium and storage costs are expected to push up costs starting in Q2 2026.
• Full-year vehicle gross margin target17% to 18%Depends on a higher-end product mix, normalization of discounts, and supply-chain optimization.
• 2026/2027 sales forecast443,000 / 506,000 unitsSales expectations after Bernstein's forecast upgrades.
• Battery-swapping station utilizationAbout 30 swaps/station/dayBroadly stable from February to May 2026; the company says about 60 swaps/station/day is needed for breakeven.

Impact & implications

For investment implications, the report confirms that NIO's near-term fundamentals are improving as the ES8 and the new model cycle lift price band, orders, and gross margin, while Q2 delivery guidance also improves revenue visibility. The target price increase reflects better sales momentum and earnings forecasts. But the continued Market-Perform rating indicates that valuation and fundamental improvement are still not enough to offset all risks, especially the possibility that reduced R&D could affect next-generation models, ADAS, and long-term brand competitiveness; meanwhile, higher lithium and storage costs may slow the pace of gross margin recovery.

Risks

• Lower R&D spending and headcount may affect next-generation product innovation and ADAS development.
• Rising lithium and storage costs are expected to increase per-vehicle BOM costs by more than RMB 10,000 starting in Q2 2026.
• Current and future model sales momentum may fall short of expectations.
• Product quality issues and potential recall risk.
• Retail network expansion execution risk.
• If premium model launches and mass-market brand launches come in slower than expected, sales and valuation will be hurt; conversely, stronger sales or faster mass-market volume ramp-up would be upside risks.

What to watch

• Whether deliveries from May to June can reach about 41,000 to 43,000 units per month and thus meet the Q2 guidance of 110,000 to 115,000 units.
• The sustainability of ES9, ONVO L80, and ES8 orders, especially the showroom traffic and ES8 order support from ES9.
• Whether full-year vehicle gross margin can stay within the 17% to 18% target.
• The actual impact of rising lithium and storage costs on Q2 and later gross margins.
• Whether R&D spending and headcount continue to decline and how that affects ADAS and the timing of next-generation models.
• Whether battery-swapping station utilization can rise from about 30 swaps/station/day toward the roughly 60 swaps/station/day needed for breakeven.