Key Takeaways
Shares of Chinese electric-vehicle makers slumped in Hong Kong trading on Tuesday, with Nio Inc. (9866.HK) plunging more than 5% as investor concerns mount over profitability and competition ahead of the company’s quarterly earnings report. Rivals also saw steep losses, with Li Auto Inc. (2015.HK) falling over 4% and the broader Hang Seng Tech Index declining.
"If the company can record strong sales momentum for the new models, that could trigger a re-rating for the stock," DBS analysts said in a recent note, highlighting the stakes for Nio's new Onvo L80 and ES9 models. The comment underscores the market's intense focus on whether new products can stand out in a crowded field.
The sector-wide weakness was exacerbated by falling input costs that failed to boost sentiment, as Chinese lithium futures tumbled 4.3% to 183,140 yuan a tonne. The drop in the key battery material did little to offset fears about vehicle margins, with analysts at Citi projecting Nio's first-quarter gross margin at 17.9%, a key figure investors will watch closely.
The selloff puts a spotlight on Nio's upcoming first-quarter results on Thursday, which will be critical for assessing its financial health. Analysts polled by Visible Alpha estimate a net loss of 1.12 billion yuan ($164.7 million), a sharp reversal from the company's first-ever quarterly profit in the final quarter of 2025, making the outlook for second-quarter deliveries and margins paramount for investors.
The negative session for Nio and its peers reflects persistent anxiety that a price war in the world's largest EV market is eroding profitability. While Morgan Stanley noted that China's battery-electric vehicle sales rebounded 9% month-over-month in April, a wide array of new model choices and subdued consumer confidence may be reinforcing a "wait-and-see" mindset among buyers.
Deutsche Bank recently warned that the initial sales boom for Nio's new mass-market Onvo brand could fade quickly, adding to pressure on the company to prove its new strategy can deliver sustainable growth. Investors are now looking to the company's second-quarter sales guidance for any signs of a durable recovery. The stock had a strong run in the first quarter, rising 7.1% on the back of its temporary swing to profitability and expectations for its new models, but Tuesday's session erased a portion of those gains.
This article is for informational purposes only and does not constitute investment advice.
