NIO Inc. NIO remains focused on maintaining healthy vehicle margins through a combination of product mix optimization, disciplined pricing and supply chain efficiency initiatives despite mounting cost pressures across the electric vehicle industry.
In the first quarter, NIO reported a vehicle margin of 18.8%, up from 10.2% in the same period last year and 18.1% in the fourth quarter of 2024. The stronger margin performance was largely driven by a greater contribution from higher-margin models, particularly the ES8, which accounted for roughly 50% of total margin contribution and achieved a vehicle margin exceeding 20% during the quarter.
The company also benefited from previously secured inventories of key parts and components, which helped offset some of the impact from rising raw material costs in the first quarter. However, the broader industry continues to face rising cost pressures related to memory chips, battery materials such as lithium carbonate and NCM, and copper and aluminum. Beginning in the second quarter, these factors are expected to increase vehicle costs by approximately RMB 10,000 or more per unit on average.
Despite these headwinds, NIO continues to target a vehicle margin of 17% to 18% for both the second quarter and the full year. To achieve this goal, the company plans to increase the sales mix of higher-priced, higher-margin models such as the ES8 and ES9. At the same time, it intends to maintain disciplined pricing and promotional strategies for models with moderate margins, prioritizing profitability over volume growth.
NIO is also working closely with its supply chain partners to mitigate cost pressures through engineering enhancements, operational efficiency improvements and commercial negotiations. Through these measures, the company believes it can sustain vehicle margins in the 17% to 18% range despite a challenging cost environment. NIO carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Steps Are NIO’s Peers Taking for Margin Improvement?
XPeng Inc. XPEV reported a gross margin of 20.6% in the first quarter of 2026, up from 15.6% a year earlier and slightly below 21.3% in the fourth quarter of 2025. Despite higher battery material and membership costs, XPeng’s gross profit remained close to the prior quarter. XPeng expects the second quarter gross margin to stay around the first quarter levels, supported by deliveries of the high-margin GX SUV and a more favorable product mix.
Li Auto Inc.’s LI gross margin fell to 7.9% in the first quarter of 2026 from 20.5% a year ago and 17.8% in the fourth quarter of 2025, pressured by its model refresh cycle, a higher mix of i6 and L6 deliveries, and purchasing tax subsidies for the i6. Li Auto expects gross margin to recover to about 10% in the second quarter with the launch and deliveries of the new L9. Li Auto anticipates further margin improvement in full-year 2026 as it completes its model refresh and optimizes its product lineup.
NIO’s Price Performance, Valuation and Estimates
NIO has outperformed the Zacks Automotive-Foreign industry year to date. Its shares have surged 11.6% against the industry’s decline of 16.7%.
Image Source: Zacks Investment Research
From a valuation perspective, NIO appears fairly valued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.63, marginally higher than the industry’s 0.62.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NIO’s 2026 loss per share has narrowed by 8 cents in the past 30 days, while the 2027 loss per share improved to breakeven earnings.
Image Source: Zacks Investment Research
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.
Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power .
Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.
See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NIO Inc. (NIO): Free Stock Analysis Report
Li Auto Inc. Sponsored ADR (LI): Free Stock Analysis Report
XPeng Inc. Sponsored ADR (XPEV): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).