How NIO Stock Needs Validation Before Scale Ahead of Q3 Update

The Chinese EV maker NIO (NIO) is set to report its quarterly results next week, on November 25. Although the stock has lost some ground over the past couple of quarters after hitting its yearly peak—mainly due to a sizable equity offering to fund operations—I believe the company is now experiencing what is likely the most decisive operational moment in its history. This comes alongside a convincing narrative of demand recovery from a weak 2024 and early 2025 in deliveries, as well as meaningful margin improvement.

With the company moving toward its long-awaited breakeven target just two quarters away, NIO appears well positioned to finally achieve this milestone—something that would confirm it as an EV maker capable of scaling and optimizing its cost structure.

Considering that, despite still relying heavily on execution, the current setup looks constructive for NIO, I believe there is upside to its ADR and maintain a Buy rating for now.

NIO Deliveries Are Accelerating

NIO’s delivery trajectory has turned into one of the most evident signs of its ongoing recovery. The Chinese EV maker reported 40,397 deliveries in October, a 16.3% month-over-month increase and a massive 92.6% year-over-year increase. For context, since July, NIO’s delivery volumes have surged—largely driven by the strong reception of the ONVO L90 and the refreshed ES8, which together triggered a sustained rebound. From July onward, NIO has consistently delivered 50%+ YoY growth, marking a clear inflection after a weaker first half of the year.

It’s also important to note that NIO’s recent delivery performance isn’t just improving—it’s leading the category among its main domestic peers. In October, only XPeng (XPEV) posted similarly strong momentum (+75% YoY), while both Li Auto (LI) and BYD (BYDDY) saw YoY declines. This reinforces that NIO’s recovery is not simply riding the industry cycle—it’s outperforming it.

Above all, NIO’s delivery trend confirms that the demand softness from early 2025—when the company delivered just 13k–15k units per month—is now decisively reversing. The NT3.0 platform (a new unified system architecture designed to lower costs and enhance reliability) and the latest wave of new models are clearly resonating with consumers, driving both volume and confidence higher.

Management Turns Upbeat

According to CEO William Li, NIO expects to deliver between 87k and 91k vehicles in Q3, which implies 40–47% year-over-year growth. That’s a surprisingly aggressive range, reflecting both the strong market reception of the new models and a high degree of confidence in production output. It also suggests management has clear visibility at least one to two quarters ahead—something they didn’t have for most of 2024 and early 2025.

This shift in tone isn’t isolated. It aligns with NIO’s multi-brand strategy, starting to gain real traction. CFO Stanley Yu said Q2 marked a true inflection point for the company, with gross margins improving to 10%, up from 7.6% in Q1, and non-GAAP operating loss narrowing by more than 30% sequentially, landing at $685 million. These improvements bring NIO notably closer to its long-promised operating breakeven and signal that the underlying cost structure is finally behaving as management intended.

NIO Demonstrates a Clear Path to Breakeven

And speaking of breakeven, the math behind this milestone for NIO implies reaching 150k deliveries in Q4 2025 and vehicle gross margins of 16–17%—versus the current 10% and the 12.2% achieved a year ago. Considering the midpoint of its Q3 delivery guidance (~89k units), this target doesn’t look out of reach, especially when combined with ongoing cost reductions and a more favorable model mix.

Reaching breakeven is crucial because profitability would eliminate most of the bearish arguments about NIO—particularly around cash burn and dilution risk—given the $3.8 billion in cash and equivalents the company holds, versus $1.2 billion in negative operating cash flow over the last twelve months.

That said, while ramping vehicle margins by 6–7 percentage points in just two quarters is ambitious, hitting this breakeven milestone would likely serve as a major catalyst for a thesis re-rating.

Upside Repricing With a Dilution Caveat

The counterpoint to NIO’s recent bullish developments heading into Q3 earnings is that the ADR has already tracked much of the rebound in deliveries and the company’s progress in cost optimization.

From July to October, NIO’s shares rallied 131%, reaching a 52-week high. This move largely reflected a reduction in perceived risk around a pre-profit EV company that depends on ongoing funding to scale. And to be fair, NIO has demonstrated since July that it can scale. However, after peaking, the stock pulled back roughly 24%, as the market cooled off from the sudden euphoria and digested the company’s September equity offering (~181 million U.S.-listed shares) to fund R&D, infrastructure, and general expansion—resulting in meaningful dilution. This recurring need for capital, even if mitigated by a realistic path to breakeven, still weighs on the stock’s short- to mid-term performance.

It’s also worth noting that despite this year’s rally, NIO’s ADR still trades at very inexpensive multiples—about 1.7x EV/Sales, up from the extremely attractive 1x seen in July. The discount reflects the considerable execution, funding, and macro risks embedded in the thesis. I still see plenty of room for upside as long as NIO executes on its plan, but there’s no question that a meaningful degree of speculation remains part of the equation.

Is NIO a Buy, Hold, or Sell?

There’s a clear divide between bulls and skeptics regarding NIO’s thesis. Among the 13 analyst ratings the stock has received over the past three months, six are Buy, six are Hold, and only one is Sell. The average price target sits at $6.90, implying roughly 15% upside from the latest share price.

A Constructive Setup for NIO’s Next Phase

I believe NIO is entering one of its most favorable operational moments in recent years. The new NT3.0 models—especially those launched starting in July—are finally showing what the company has struggled to prove for a long time: that NIO can scale and compete across major segments with a much more attractive cost-per-unit structure.

This shift clearly lays the groundwork for a re-rating, which is already underway, though I believe there’s still meaningful upside ahead as the full potential of this product cycle has yet to play out. The main risk remains execution, which naturally adds greater speculation to the thesis. Even so, the setup looks more constructive than not, and I believe NIO warrants a Buy heading into its Q3 earnings.