(Yicai) Sept. 6 -- Nio’s shares soared after the Chinese electric vehicle startup said its net loss narrowed 17 percent and revenue doubled in the second quarter of the year thanks to strong sales.

Nio [NYSE: NIO] closed 14.4 percent up at USD4.85 a share in New York yesterday, while its Hong Kong-listed stock [HKG: 9866] rose 1.2 percent to HKD34.10 (USD4.37). Trading in Hong Kong is suspended today because of super-typhoon Yagi.

The net loss was CNY5.1 billion (USD694.4 million) in the three months ended June 30, versus CNY6.06 billion a year earlier, the Shanghai-based automaker’s earnings report revealed yesterday. Revenue surged 99 percent to CNY17.5 billion (USD2.4 billion).

Nio delivered a record 57,373 EVs in the quarter, up 144 percent from a year ago and 91 percent from the first quarter. Vehicle sales surged 118 percent year on year and 87 percent quarter on quarter to CNY15.7 billion.

The automaker secured more than a 40 percent share of the Chinese market for battery EVs priced at more than CNY300,000 (USD42,310) each, founder William Li said on the firm’s earnings conference call. He is also chairman and chief executive.

Nio’s gross margin was 9.7 percent in the quarter, up from 1 percent a year earlier and 4.9 percent in the first quarter, mainly thanks to a wider vehicle margin. The margin soared to 12.2 percent from 6.2 percent a year ago and 9.2 percent in the prior three months.

“The year-over-year increase in vehicle margin was mainly due to the decreased material costs and was partially offset by a lower average selling price,” Chief Financial Officer Stanley Qu said on the call. “We’ll keep improving the vehicle margin in the following two quarters of this year and expect to realize a vehicle margin of around 15 percent by the end of the year.”

Striking a Balance

The company’s flagship Nio brand targets the premium EV segment priced at over CNY300,000. For that brand, Nio has a long-term target to sell 40,000 units a month, with a vehicle margin of 25 percent, Li said.

Nio unveiled its second vehicle brand Onvo this year, priced from CNY219,900 each. Deliveries of the L60, Onvo’s first model, will begin in late September.

“We’ll try to strike a balance between the vehicle margin and the price point of the product to find the sweet spot,” Li said when asked whether Nio would be more aggressive on its pricing in light of the competition. “In general, we will not be very aggressive as we needed to realize a reasonable margin for the project,” he added.

For the L60, Nio expects to achieve monthly deliveries of 10,000 units in December and 20,000 units next year, according to Li. Preorders for the L6 exceeded expectations.

Nio will unveil its third brand, Firefly, in the first half of next year, Li added.

Nio forecast deliveries of 61,000 to 63,000 vehicles this quarter, up 10 percent to 14 percent from a year earlier. Revenue will likely inch up 0.2 percent to 3.2 percent to between CNY19.11 billion and CNY19.67 billion in the period.

Li expressed optimism about the future of the Chinese EV market during the conference call. The penetration rate of new energy vehicles has already exceeded 50 percent and will surpass 80 percent in the next two to three years, he predicted.  

Editor: Futura Costaglione