In a move that has caught the attention of investors, Morgan Stanley analyst Tim Hsiao released a research note on electric vehicle (EV) manufacturer Nio after the company unveiled its fourth-quarter earnings. While the results contained some concerning figures, Hsiao remains optimistic, maintaining an Overweight rating and setting a $5.90 price target for the Shanghai-based automaker—suggesting a potential upside of 31% from its current trading price of $4.50.

Nio's fourth-quarter report revealed a widening net loss of 7.1 billion yuan ($0.98 billion), a significant increase from the 5.1 billion yuan loss recorded in the previous quarter. This loss was higher than Morgan Stanley's expectation of a 5.8 billion yuan deficit. Notably, Nio’s annual losses also grew to 22.4 billion yuan from 20.7 billion yuan in 2023.

Despite the bleak loss figures, revenue showed a modest increase—up 6% quarter-over-quarter to 19.7 billion yuan, aligning with the lower end of the company's guidance range of 19.7 to 20.4 billion yuan. The vehicle margin, a critical metric for profitability, also improved year-over-year, rising to 13.1% from 11.9%, although it remained flat compared to the previous quarter.

In its official statement, Nio expressed confidence in its financial sustainability, asserting that its resources would adequately support operations for the next twelve months. The company stated, “Based on our going concern and liquidity assessment, we believe that our financial resources, including cash and short-term investments, will be sufficient to support continuous operations in the ordinary course of business.

When examining operational expenses, the report indicated that while the overall operating expense ratio remained consistent, research and development expenditures surged by 10%, and selling, general, and administrative costs grew by 19% amid the expansion of the Onvo brand.

Hsiao also highlighted a non-operating loss of 528 million yuan attributed to the revaluation of overseas RMB-related assets, further emphasizing the need for scrutiny in Nio's financial management.

For the early part of 2025, Nio has forecasted deliveries of between 41,000 and 43,000 vehicles in the first quarter. To date, the company has delivered 13,863 vehicles in January and 13,192 in February, totaling 27,055 vehicles as of February 28. However, projected deliveries for March range between 13,945 and 15,945, significantly lower than previous targets of 20,000 for the Onvo sub-brand.

Morgan Stanley’s analysis suggests that March deliveries will show a moderate increase but will still fall short of the expectations set earlier in the year. As the market watches closely, all attention is shifting towards Nio's ongoing initiatives, including the anticipated NT 3.0 facelifts for its vehicle lineup and restructuring efforts aimed at cost reduction.

As the electric vehicle landscape continues to evolve, Nio's next steps will be pivotal in determining its long-term viability and ability to capitalize on the growing demand for EVs. Will they adapt to overcome these challenges and seize the opportunities that lie ahead? Only time will tell.