Morgan Stanley believes that although Nio's fourth-quarter delivery guidance is relatively conservative, the gross margin of vehicles is expected to improve significantly driven by product structure optimization and economies of scale.
On November 26, according to news from the Chasing Wind Trading Desk, Morgan Stanley gave a positive evaluation of Nio's third-quarter financial report in its latest research report, stating that although the company lowered its fourth-quarter delivery guidance to 120,000-125,000 units, the gross margin of vehicles is expected to reach 18%, highlighting the continuous improvement in profitability.
The research report stated that Nio's net loss in the third quarter narrowed to RMB 3.7 billion, better than Morgan Stanley's expected loss of RMB 4.3 billion, mainly due to a quarter-on-quarter increase in vehicle gross margin of 4.4 percentage points to 14.7%. The company's fourth-quarter revenue guidance is RMB 32.8-34 billion, a quarter-on-quarter increase of 50-56%, implying an average selling price will achieve high single-digit growth, mainly benefiting from the increased sales proportion of high-margin models such as the ES8 and the Lado L90.
The team led by Morgan Stanley analyst Tim Hsiao pointed out that it is expected that the vehicle gross margin will reach 18% in the fourth quarter, and the revenue and gross margin of non-vehicle businesses will also improve quarter-on-quarter. Nio's management reiterated the goal of achieving non-GAAP breakeven in the fourth quarter, despite the delivery guidance being lower than previously expected.
The firm maintains an &#34;Overweight&#34; rating on Nio, with a target price of $9, indicating a 57% upside potential from the current stock price.
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<h2>Third Quarter Performance Exceeds Expectations, Significant Improvement in Gross Margin</h2>
According to an article from Wallstreetcn, the latest financial report shows that Nio's third-quarter financial performance was better than market expectations. The net loss narrowed from RMB 5.1 billion in the second quarter to RMB 3.7 billion in the third quarter, with vehicle revenue increasing by 19% quarter-on-quarter and delivery volume increasing by 21%, while the average selling price slightly declined.
Morgan Stanley stated that the vehicle gross margin increased from 10.3% in the second quarter to 14.7%, higher than its expected 13%.
Analysts believe this is mainly due to economies of scale and the higher gross margins of the new models Lado L90 and Nio ES8, offsetting the impact of ongoing promotional activities. The overall gross margin improved by 3.9 percentage points quarter-on-quarter to 13.9%, exceeding the expected 10.9%.
<h2>Fourth Quarter Guidance Conservative, But Profitability Target Unchanged</h2>
Morgan Stanley stated that Nio's fourth-quarter delivery guidance is 120,000-125,000 units, lower than Morgan Stanley's previous expectation of 150,000 units, implying an average monthly delivery of about 42,000 units in November and December, slightly higher than October's 40,000 units. The firm's analysts believe that this conservative guidance is mainly affected by the recent suspension of the old-for-new subsidy.
Nio's fourth-quarter revenue guidance is RMB 32.8-34 billion, a quarter-on-quarter increase of 50-56%, implying that the average selling price will increase by a high single-digit percentage quarter-on-quarter. Morgan Stanley analyzes that this mainly reflects the product structure optimization brought about by the increased sales proportion of the ES8 and Lado L90.
According to the research report, it is expected that Nio's overall vehicle gross margin will reach 18% in the fourth quarter, an increase of 3.3 percentage points quarter-on-quarter. This target is based on scale effects, supply chain cost savings, and an increase in the sales proportion of high gross margin models. The sales revenue and gross margin of non-vehicle businesses are also expected to improve quarter-on-quarter.
At the same time, Nio's management reiterated the goal of achieving non-GAAP breakeven in the fourth quarter.
<h2>2026 Outlook: Targeting 20% Gross Margin</h2>
Morgan Stanley stated that Nio's management has a positive outlook for 2026. The company plans to launch three large SUV models—Nio ES9, ES7, and Lido L80—in the second to third quarters of 2026 to support sales growth in that year.
Regarding gross margin targets, Nio has set a goal of achieving a 20% overall vehicle gross margin by 2026, based on supply chain cost savings, scale effects, and product structure optimization.
Management indicated that since the gross margins of Nio ES6, EC6, and ES8 all exceed 20%, even with a slight increase in promotional efforts due to potential demand headwinds, the company remains confident in maintaining its overall gross margin target.
In terms of cost control, Nio aims to keep R&amp;D expenses at RMB 2 billion per quarter, with sales and management expenses accounting for 10% of total revenue.
Morgan Stanley stated, if these targets can be achieved, 2026 is expected to be a turning point year for non-GAAP profitability.
Morgan Stanley believes that with management clarifying the profitability path for the fourth quarter and 2026, investors will closely monitor the order backlog and delivery ramp-up of Nio ES8 and Lido L90, as well as the performance of upcoming new models. These factors are crucial for the company to achieve scaled revenue and gross margin expansion in 2026

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Morgan Stanley believes that the delivery guidance of 120,000 to 125,000 units for the fourth quarter is conservative, but the revenue guidance of 32.8 billion to 34 billion yuan, with an average selling price expected to grow in the high single digits, mainly reflects the optimization of product structure due to the increased sales proportion of the ES8 and the Ledo L90. The gross margin for complete vehicles in the fourth quarter is expected to reach 18%. Looking ahead to 2026, there are plans to launch three large SUVs, with a target gross margin of 20%, which is expected to be a turning point for profitability

- Morgan Stanley views NIO's fourth-quarter delivery guidance as conservative but expects significant improvement in gross margins due to product optimization and scale effects.  
- The company reported a narrower net loss of 3.7 billion RMB in Q3, better than expected, with gross margins rising to 14.7%, driven by higher-margin models like the ES8 and L90.  
- NIO aims for a gross margin of 18% in Q4 and targets a 20% margin by 2026, supported by new SUV launches and cost control measures.

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Morgan Stanley comments on NIO's financial report: The Q4 delivery guidance is conservative, but the average selling price is expected to increase, with an estimated Q4 vehicle gross margin reaching 18%