NIO Inc. (NIO (NIO)) shares took a hit Friday, falling nearly 7% as a broad regulatory crackdown by Beijing rattled Chinese stocks listed in the U.S. The move overshadowed what was actually a pretty stellar earnings report from the electric vehicle maker.
The China Securities Regulatory Commission (CSRC) announced plans to eliminate illegal cross-border securities trading within two years, according to market data. The regulator is actively penalizing offshore brokerages for violations, and that sent a chill through Chinese American Depositary Receipts (ADRs) across the board. NIO, despite its own good news, wasn't spared.
That good news came Thursday afternoon, when NIO reported fiscal first-quarter results that beat Wall Street expectations. Revenue came in at 25.53 billion yuan ($3.701 billion), a 112.2% jump from a year ago and comfortably above the $3.550 billion analysts were looking for. Adjusted earnings improved to 0.02 yuan per ADS, swinging from a loss of 3.01 yuan per ADS in the same period last year.
The operational numbers were equally impressive. NIO delivered 83,465 vehicles in the quarter, up 98.3% year over year. Vehicle revenue surged 129.2%, driven by a higher average selling price thanks to a richer product mix. Gross margin expanded to 19% from 7.6% a year earlier, and vehicle margin rose to 18.8%.
So why the sell-off? Part of it is likely the classic "sell the news" reaction. Despite the year-over-year growth, there's a clear sequential cooldown: deliveries fell 33.1% from the fourth quarter, and revenue dropped 26.3%. Traders are also digesting April deliveries of 29,356 vehicles—up 22.8% year over year but down 17.3% from March—along with ongoing Chinese scrutiny over alleged "battery locking" and over-the-air updates that reportedly cut range by about 200 km (125 miles).
At the time of publication Friday, NIO shares were down 6.96% at $5.210, according to market data. The regulatory headwind from Beijing may keep pressure on the stock in the near term, but the underlying business story—strong revenue growth, expanding margins, and a path to profitability—remains intact for those willing to look past the noise.
