Why Nio's pretty good sales numbers might not be good enough

The EV market stands apart because one or two players dominate so much of the share that new entrants struggle to build a viable business.

Consider North America. The top three traditional automakers by market share are General Motors (17%), Toyota (15%) and Ford (13%).

While GM's lead is solid, it's not what many observers would call a dominant position.

But when it comes to the EV market in North America, it's a much different story: As of the third quarter of this year, the top three automakers by market share were Tesla (40.9%), GM (15.2%) and Hyundai Motor Group (11.1%).

At the beginning of 2024, Tesla controlled over half (52.1%) of the EV market in North America.

Although it has suffered through one of its most tumultuous years, putting a fairly significant dent in its sales, its position nonetheless remains overwhelmingly dominant as we near the end of 2025.

The EV market in China is just as lopsided. As of June of this year, BYD (26%), Geely (8.8%) and Wuling (6%) are the top three by market share.

It's unclear where Chinese startup NIO Inc. (NIO) ranks in its home country in terms of market share, but since it falls outside the top 10 it means that it has a lot of ground to make up.

Competitive market makes it hard to move the needle

This could be why investors have turned lukewarm on its stock over the past month even as it has been increasing its sales and narrowing its losses. In fact, shares of NIO dropped 4% on Tuesday despite the company reporting better-than-expected earnings for the third quarter.

The company posted a per-share loss of 16 cents from sales of $3.1 billion, compared to Wall Street's expectation of 23-cent per share loss from sales of $3.1 billion. Its revenue rose 17% year over year and its gross profit margin was 13.9% for Q3, up from 10.7% for the same quarter a year ago.

NIO is expecting to deliver between 120K and 125K vehicles in the fourth quarter, significantly better than the 73K it delivered in Q4 of 2024. However, it's still lower than the Street was expecting.

The company is expecting sales to be between $4.6 billion and $4.8 billion.

Wall Street is expecting $4.8 in sales for Q4.

To be sure, the company's stock has climbed 24.7% for the year, driven by its higher sales numbers. Through October, the company has sold roughly 270,000 vehicles, up 60% year over year.

But NIO's stock has slumped over the past month, dropping nearly 21%, proving that momentum can be difficult to sustain unless the company produces numbers that are exceptionally better than what investors were expecting.

Bank of America analyst Ming Hsun Lee maintained a Neutral rating on NIO's stock in a client note this week, while cutting the price target to $6.70 from $7.60.

Although Lee acknowledged NIO's "strong model pipeline," he said that BofA views "the positives from volume growth and a narrowing loss are already reflected in the current valuation."

Meanwhile, Macquarie analyst Eugene Hsiao downgraded NIO this week to Neutral from Outperform, while cutting his price target to $5.30 from $6.70.

Hsiao said that he's remaining cautious, citing slower EV market demand in 2026. He wrote that "margin progress is noted but overshadowed by weakening volume outlook and demand headwinds."