Nio Navigates a Crossroads: Record Profit Outlook Amid Major Vehicle Recall

Chinese electric vehicle manufacturer Nio finds itself at a pivotal moment, caught between a landmark financial achievement and a significant operational challenge. The company's shares are reflecting this tension as investors weigh the prospect of its first-ever quarterly operating profit against the impact of a software-related recall affecting nearly a quarter-million cars.

In a significant shift for the company, Nio announced last Thursday that it anticipates achieving its first non-GAAP operating profit in the fourth quarter of 2025. The projected range is between 700 million and 1.2 billion renminbi (RMB). This stands in stark contrast to the 5.54 billion RMB operating loss reported for the same period a year earlier.

Company leadership attributes this dramatic turnaround to robust delivery growth, a more profitable mix of vehicles sold, and sustained cost-reduction efforts. This positive financial forecast is bolstered by strong recent sales, with January deliveries reaching 27,182 units—a year-over-year increase of 96.1%.

Software Glitch Prompts Extensive Recall

Counterbalancing this financial optimism is a large-scale vehicle recall confirmed by regulators this past Monday and Tuesday. The action encompasses 246,229 units of the ES8, ES6, and EC6 models produced between March 2018 and January 2023. The issue involves a software defect that may cause temporary failures of the digital instrument cluster and the central infotainment display.

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Nio plans to address the problem through an over-the-air (OTA) software update, a method that avoids the substantial logistical costs associated with physical dealership visits. Despite this efficient approach, the scale of the recall is notable, representing approximately three-quarters of the company’s total vehicle deliveries for the entire previous year.

Leadership Confirms Ambitious Roadmap

Amid these developments, CEO William Li reaffirmed the company's long-term strategy this Monday. He confirmed Nio's target of achieving full-year non-GAAP profitability for the 2026 fiscal year. Aggressive growth remains central to this plan, with management citing an annual delivery increase of 40% to 50% as a core requirement for success.

The market's reaction has been measured. Analysts at JPMorgan, while maintaining an "Overweight" rating on the stock, reduced their price target from $8 to $7 on Monday. They expressed confidence in Nio's operational turnaround but highlighted execution risks related to its ambitious growth targets. Trading at $4.98 this Tuesday, Nio's shares have stabilized after declining roughly 40% from their late-2025 highs.

Infrastructure Achievement

Separately, Nio passed a major infrastructure milestone last Friday, having completed over 100 million battery swap services for its customers to date. This achievement underscores the company's continued investment in its unique power solution network, a key differentiator in the competitive EV landscape.