Gasgoo Munich- For years, the NIO model was the dark horse among China’s EV startups. Battery swapping was too capital-intensive, the multi-brand push came too soon, and profits were too slow to arrive. For a decade, these were the labels the market assigned to the company.

The latest operating data tells a different story: NIO has posted operating profits for two straight quarters, with its overall gross margin hitting a four-year high and its services division turning a profit for the first time. In recent years, the industry has been following Li Auto’s lead—copying its extended-range SUVs, family-focused positioning, and hit-driven logic. Yet NIO spent a decade forging a completely different path: pure electric, battery swapping, and a multi-brand strategy.

Today, that once-questioned path is finally finding validation—at least on the financial front.

Has NIO’s Decade-Long Experiment Finally Paid Off?

For the past few years, Li Auto served as a clear benchmark for the EV startup sector.

Image source: Li Auto

By precisely targeting the family extended-range SUV market and maintaining tight operational control, Li Auto was the first to achieve consecutive quarterly profits, becoming the industry’s recognized template for earnings. From the AITO M7 to the Leapmotor C-series extended-range versions, and with Deepal, Avatr, and others rolling out extended-range SUVs in quick succession, the rush to copy the “Li Auto paradigm” began. The extended-range race has shifted from a monopoly to a crowded field.

But entering 2026, this product-definition-driven playbook is facing fresh market scrutiny. Li Auto delivered 95,100 vehicles in the first quarter, yet revenue fell 11.4% year-on-year to 23 billion yuan. The company swung to a net loss of 2.28 billion yuan, with its overall gross margin plunging from 20.5% a year earlier to 7.9%, and vehicle margins sliding from 19.8% to 6.1%.

The product mix is shifting too. Pure electric vehicles have gained traction to become the mainstay, with the i6 pure EV accounting for roughly 60% of sales, while the Mega represents just 1.4%. Having once achieved consecutive profits on the back of extended-range SUVs, Li Auto is now navigating a product cycle adjustment driven by the ramp-up of its EV offerings and the phasing out of older models.

Image source: NIO

Over the same period, NIO reported first-quarter revenue of 25.53 billion yuan, a 112.2% surge from the previous year. Gross profit jumped 428.4% to 4.86 billion yuan. The company posted an overall gross margin of 19.0%, with vehicle margins at 18.8% and “other sales” margins at 20.6%—all three marking four-year highs. Adjusted operating profit has been positive for two straight quarters, while the net loss under GAAP narrowed to 332 million yuan, a 95.1% reduction year-on-year.

Even more critical, NIO’s cash reserve climbed to 48.2 billion yuan, marking three straight quarters of positive operating cash flow. In a first quarter where many startups incurred losses, NIO used hard data to answer the question that had long dogged it: Is the path of pure electric, battery swapping, and multi-brand actually viable?

Behind this shift lies a temporary triumph of “systemic capability” over “hit-driven logic.” NIO is writing a new story: using a single system to cover everything from premium to mass markets. The synergy of its three-brand matrix, the closed loop of its battery-swapping ecosystem, and improved R&D efficiency—these three pieces of the puzzle have combined to deliver NIO’s current profitability.

Consider the three-brand matrix first. When NIO launched its multi-brand strategy in 2021 and rolled out ONVO and Firefly in 2024, skepticism was rampant. How could an unprofitable company manage three brands simultaneously? How could it allocate limited resources without cannibalizing its own sales? These were the prevailing concerns in the market at the time.

Image source: ONVO

Time has clearly provided the answer. In the first quarter, the main NIO brand held its ground in the premium market above 300,000 yuan, with an average transaction price of 390,000 yuan. Its market share in Shanghai, the Yangtze River Delta, and other first-tier cities has surpassed that of traditional luxury brands. ONVO is driving volume, delivering nearly 150,000 units in less than 20 months. Firefly, meanwhile, delivered over 10,000 units in its first quarter, validating the feasibility of the premium small-car segment.

The combined force of the three brands drove first-quarter deliveries to 83,500 units, a 98.3% year-on-year increase. Revenue growth outpaced delivery growth, signaling that NIO’s strategy of “rising volume and rising prices” is delivering results.

Then there is the battery-swapping ecosystem. Long criticized by the market as a “financial drain,” it hit a turning point in the first quarter. The “other sales” division—which includes charging and swapping services, after-sales, and NIO Life—reached a gross margin of 20.6%, the highest in four years.

NIO CFO Qu Yu noted in the earnings report that as the user base expands, the profitability of parts, after-sales service, and energy replenishment continues to improve, becoming a key pillar for optimizing the earnings structure. William Li has also pointed out that during peak hours, a single swapping station handles 40 to 45 battery swaps per day—a sign that economies of scale are kicking in.

Currently, seven automakers—including Changan, Geely, Chery, GAC, and FAW—along with CATL have joined the battery-swapping alliance. In January 2026, NIO and CATL signed a five-year comprehensive strategic partnership agreement focused on the joint development of long-life batteries and breakthroughs in swapping compatibility technology.

Finally, consider the shift in systemic capability. NIO’s first-quarter R&D spending fell 40.7% year-on-year to 1.885 billion yuan, yet efficiency improved. CFO Qu Yu revealed on a conference call that every 2 billion yuan spent on R&D now yields results equivalent to what 3.5 billion yuan produced in the past.

Additionally, sales and administrative expenses dropped 20.5% year-on-year as the organization streamlined further. Once the inflection point in investment efficiency is reached, the heavy spending once used to buy a future turns into a present-day cost advantage.

The scaling and closed-loop nature of its service ecosystem are solidifying NIO’s core competitiveness. Li Bin argued on the earnings call that the industry has moved from a “chaotic phase” into a “clarification phase”—where the core consideration for buyers is shifting from individual specs to a brand’s overall systemic strength.

That judgment serves as both an interpretation of NIO’s validation and a forecast of the shifting logic of industry competition.

NIO Gains an Early Advantage

NIO’s strategy is being validated, but does that mean the industry will follow suit? Judging by the moves of various startups, the answer isn’t a simple yes or no.

Currently, Leapmotor, Xiaomi, and XPENG are all deploying multi-brand or multi-series strategies, but the drivers behind these moves differ. Leapmotor needs to move upmarket to boost margins; Xiaomi needs to break through brand boundaries; and XPENG needs the MONA series to stabilize its sales base. Yet it is undeniable that NIO’s early experiment with a multi-brand strategy is becoming a reference point for the industry.

Leapmotor Vice President Li Tengfei confirmed during the first-quarter earnings call that the company indeed plans a second brand. Positioned in the premium market above 300,000 yuan, its products are set to debut as early as late 2026 or 2027.

Leapmotor’s goal is clear: use a second brand to break into the premium segment, covering a broader market space with a differentiated product matrix.

Image source: Xiaomi EV

Multiple sources indicate that Xiaomi has established an independent sub-brand called “Xuntian.” Its first model, the Kunlun N3 extended-range SUV, is slated for launch in the second half of 2026 and will not carry the main Xiaomi logo. Corporate records show Xiaomi applied for the “Xuntian” trademark as early as April 2023 and registered nearly 140 related trademarks between 2025 and 2026, revealing that this strategy was in motion well before the SU7 launched. Li Yanwei, an expert at the China Automobile Dealers Association, notes that startups launch second brands to break through growth ceilings, as single brands are often constrained by established market perceptions and price ranges. This underlying logic is identical to the multi-brand architecture NIO validated early on.

XPENG has taken a different path of “brand downscaling,” anchoring the mass market with its MONA series. In 2025, the first MONA model, the M03, sold 175,300 units alone, accounting for roughly 40% of XPENG’s total sales. Furthermore, the XPENG MONA L03 has completed regulatory filings. With the addition of the L03 and other models, MONA has evolved from a single model into a full product matrix.

Priced between 110,000 and 150,000 yuan, the XPENG MONA is distinct from the main brand’s G and P series—a pricing strategy similar to NIO and ONVO’s move downmarket.

Building a premium brand is a notoriously difficult challenge, yet NIO has completed the cycle from skepticism to recognition. Li Bin revealed on the earnings call that the NIO brand’s average transaction price in the first quarter was 390,000 yuan. In Shanghai, NIO ranked first in sales among all automakers, capturing roughly 8% of the passenger vehicle market.

Brand differentiation isn’t as simple as swapping a logo; it demands higher organizational capability and smarter resource allocation, especially in building channels and service systems. Outsiders once worried that launching a second brand would dilute the main NIO brand’s premium tone, but current market feedback and financial data show that fear has not materialized.

For one ES6 owner, the launch of ONVO and Firefly did not diminish NIO’s service or premium image. He stated he hoped NIO would achieve economies of scale through its sub-brands, noting, “What I value most is the value the NIO brand conveys.” He added from an industry perspective, “The NEV market has entered a phase of relative brand maturity and intense product competition. Users now place greater value on actual experience and accumulated reputation.”

From this perspective, NIO has spent a decade proving that a homegrown Chinese premium EV brand can indeed be built. That, in itself, holds significant value for the country’s startup sector.

Image source: NIO

Then there is battery swapping—the path NIO faced the most skepticism over and which is the hardest to replicate. It is now evolving from a “financial drain” into a “value moat.” The first-quarter profitability of NIO’s service division is the most direct financial proof of this shift. The entry of seven automakers into the swapping alliance and CATL’s strategic investment suggest the industry’s stance on battery swapping is shifting from “wait-and-see” to “cautious participation.”

Yet so far, not a single alliance partner has launched a mass-produced battery-swapping model. The reason is clear: the upfront investment for swapping networks is massive, standardizing is difficult, and managing battery assets is complex. These are the practical hurdles facing the industry. The large-scale adoption of battery swapping depends on the coordinated progress of costs, standards, and the broader ecosystem.

This also underscores that battery swapping, as NIO’s core differentiator, will be difficult to replicate in the short term.

From “Validated” to “Followed”: How Far Does NIO Still Have to Go?

NIO’s back-to-back profitable quarters have sent a positive signal, but to move from a “validated model” to an “industry standard,” and from “slim profits” to sustainable earnings, the company still has several key questions to answer.

First, the quality of those earnings needs time to accumulate. The first-quarter Non-GAAP operating profit was just 66.8 million yuan—a tiny fraction of the 25.5 billion yuan in revenue—and the company still posted a net loss of 332 million yuan under GAAP.

Two consecutive quarters of operating profit certainly prove the viability of NIO’s path, but for it to become a recognized industry paradigm, a longer track record is needed to demonstrate the sustainability of these profits.

Furthermore, external cost pressures cannot be ignored. Since the beginning of the year, prices for raw materials like memory chips have continued to climb. Memory chip prices alone have surged 180% in the past three months, while high-end DDR5 spot prices have jumped more than 300%.

Image source: NIO

Li Bin acknowledged on the earnings call that rising memory chip prices have placed significant pressure on the entire industry, forcing NIO to reduce its discounts. NIO’s target for comprehensive vehicle gross margin for the second quarter and the full year is 17% to 18%, a downward revision from the 18.8% posted in the first quarter. External costs are a variable NIO cannot control; if costs remain high, they could disrupt its profit cadence at critical moments.

Overall, NIO’s two consecutive quarters of profit validate the feasibility of combining pure electric, battery swapping, and multi-brand synergy. However, given the heavy investment in swapping networks, the complexity of managing multiple brands, and the short track record of profitability, this model will be difficult to replicate widely in the short term.

For the industry, NIO’s value lies not in becoming a “template,” but in offering a practical reference for other automakers exploring premium positioning and multi-brand strategies. At the very least, “premium EV + swapping network + multi-brand synergy” is no longer an option that can be easily dismissed.

Conclusion:

In the past, the industry was accustomed to asking, “What did Li Auto get right, and how do we follow?” In the future, the question may increasingly be, “How did NIO do it, and to what extent is this logic replicable?” This subtle shift in inquiry may mark the true beginning of a change in benchmarks. Whether NIO can sustain its profitability over the coming quarters will determine if this “possible path” becomes a “new path” that more companies are willing to navigate.