We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will NIO's CBU Mechanism Help It Manage Expenses Efficiently?
Read MoreHide Full Article
Key Takeaways
NIO introduced its CBU mechanism to control R&D expenses and enhance operational efficiency.
Each business unit tracks costs independently with ROI targets and performance-based incentives.
NIO targets quarterly R&D spending of RMB 2B and SG&A below 10% of sales revenues by Q4 2025.
NIO Inc. (NIO - Free Report) implemented a series of measures under its Cell Business Unit (CBU) mechanism to better control R&D expenses, starting from the second quarter of 2025. Per 36kr, the core idea behind NIO’s CBU system is to break down its operations into distinct, non-overlapping units, each responsible for setting clear ROI targets, along with a performance-based reward and penalty structure. Under this model, every division tracks its costs independently, accounting for both current and projected expenses across various projects.
The company emphasized that while major product planning and core R&D activities will not be compromised, it is focused on improving efficiency in R&D. With this approach, NIO set a non-GAAP R&D expense target of RMB 2 billion per quarter for the third and fourth quarters.
On the SG&A side, also guided by the CBU mechanism, NIO has taken steps to enhance efficiency. In the second quarter, with sales volume at around 70,000 units, the SG&A ratio to revenues remained relatively high. However, as sales volume and revenues increase in the subsequent quarters, the company expects this ratio to decline to a more reasonable level.
NIO launched several new products in the third quarter, which would have likely brought additional marketing and go-to-market expenses. As a result, breakeven on SG&A expenses is not expected in the third quarter. By the fourth quarter, however, the company aims to bring non-GAAP SG&A expenses down to within 10% of sales revenues. NIO carries a Zacks Rank #3 (Hold) at present.
Rivian Automotive, Inc. (RIVN - Free Report) is benefiting from engineering optimizations, supply chain savings and lower commodity costs. The second-generation Rivian R1 models are expected to reduce material costs by 20%, while operational efficiencies at the Normal plant further support cost-cutting efforts. Rivian R2 model's material costs are expected to be nearly 50% lower than R1’s.
Li Auto Inc. (LI - Free Report) has developed in-house batteries and a thermal management system designed to better support ultrafast charging and extended driving range. The company plans to continue leveraging its internal R&D strengths to enhance product competitiveness and lower production costs by advancing key technologies internally while relying on joint ventures for manufacturing.
NIO’s Price Performance, Valuation and Estimates
NIO has outperformed the Zacks Automotive-Foreign industry year to date. Its shares have surged 76.6% compared with the industry’s growth of 3.8%.
Image Source: Zacks Investment Research
From a valuation perspective, NIO appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.89, higher than the industry’s 0.45.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NIO’s 2025 and 2026 loss per share has narrowed by a penny and widened by a penny, respectively, in the past 30 days.
Image Source: Zacks Investment Research
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Will NIO's CBU Mechanism Help It Manage Expenses Efficiently?
Key Takeaways
NIO Inc. (NIO - Free Report) implemented a series of measures under its Cell Business Unit (CBU) mechanism to better control R&D expenses, starting from the second quarter of 2025. Per 36kr, the core idea behind NIO’s CBU system is to break down its operations into distinct, non-overlapping units, each responsible for setting clear ROI targets, along with a performance-based reward and penalty structure. Under this model, every division tracks its costs independently, accounting for both current and projected expenses across various projects.
The company emphasized that while major product planning and core R&D activities will not be compromised, it is focused on improving efficiency in R&D. With this approach, NIO set a non-GAAP R&D expense target of RMB 2 billion per quarter for the third and fourth quarters.
On the SG&A side, also guided by the CBU mechanism, NIO has taken steps to enhance efficiency. In the second quarter, with sales volume at around 70,000 units, the SG&A ratio to revenues remained relatively high. However, as sales volume and revenues increase in the subsequent quarters, the company expects this ratio to decline to a more reasonable level.
NIO launched several new products in the third quarter, which would have likely brought additional marketing and go-to-market expenses. As a result, breakeven on SG&A expenses is not expected in the third quarter. By the fourth quarter, however, the company aims to bring non-GAAP SG&A expenses down to within 10% of sales revenues. NIO carries a Zacks Rank #3 (Hold) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Expense Management by NIO’s Competitors
Rivian Automotive, Inc. (RIVN - Free Report) is benefiting from engineering optimizations, supply chain savings and lower commodity costs. The second-generation Rivian R1 models are expected to reduce material costs by 20%, while operational efficiencies at the Normal plant further support cost-cutting efforts. Rivian R2 model's material costs are expected to be nearly 50% lower than R1’s.
Li Auto Inc. (LI - Free Report) has developed in-house batteries and a thermal management system designed to better support ultrafast charging and extended driving range. The company plans to continue leveraging its internal R&D strengths to enhance product competitiveness and lower production costs by advancing key technologies internally while relying on joint ventures for manufacturing.
NIO’s Price Performance, Valuation and Estimates
NIO has outperformed the Zacks Automotive-Foreign industry year to date. Its shares have surged 76.6% compared with the industry’s growth of 3.8%.
Image Source: Zacks Investment Research
From a valuation perspective, NIO appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.89, higher than the industry’s 0.45.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NIO’s 2025 and 2026 loss per share has narrowed by a penny and widened by a penny, respectively, in the past 30 days.
Image Source: Zacks Investment Research