Chinese electric car maker NIO, Inc. (NIO) reported a narrower net loss for the fourth quarter when a sharp increase in deliveries drove up its revenues. However, the stock dropped about 10% in the extended trading session Tuesday after the company warned of a worse-than-expected slowdown in deliveries in the first quarter.

An infographic on NIO's fourth quarter 2018 earnings results
NIO Q4 2018 Earnings Infographic

The company reported revenues of RMB 3.44 billion ($499.7 million) for the December quarter, compared to RMB 1.47 billion in the preceding three-month period. Higher vehicle sales accounted for most of the revenue growth.

Net loss, on an adjusted basis, narrowed to RMB 3.20 per share ($0.47 per share) from RMB 71.47 per share in the fourth quarter of 2017. Reported loss was RMB 3.52 billion ($511.5 million) or RMB 3.37 per share ($0.49 per share), compared to RMB 2.78 billion or RMB 119.73 per share a year earlier.

During the quarter, deliveries of NIO’s premium electric SUV ES8, which competes with Tesla’s (TSLA) Model X, more than doubled to 7,980 units from 3,268 units in the third quarter. A total of 8,069 vehicles were manufactured during the quarter.

Deliveries of the company’s premium electric SUV ES8, which competes with Tesla’s (TSLA) Model X, more than doubled to 7,980 units

“During the year, we began deliveries of the ES8, a 7-seater high-performance premium electric SUV, in June and delivered 11,348 ES8s to users in 2018; we successfully completed our initial public offering on the NYSE in September; and we launched our second production model, the ES6, a 5-seater high-performance premium electric SUV, in December,” said CEO William Li.

Looking ahead, the management expects first-quarter revenues to be in the range of RMB 1.39 billion ($202.3 million) to RMB 1.52 billion ($220.5 million), which represents a sequential decline of more than 50%. The company looks to deliver 3,500-3,800 ES8 units in the March-quarter, which is less than half the number it delivered in the fourth quarter.

Also read: Tesla’s stock hurt by Model 3 pricing

The company said it experienced softness in ES8 deliveries in the first two months of 2019, mainly due to seasonal factors and accelerated deliveries towards the end of last year in the wake of the government’s decision to reduce the subsidy for EV manufacturers.

NIO, which is also called the Tesla of China, emerged as the top electric vehicle maker in the region in a very short span of time, to the extent that it started giving competition to its better-established US counterpart. While the company is improving its bottom-line performance consistently, it is unlikely to achieve profitability in the near term due to the continuing drag on margins from the high expenses.

NIO shares gained 58% since the beginning of the year. The stock closed Tuesday’s regular session higher at the New York Stock Exchange but dropped sharply in the after-hours following the earnings report.

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