Down 50% This Year, What’s Happening With Nio Stock?

Chinese luxury electric vehicle maker Nio stock (NYSE:NIO) delivered 11,866 vehicles in March, up 14.3% from 10,378 a year ago. Sales were driven in part by the launch of the company’s 2024 series of vehicles during the month, including updated versions of the ES8, ES6, EC7, EC6, and ET5T. However, Nio’s performance lagged its rivals. Xpeng delivered 9,026 cars in March, up 28.9% from a year ago, while Li Auto saw sales grow by 39.2% year-over-year to 28,984 vehicles. Nio’s overall deliveries for Q1 stood at 30,053 vehicles, meeting its reduced delivery guidance.

NIO stock has suffered a sharp decline of 90% from levels of $50 in early January 2021 to around $4 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. Notably, NIO stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -35% in 2021, -69% in 2022, and -7% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that NIO underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the mega-cap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could NIO face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

There are concerns about global EV demand, with most mainstream automakers seeing tepid demand and scaling back on their electrification goals. For instance, Mercedes-Benz dialed back on its target of going all-electric by 2030, now estimating that only 50% of total sales would be EVs. We’ve seen similar production scalebacks from the likes of Ford, as well. While the Chinese EV market is poised to grow this year, competition and price wars are mounting, and this is putting pressure on players such as Nio. Even EV bellwether Tesla reportedly scaled back production at its plant in Shanghai amid rising competition.

While Nio has a slew of models in its lineup including five SUVs and three sedans, this isn’t enough for the company to win market share. Earlier this week, the company announced a subsidy program totaling RMB 1 billion (about $138 million) to attract gasoline vehicle owners to buy its EVs. Nio is also making progress with its battery technology and battery-swapping partnerships. Nio is also looking to enter the lower end of the market via new sub-brands, expanding beyond its premium price range under a brand called Alps which is reportedly set to begin production sometime this year. That said, Nio stock trades at just about $4.50 per share, about 1x consensus 2024 revenues. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Nio stock compares with its rivals Li and Xpeng.

[1] Returns as of 4/4/2024
[2] Cumulative total returns since the end of 2016

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