Nio’s Deliveries Surge Over 3x In May. Will The Stock Follow?

Chinese luxury electric vehicle maker Nio stock (NYSE:NIO), has declined by about 41% year-to-date. This compares to rival Xpeng stock (NYSE:XPEV) which is down by 29% over the same period. Nio recently published a strong set of delivery numbers for May shipping a total of 20,544 vehicles for the month, up almost 234% from 6,155 vehicles in the same month last year and up 31.5% from 15,620 in April 2024. The company’s year-to-date deliveries stood at 66,217 units, up by 51% year-over-year. Nio’s growth was considerably stronger than its rivals. For instance, Xpeng delivered 10,146 vehicles for May, up about 35% year-over-year and close to 8% compared to April. Li Auto, a company specializing in EVs with a gasoline-based range extender, delivered 35,020 vehicles for the month, up 23.8% yearly.

Despite the recent strength in Nio’s deliveries, the stock has suffered a sharp decline of 90% from $50 in early January 2021 to around $5. This compares to 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.

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 while taking on less risk compared to 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?

Nio stock has a couple of things going for it. The automaker recently unveiled the first vehicle under its lower-priced Onvo brand, taking on Tesla’s Model Y crossover, which is the world’s best-selling EV. The new vehicle will have a starting price of RMB 219,900 yuan (about $30,500), which is about 10% below Tesla’s Model Y in China, and should go on sale around September of this year. Nio intends to expand the Onvo brand, adding one new model per year under the new low-priced brand, the next of which is expected to be a model targeting larger families. The Chinese government has also been supporting the EV industry, recently announcing new incentives of RMB 10,000 (about $1,410) for consumers to trade their older gasoline cars for electric and low-emission vehicles by year-end. This incentive could benefit mass-market EVs more than luxury vehicles, potentially helping Nio’s Onvo brand. That said, it remains to be seen how well the company will fare. The Chinese EV market is extremely crowded, with over 100 brands competing in the space. There has also been a severe price war, with players including Tesla reducing prices for their vehicles multiple times over the past year while scaling back production.

Now Nio is also looking to keep costs low with its new models, with the company buying batteries from BYD, while abandoning plans to produce batteries in-house. Nio has also invested considerably into building out its EV charging infrastructure including battery-swapping and charging stations and this could also give the company an advantage over rivals. Nio stock trades at about $5.40 per share, just 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 6/3/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates