What’s New With Nio Stock?

December 3rd, 2024 by Trefis Team
NIO: NIO logo
NIO
NIO

Chinese luxury electric vehicle maker Nio stock (NYSE:NIO) reported deliveries of 15,493 vehicles for November, marking an increase of about 29% compared to last year, although the number was down by about 2% compared to October. Deliveries for the first 11 months came in at 190,832 vehicles, up 34% versus last year. Nio’s delivery performance lagged behind rival Xpeng (NYSE:XPEV) which sold 30,895 vehicles, up a 54% year-over-year increase and 29% growth from the previous month, although its growth was ahead of Li Auto (NASDAQ:LI), which saw deliveries expand 19% year over year. So what has been driving growth for Nio?

Growth for Nio was driven largely by its value-priced Onvo brand, which sold a total of 5,082 vehicles for the month, up 17.7% compared to October.  The brand’s first vehicle, the Onvo L60, was launched in September and is priced between RMB 200,000 ($28,000) and RMB 300,000 ($42,000). Sales are expected to scale up further as production ramps up. Nio is also preparing to launch another brand called Firefly in the coming weeks. Firefly’s first model, which is expected to be a mix of small and compact SUV designs, will likely target even lower price points, expanding Nio’s presence further downmarket.

Notably, NIO stock has performed worse than the broader market in each of the last three years. Returns for the stock were -35% in 2021, -69% in 2022, and -7% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it 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 around rate cuts and multiple wars, 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’s valuation is very attractive. The stock trades at about $4.50 per share, or roughly 1x consensus 2024 revenues, which is low considering that revenues are projected to grow by over 20% this year and by over 40% next year per consensus estimates. In comparison, Tesla trades at about 10x revenues, even though revenues are likely to remain almost flat this year. Tesla Stock And Trump: Risks Galore

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Nio’s premium electric vehicles held about 48% market share in China and the company has improved margins a bit of late. For Q3, vehicle gross margins came in at 13.1% compared to 11% in the year-ago quarter and the company is aiming for overall profitability by 2026. However, there are some concerns as well. The company’s guidance for Q4 was weaker than expected and competition in the Chinese EV market is also mounting. Moreover, Nio’s push into lower-priced vehicles could impact its average selling prices and margins to an extent and its premium EV sales have actually declined year-over-year. 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.

 Returns Dec 2024
MTD [1]		 2024
YTD [1]		 2017-24
Total [2]
 NIO Return 0% -51% -30%
 S&P 500 Return -1% 26% 168%
 Trefis Reinforced Value Portfolio 0% 24% 824%

[1] Returns as of 12/2/2024
[2] Cumulative total returns since the end of 2016

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