What’s Weighing Nio Stock Down?

NIO: Nio logo

Nio stock (NYSE:NIO) has declined by close to 40% over the last month (about 21 trading days) considerably underperforming the broader S&P 500 which remains down by about 12% over the same period. The sell-off is driven by multiple factors. With bond yields rising and global economic growth poised to slow, investors are continuing to pivot away from riskier growth stocks such as Nio. Moreover, Nio’s Q2 results, which were published in September, were also somewhat mixed, with net losses widening to RMB 2.76 billion ($411.7 million) due to rising operating expenses and weaker gross margins. For perspective, vehicle gross margins fell to 16.7%, compared to 20.3% in the year-ago period, amid inflation and supply chain challenges. Nio’s delivery numbers for Q3 (the quarter ended September) were also weaker than expected coming in at 31,607 vehicles, although it was within the company’s guidance of between 31,000 and 33,000 vehicles.

However, digging a bit deeper, Nio’s overall delivery growth rate actually picked up coming in at 29% year-over-year compared to 14.4% growth in Q2.  The 31,607 delivery number is also well above the average 25,000 vehicles that the company has been delivering over the last four quarters. Nio has also fared better than rivals Xpeng and Li Auto, which actually saw their deliveries decline sequentially in Q3. Now overall EV demand and favorable regulation remain a big tailwind for EV players in China. For the month of September, deliveries of new energy vehicles – a broad term that includes hybrids, EVs, and fuel cell vehicles – almost doubled versus last year. Nio is also increasing its focus on the European market. While it entered Norway in 2021, it recently said that it would start delivering vehicles in Germany, Denmark, the Netherlands, and Sweden as well.  Moreover, while Nio has focused on the premium EV market thus far, with its average selling price of over $55,000 per vehicle, in the same ballpark as Tesla, the company is looking to enter the low-end market with a new sub-brand.  This could help the company drive additional volumes.

Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how Nio stock stacks up versus its peers Li Auto and Xpeng.

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Returns Oct 2022
MTD [1]
YTD [1]
Total [2]
 NIO Return -16% -58% 108%
 S&P 500 Return 1% -24% 61%
 Trefis Multi-Strategy Portfolio 1% -26% 195%

[1] Month-to-date and year-to-date as of 10/11/2022
[2] Cumulative total returns since the end of 2016

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