Nio’s Delivery Performace Lags Peers. What’s Next For The Stock?

NIO: Nio logo
NIO
Nio

Chinese luxury electric vehicle maker Nio stock (NYSE:NIO) delivered 15,641 vehicles for the month of September. While this marks an increase of 43% year-over-year, deliveries were down by about 19% versus last month. Nio has benefited from the release of the updated ES6 SUV, which was launched in May. Nio also cut prices on its vehicles by about $4,200 in early June, accounting for close to 10% of the starting price of some vehicles, and this could have stimulated demand to a certain extent. However, the company didn’t provide any reasons for the month-over-month decline in deliveries in September. Nio’s growth rates appear to be falling behind rivals who posted record monthly deliveries. For perspective, Li Auto saw deliveries surge by 213% year-over-year to a record 36,000 units in September, driven by strong demand for its three L-Series models which combine gasoline generators to extend the range of its EVs. XPeng saw deliveries grow by 81% year-over-year for the month to a record 15,310 units, led by a strong performance of its G6 vehicle which accounted for over half its total deliveries. Overall, Nio delivered 55,432 vehicles over the third quarter,  marginally ahead of the company’s revised guidance range of 55,000 to 57,000 cars. This takes the company’s full-year delivery tally to 43,854 vehicles this year, marking an increase of 15.8% year-over-year.

Interestingly, NIO has had a Sharpe Ratio of 0.5 since early 2017, lower than 0.6 for the S&P 500 Index over the same period. This also falls short of the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

Nio stock has performed the worst of its peers, declining by about 7% year-to-date, and still remains down by about 85% below all-time highs seen in 2021. Investors have been concerned about the company’s recent price cuts, which impacted average selling prices and reduced gross margins in Q2 to just 1%, compared to around 13% in the year-ago quarter. However, there are still some reasons to consider the stock. While Nio’s overall performance has been weaker than peers like Li Auto, the company expects deliveries of over 20,000 units a month over Q4. Nio is also targeting gross margins of about 15% by the fourth quarter of this year, driven by the volume ramp-up of new models. The stock also presently trades at under 1.5x estimated 2023 revenues, which is well below other EV players such as Tesla and Li Auto. 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 Auto and Xpeng.

Returns Oct 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 NIO Return 0% -7% 42%
 S&P 500 Return 0% 12% 92%
 Trefis Reinforced Value Portfolio 0% 23% 533%
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[1] Month-to-date and year-to-date as of 10/2/2023
[2] Cumulative total returns since the end of 2016

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