From EV Darling to Sub-$5 Stock, What’s Next for NIO Investors?

Stocks to sell

Chinese EV manufacturer Nio (NYSE:NIO) has certainly been on a downtrend over the past year. On a year-to-date basis alone, NIO stock has lost nearly 50% of its value, making this among the worst-performing EV stocks most investors are watching closely right now.

Of course, there are a range of reasons this is the case. Macro headwinds tied to rising interest rates around the world and slowing demand (even in China) along with price-cutting pressures (and some rising input costs) have put pressure on margins and demand forecasts. On this basis alone, Nio’s recent decline makes sense.

The thing is, Nio is well-known for its status as a leader in battery technology. If investors believe this is the future, and the Chinese EV market will remain the golden goose of the global EV sector, NIO stock should trade higher than where it is.

Let’s dive into what to make of this conundrum, and whether NIO stock can be considered a buy right now.

Deal with Cinemo

In a separate NIO feature article I wrote last week, Nio has partnered with multimedia specialist Cinemo to introduce high-quality in-car entertainment. This collaboration promises Nio owners access to subscription-based streaming services directly from their vehicles.

Nio’s partnership with Cinemo aims to elevate in-car entertainment, potentially boosting its appeal amid fierce competition from XPeng and BYD. This move, targeting European markets despite tariff challenges, underscores Nio’s strategy to differentiate itself.

While enhancing in-vehicle streaming and preparing for software upgrades, Nio seeks long-term market advantage despite current investor concerns.

Autonomous Driving Trial

China allowed NIO to test automated driving on public roads. After approval from four ministries, NIO established its first demonstration zone in Jiading, a hub for the intelligent connected vehicle industry. Jiading pioneered enclosed testing zones, issued the first permits, and designated open roads for testing.

The “auto city” supported NIO’s autonomous driving tests with its intelligent infrastructure, policies, and safety practices. NIO will test Level 3 and 4 autonomous vehicles on restricted roads after approval, paving the way for advanced autonomous driving market development.

Shanghai designated four autonomous driving zones in Lingang, Pudong, Jiading, and Fengxian, covering 1,002 roads and 2,000 kilometers for testing.

Nio EL8

The new Nio EL8 focuses on overwhelming power and then offering calm, blending a 241hp front motor with a 402hp rear one for a total of 643hp. It accelerates from 0 to 100 kph in 4.1 seconds, close to the MG 4 XPower despite its larger size.

The car boasts six-piston front brakes and a hefty 100 kWh battery (with a 75 kWh option), providing a range of around 510km.

The interior of the Nio EL8 offers two six-seat configurations in its spacious cabin, measuring 5,099 mm long, 1,750 mm tall, and 2,199 mm wide with a 3,070 mm wheelbase.

One layout features 14-way adjustable rear seats, while the other includes 12-way adjustable ottomans and a ‘smart’ fridge. The materials used are eco-friendly: rattan, soybean foam, Haptext synthetic leather, sugar cane, and castor oil. 

The headliner boasts the world’s first plant-based woven suede. Additionally, it features an in-car fragrance system with ‘woodland freshness,’ ‘waterfall’ LED ambient lighting, and a 23-speaker, 2,300W surround sound system.

There Are Better Alternatives

Nios Q2 2024 guidance was mixed. Revenue projections of $2.297 billion to $2.373 billion exceeded analysts’ $1.99 billion estimate. However, the company’s vehicle delivery forecast of 54,000 to 56,000 units disappointed, considering over 36,150 deliveries in April and May alone.

Nio soared from a penny stock in 2020 to over $60 in 2021. But this stock now trades below the $5 per share level. Despite strong cash reserves, Nio faces slowing deliveries growth, high cash burn, and tariff challenges, making it less attractive long-term compared to other Chinese rivals such as BYD (OTCMKTS:BYDDF) in my view.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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