Chinese luxury electric vehicle Nio stock (NYSE:NIO) delivered 16,074 vehicles for the month of October marking an increase of 60% year over year. Deliveries were also up 3% compared to September. Although Nio did not explain what caused its growth, the company likely benefited from the release of the updated ES6 SUV, which was launched in May. Price cuts during the second quarter are also likely to have stimulated demand to some extent. Overall, for this year, Nio delivered 126,067 vehicles marking an increase of 36.3% year on year. That said, Nio’s growth rates continue to fall behind rivals that have posted even stronger monthly deliveries. For example, XPeng delivered 20,002 vehicles, almost 4 times compared to last year and 30% compared to the previous quarter. Li Auto also saw deliveries grow by nearly 4x year-on-year to a record 40,422 units, driven by strong demand for its three L-Series models that combine gasoline generators to extend the range of its EVs. In September, Li delivered 36,060 units.
Amidst the current supply backdrop, NIO stock has suffered a sharp decline of 85% from levels of $50 in early January 2021 to around $8 now, versus an increase of around 15% for the S&P 500 over this roughly 3-year period. Notably, NIO shares have underperformed the broader market in each of the last 3 years. Returns for the stock were -35% in 2021, -69% in 2022, and -19% in 2023 (YTD). By comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022, and 14% in 2023 (YTD) – 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 tough over the past few years for individual stocks. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 every year during the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less roller coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, NIO could face a similar situation as it did in 2021, 2022 and 2023 and underperforms the S&P over the next 12 months – or will it see a recovery?
Nio stock has performed the worst among its peers, down about 18% year-to-date, and continues to remain more than 85% below all-time highs seen in 2021. There are also concerns about global EV demand, with most major . automakers, including Volkswagen, Mercedes, Ford, and GM indicating softer-than-expected intake. Automotive chip suppliers also flagged weaker-than-expected usage for automotive semiconductors for the fourth quarter. However, demand does not seem to be a problem at the moment in China. Fully battery electric vehicles accounted for about 25% of the country’s car sales during the month of September. However, competition is increasing and this has resulted in considerable price wars. Investors have been concerned about Nio’s pricing, which has affected average sales prices and reduced gross margins in recent quarters. During the June quarter, gross margins stood at just 1%, down from 13% in the previous year. However, there are still a few reasons to consider the stock. Nio also previously indicated that it would aim for gross margins of around 15% by the fourth quarter of this year, driven by the volume increase of new models. There were also reports that the company could cut its workforce by around 10% in a move that could cut costs. The stock also currently trades at less than 1.5x estimated 2023 earnings, 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 to its rivals Li Auto and Xpeng.
returns | Nov 2023 MTD (1) |
2023 YTD (1) |
2017-23 Total (2) |
NOTHING Return | 8% | -19% | 24% |
S&P 500 Return | 4% | 14% | 96% |
Hit Enhanced Value Portfolio | 3% | 22% | 524% |
(1) Monthly and up to date as of 11/8/2023
(2) Cumulative total profit since the end of 2016