NIO Stock Outlook: Can the Chinese EV Maker Stay Ahead of the Curve?

view original post

InvestorPlace – Stock Market News, Stock Advice & Trading Tips

Speaking at the Qatar Economic Forum on May 14, billionaire investor Ken Griffin lambasted Joe Biden’s policy of putting tariffs on Chinese EVs, suggesting that the move would hurt American consumers. Nio (NYSE:NIO) stock gained more than 6% on the news. 

Griffin argues that the Biden administration’s policy is bad for America because it will reduce the number of low-cost, high-quality Chinese EVs consumers here can buy, slowing Biden’s desire to move toward low-emission energy. 

While I don’t think there’s any question Griffin is a Republican — he’s a wealthy billionaire; what else would he be? — he said at the conference that he’s waiting to see who Trump picks as his VP before supporting the former president’s 2024 candidacy. 

Although it’s too late for Griffin to run for president in 2024, I’m sure Nio would support his candidacy in four years.

In the meantime, Nio stock trades up 59% from its 52-week low of $3.61 in April.

Is the move over the past month a dead cat bounce or a sign the company’s shares have bottomed and are moving higher? 

Here’s a look at both sides of the argument.

It’s Got a New Brand

The Chinese EV maker announced on May 7 that it would launch Onvo, the company’s lower-priced brand, on May 15. Two sub-brands have been in the works since 2022

However, a slowdown in the Chinese consumer’s appetite for new EVs and a cutthroat market where price wars were killing profits slowed its push to launch a new brand.

“Nio said the first Onvo model, the L60, will be a ‘family-centric smart BEV priced around RMB 250,000, in the same segment as Tesla Model Y.’ That’s about $34,600,” CNBC reported. 

It is rumored to partner with BYD (OTCMKTS:BYDDY) for its batteries. That’s a change from CATL, which currently supplies most of Nio’s battery packs. However, Nio has said the reports are inaccurate. Given that 95% of BYD’s batteries go to its vehicles, it’s hard to know the real story. We’ll know soon enough. 

Nio’s Business Is Doing Well

Nio reported its April delivery update on May 1. According to the company’s news release, it delivered 15,620 vehicles last month, 135% higher than April 2023 and 32% up from March. Of the April deliveries, 56% were SUVs, while 44% were sedans. Its most recent launch was the ET7 on April 25.

Year-to-date, it has delivered 45,673 vehicles, 21% higher than in the first four months of 2023. Through April 30, the company has delivered 495,267 vehicles since the first vehicle came off the assembly line in June 2018. Nio’s 500,000th vehicle was an ES8, which came off the line on May 9.

In the first three months of 2024, Nio delivered 30,053 vehicles, down slightly from 31,041 in the first quarter of 2023.  

The downside to its business is that it’s not making money. In 2023, it had an operating loss of 20.29 billion Chinese yuan (2.80 billion), up from a loss of 13.34 billion yuan ($1.84 billion) in 2022. 

Fortunately, it secured $2.2 billion in equity investment this past December from the Abu Dhabi government’s investment firm, CYVN Holdings LLC. That should help keep the lights on through the end of 2024 and into 2025. As a result of the investment, CYVN owns 20.1% of Nio.  

The Downside Is Tesla and BYD

China has the most competitive EV market in the world. Al-Jazeera recently wondered, “Are Chinese electric vehicles taking over the world?”

According to the publication, Elon Musk said in January’s conference call that Chinese car companies are the most competitive anywhere and will do well outside their domestic market. Joe Biden’s certainly trying to stop that from happening in the U.S. 

Chinese EVs account for 60% of the world’s total, and they’ve only expanded to Europe. While Tesla (NASDAQ:TSLA) is number one at 19.9% market share, BYD has 17%, and two other Chinese manufacturers account for an additional 101%. 

As Al-Jazeera points out, its market share in 2012 was just 0.1%. Oh, how times have changed. 

So, Tesla and BYD control nearly 37% of the world’s EV market. That puts Nio a million miles behind. 

I wouldn’t recommend anyone buy NIO stock if it weren’t for the equity investment. However, the cash could help it get over the hump and get its lower-priced Onvo on the roads of China, helping to deliver future profits.

That makes it a Buy for risk-tolerant investors.  

On the date of publication, Will Ashworth did not have (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 InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

More From InvestorPlace

The post NIO Stock Outlook: Can the Chinese EV Maker Stay Ahead of the Curve?  appeared first on InvestorPlace.