The NIO (NYSENIO) share price is down 49.5% over 12 months. The company just keeps on underdelivering, and this time there’s less optimism that the stock will pop back up. Well, that’s certainly my view.
Underdelivering time after time
The Shanghai-based EV firm delivered 30,053 vehicles in the first quarter of 2024. That translates to a 3% decline versus the same quarter last year. In a fast-growing market like new energy vehicles (NEVs), going backwards isn’t impressive.
However, some of this can be put down to the broader macroeconomic climate. Tesla is among those companies that are struggling at the moment, recently announcing falling deliveries year on year. The big difference is that NIO is a million miles behind Tesla, and it still loses money.
In my view, NIO has proven to be the loser in the highly competitive Chinese EV market. My top pick, Li Auto, recently announced a 53% increase in deliveries year on year for Q1 — and that was still down on where it hoped to be.
Waiting longer on profitability
When I first started covering NIO stock two years ago, it was due to turn its first profit in 2024/25. Of course, there have been issues that were outside of the company’s control. NIO was seemingly harder hit by prolonged Chinese lockdowns before ‘Covid Zero’ was lifted.
However, the business just hasn’t moved forward as quickly as we’d have hoped. In fact, it’s now unlikely to turn a profit until 2027. That means three more years of losses, and maybe more cash raises. NIO ended 2023 with $8.1bn in cash and equivalents, but it lost $600m in the last quarter of the year.
While this run rate doesn’t look overly alarming, the company is planning to open over 1,000 battery-swapping stations over the next year. And it may need to open more to develop its battery-swapping infrastructure fully. At $420,000 per station, it’s going to require plenty more capex.
Great cars, but USP fading
I really like what NIO has done. It has a great range of vehicles, cool tech and unique battery-swapping technology. But while the battery-swapping concept is impressive, I believe it’s less of a selling point than it used to be.
NIO says you can swap your car’s empty battery for a full one in a matter of minutes. And that’s faster than any charging alternative. It could still be a feature that helps it bounce back. The problem is that car charging is getting faster, so building all this battery-swapping infrastructure seems less relevant to me.
For example, Li Auto’s Mega can reach full charge in just 12 minutes. And I imagine it’s only going to get faster. I’m no longer convinced that battery swapping is the way forward.
All in all, I’m not convinced NIO can turn things around. I’d love to be optimistic, but it’s in a tricky situation and has a track record of disappointing me. It’s currently trading at 25.9 times predicted earnings for 2027 — not expensive, but that’s a long way away.
