NIO (NYSE:NIO) stock is quite frankly a disappointment. There was so much faith in this electric vehicle (EV) challenger with its innovative battery-swapping technology. However, it’s flopped.
The stock’s down 10% over a year. As such, a £10,000 investment then would be worth, well, around £8,950. That’s also because the stock’s denominated in dollars and the pound has strengthened slightly.
However, this is nothing compared to the losses an investor would have sustained if they’d invested during the pandemic tech bubble. The stock’s now down 91% from its highs.
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Things are getting a little better
Despite the falling share price, some things are getting better at NIO. The firm reported a 62.2% year-on-year increase in February deliveries, reaching 13,192 vehicles. This growth includes 9,143 units from the NIO brand and 4,049 from its family-oriented ONVO brand, which has been steadily gaining traction since its launch.
The company’s also expanded its infrastructure, opening another NIO House — seemingly a sort of club house — and deploying 36 Power Swap Stations and 24 charging stations globally in February. This brings the total to 3,201 Power Swap Stations and 4,395 charging stations worldwide. During the Chinese New Year, NIO’s power network facilitated over 1.7m battery swaps. Over 80% of highway energy replenishments were achieved through swaps.
Burning cash like few others
NIO’s burning cash. In 2023, its financials showed a net loss of CNY21.2bn/$2.9bn, a 46.6% increase from 2022. This reflects ongoing operational inefficiencies and high costs, particularly in R&D and administrative expenses, which totalled CNY13.4bn/$1.9bn and CNY9.3bn/$1.3bn, respectively.
This is exacerbated by a relatively low gross profit margin, around 10.8%, which is behind many of its peers. This comes despite NIO operating in the higher end of the market, where we typically see higher margins. The company also has a large infrastructure spend — building out battery-swapping stations — which is unique among its peer group.
For Q4 2024, NIO is expected to report a net loss of CNY5.1bn/$710m. This is a slight improvement compared to Q3 2024, where the net loss was CNY5.3bn/$738m. However, the company’s financial challenges persist, with cumulative losses continuing to weigh on its profitability outlook. NIO’s set to release its unaudited Q4 2024 and full-year financial results on 21 March. This will provide further insights into its performance and cash burn trends.
Looking further ahead, analysts project that NIO will not achieve profitability until 2027. And even for 2027, the stock’s trading at 37 times projected earnings for the year.
A new threat
BYD‘s currently the dominant player in the EV market, and it has just introduced new charging technology that can provide 400km of range with only five minutes of charging. This could signal a major shift in how customers view EVs, especially by alleviating concerns about range anxiety.
However, I’m also wondering how this will impact NIO’s battery swapping system, which can replace a battery in as little as three minutes. This was a significant advantage when charging times were much longer, but with new technologies like BYD’s, that edge may not last for much longer.
In short, this isn’t an investment for me.
