Chinese electric-vehicle maker NIO (NIO 3.49%) said that it delivered a total of 3,553 vehicles in the second quarter of 2019, including the first examples of its all-new ES6 SUV. 

Deliveries declined 21% from NIO's first-quarter result, but its second-quarter total was solidly above the conservative guidance range the company gave when it reported its first-quarter earnings.

That was welcome news for NIO's battered American depositary receipts, which were up 15% this week through Wednesday's close. 

A red NIO ES6, a sharply-styled midsize electric crossover SUV.

NIO is hoping that its all-new ES6 will help it get back on a growth trajectory. It began shipping in June. Image source: NIO.

Why NIO's stock has been sliding in 2019

NIO had a promising start in 2018, but several factors have put pressure on the stock since December:

  • Slumping sales. The company's first mass-produced model, a "three row" (seven-passenger) electric crossover SUV called the ES8, dropped sharply in January after the Chinese government cut a subsidy for buyers of electric vehicles. 
  • Executive departures. NIO's well-regarded U.S. CEO, Padmasree Warrior, left in December, and several others have followed. 
  • Concerns about NIO's build quality have been rising. That's not good anywhere, but it's especially bad in China, where consumers have lots of other choices. 
  • Competition. NIO has often been talked up as a potential home-grown rival to Tesla (TSLA 12.06%) in China. But Tesla is now building its own factory near Shanghai, and may soon be able to offer its Model 3 to Chinese buyers free of the taxes that China imposes on imported vehicles. 

The upshot: NIO's stock price has fallen nearly 42% since its initial public offering last September.

NIO Chart

NIO data by YCharts.

But all may not be lost. After several tough months, NIO's sales rose a bit in June, thanks to early demand for a new model. 

A bar chart showing NIO's monthly deliveries since production of the ES8 began last June. Monthly deliveries increased to a high level in December, and then fell sharply in January.

Data source: NIO. Monthly deliveries of the ES8 (in blue) and the ES6 (green) since the beginning of mass production in 2018. Deliveries of the ES8 began on June 28, 2018; ES6 deliveries began on June 18, 2019. 

That model is the ES6, a "two row" (five-passenger) battery-electric crossover SUV that has better range than the ES8 and a more attractive price. 

On paper at least, the ES6 is a compelling vehicle. Its interior is trimmed well enough to meet upscale shoppers' expectations, and it incorporates a long list of high-tech features including NIO's proprietary artificial-intelligence assistant, called NOMI. From a mechanical perspective, the ES6 is a dual-motor design with an intriguing twist: The motor driving the front axle is optimized for efficiency; the rear-axle motor is optimized for performance. 

The upshot: Tough road ahead, but some reasons for hope

NIO first showed the ES6 in December. Early interest has seemed strong, but it'll be at least a few months before we know the extent to which that initial interest has turned into orders, and whether demand is sustainable. In the meantime, investors will be watching the Chinese new-car market and the progress of Tesla's Shanghai factory as they try to decide whether current prices represent an entry point -- or the new normal for NIO.