What happened
The stock markets tumbled and a short-seller slammed Nio (NIO 5.26%) for fudging its numbers last month, but the electric vehicle (EV) stock still ended June with solid 24.9% gains, according to data provided by S&P Global Market Intelligence.
A new product launch and big plans for the near future helped the stock bottom after its steep fall this year through May, and Nio stock has sustained its momentum in July so far.
So what
Nio put to rest investors' fears about decelerating growth when it released its delivery numbers for May on the first day of June. Although Nio's deliveries rose only 5% year over year, they were up 38% sequentially, confirming a rebound in production after the company had to suspend operations amid COVID-19 lockdowns in China. Nio also sold 1,707 units of its flagship sedan, ET7, in May -- a car the company first delivered on March 28.
Image source: Nio.
Those numbers lifted the market's hopes, and with Nio's first-quarter earnings around the corner, the market continued to pump up the stock. Unfortunately, Nio stock plunged after earnings as its margins declined, partly because of lower average selling price per vehicle.
Nio, however, projected a much stronger second half of the year and announced some big growth plans, including:
- Launching a mid-to-large sized SUV, ES7, in June.
- Delivering mid-sized sedan, ET5, in September.
- Launching a new mass-market brand with deliveries starting in 2024.
- Building in-house battery packs that will also power Nio's mass-market brand.
As promised, Nio launched ES7 on June 15, and it took many by surprise as it turned out to be Nio's fastest SUV yet as well as one of the first passenger cars in China certified to tow a trailer or a caravan.
More importantly, Nio hiked prices of all its models as it announced they'll now come equipped with its advanced in-vehicle intelligence digital system called Alder. At the same time, Nio offered its existing owners the option to upgrade their vehicles with Alder but at a low cost. The moves kindled investor interest in Nio as they recognized how customer-oriented the company is.
Now what
As Nio expected, June turned out to be a much stronger month, with its deliveries soaring 60% year over year. Several analysts have also turned bullish about Nio in recent weeks. Deutsche Bank analyst Edison Yu, for instance, sees Nio embarking on its "most important product cycle" ever and projects ET7 and ET5 sedans to become the most desired premium electric cars in China.
The increase in prices of its vehicles should also boost Nio's top line through the rest of the year. For the second quarter, Nio expects its revenue to rise by 10.6% to 19.4% year over year, backed by deliveries of 23,000 to 25,000 units.
So, while short-seller Grizzly Research may believe that Nio is hugely inflating its revenue numbers, investors are paying no heed to pessimists anymore. Nio's delivery growth in June was really strong, and with the Chinese government just revealing plans to boost the EV industry by extending subsidies and building out a robust charging infrastructure, Nio's growth prospects have started to look even stronger now.
