Where will Nio (NIO 2.45%) stock find a bottom? That's the question investors in the electric vehicle (EV) stock must be asking right now. Shares plunged 21.7% in March, according to data provided by S&P Global Market Intelligence, and are now down 47% this year as of this writing.

Why Nio stock fell so much

Nio kicked off March on a somber note when its fourth-quarter and full-year 2023 numbers failed to impress investors. Although fourth-quarter deliveries of 50,045 units were up 25% year over year, they fell 9.7% sequentially.

For the full year, deliveries rose around 31% from 2022, but its gross margin slumped to only 5.5% from 10.4% in the previous year. Nio's net loss surged almost 44% to $2.9 billion in 2023.

Its stock plunged after the earnings report as investors became wary amid a slowdown in the global EV market. With several analysts also slashing their price targets on Nio, the pressure on the EV stock continued to build, only to get much worse when later in March, the automaker cut its delivery guidance for the first quarter to 30,000 units versus its earlier projection of 31,00 to 33,000 vehicles.

Why Nio stock could rebound

A guidance cut never goes down well with investors, but they might be reading too much into it in this case. January and February are seasonally weak months in China, so car sales are typically lower during the period.

Chinese rival Li Auto also downgraded its first-quarter guidance for deliveries in March. On top of that, Nio was upgrading its models to a new platform in recent months, and that hit production and deliveries, too.

First-quarter numbers are already in, and the company delivered 30,053 units in the quarter. Notably, its deliveries in March rose 14% year over year and were up almost 46% from February. Nio started deliveries of five of its 2024 models in March and expects to start shipping the remaining three models in the second quarter, which could drive its sales higher.

Management also has a lot of other things on its plate. It will launch its first mass-market brand, called Onvo (or "Alps" in Chinese) in the coming weeks, according to the Chinese EV news website CnEvPost, with the brand's first model competing with Tesla's Model Y.

Nio has also revamped its battery-as-a-service (BaaS) program to make its cars more attractive for buyers amid rising competition. Under BaaS, potential customers can buy Nio cars without batteries for a lower price and rent the batteries instead. BaaS is an important competitive advantage for Nio, and the company has now lowered the cost of rentals under the program.

Sales are under pressure amid a price war and a slowdown in the industry, but Nio expects margins to improve from the second quarter, driven by lower costs and higher volumes. If that happens, it could well be an inflection point for this cheap EV stock.