Nio (NIO +3.38%), a leading maker of electric vehicles (EVs) in China, currently trades more than 40% below its initial public offering (IPO) price of $6.26 per American depository receipt (ADR) from Sept. 12, 2018. It's also dropped 90% from its record closing high of $62.84 per ADR on Feb. 9, 2021.
Nio initially impressed investors with its rapid expansion and usage of swappable batteries as a faster alternative to traditional charging stalls. But its growth slowed down as it faced tougher competition, China's economy cooled off, and higher tariffs crimped its ambitious expansion into Europe. It also burned cash and racked up persistent losses.
Image source: Nio.
Nio might not seem like a compelling investment as the Trump administration's unpredictable tariffs and the escalating trade war drive investors toward safe haven investments. But could this beaten-down EV stock bounce back over the next 12 months?
What happened to Nio over the past year?
Nio sells a wide range of electric sedans and SUVs. Its deliveries more than doubled in 2020 and 2021, but only grew 34% in 2022 and 31% in 2023. That slowdown, which was caused by the macro and competitive headwinds, spooked the bulls.
But in 2024, Nio's deliveries increased 39% to 221,970 vehicles as it sold more high-end ET-series sedans and Onvo midsize SUVs in China. It continued to ramp up its shipments in Europe, even as it faced the pressure of rising tariffs. That robust year-over-year growth continued over the past four quarters. Its vehicle margins -- which had plummeted from a record high of 20.2% in 2021 to 9.5% in 2023 -- also expanded sequentially over the past year as its pricing power improved.
|
Metric |
Q1 2024 |
Q2 2024 |
Q3 2024 |
Q4 2024 |
Q1 2025 |
|---|---|---|---|---|---|
|
Deliveries |
30,053 |
57,373 |
61,855 |
72,689 |
42,094 |
|
Growth (YOY) |
(3.2%) |
143.9% |
11.6% |
45.2% |
40.1% |
|
Vehicle margin |
9.2% |
12.2% |
13.1% |
13.1% |
TBA* |
Data source: Nio. YOY = Year over year. *Full Q1 report not posted yet.
Nio hasn't reported its full first-quarter earnings results or provided any guidance for the full year yet. However, three catalysts could boost its deliveries this year: stronger sales of its Onvo to family oriented drivers, the rollout of its Firefly compact EV in China and Europe, and the recent launch of its premium ET9 flagship sedan.
The European Union and China have also been holding talks to replace the existing tariffs against Chinese EVs with minimum market prices. A deal could help Nio stay competitive in the European market and gradually diversify its business away from China.
NYSE: NIO
Key Data Points
Nio is still deeply unprofitable, but it recently laid off roughly 10% of its workforce and might sell a controlling stake in Nio Power (its lower-margin business that handles its batteries and battery charging stations) to the Chinese battery giant CATL.
Those moves could stabilize its losses as it expands its core business. It still had $5.7 billion in cash and equivalents at the end of 2024, it recently proposed another 118 million share offering to fund its development of new EV technologies, and it's still partly subsidized by local governments in China. In other words, Nio won't go bankrupt anytime soon.
Nio still looks dirt cheap relative to its growth potential
From 2024 to 2027, analysts expect Nio's revenue to grow at a compound annual growth rate (CAGR) of 27%. By comparison, Tesla (TSLA +1.97%) is only expected to grow its revenue at a CAGR of 16% during the same three years.
With an enterprise value of 71.35 billion yuan ($9.8 billion), Nio trades at just 0.8 times this year's estimated sales. Tesla trades at 7.3 times this year's sales. Therefore, Nio still looks dirt cheap relative to its growth potential -- and its valuations are likely being squeezed by concerns about rising tariffs and the escalating trade war. Those headwinds could continue to compress Nio's valuations, but any positive news, like a trade deal between the U.S. and China, could drive its stock higher.
So while I'm not sure Nio's stock will win back the bulls over the next 12 months, I believe its low valuation will limit its downside potential. That's why it could be a good contrarian play for investors who can tune out all the near-term noise.
