Nio (NIO 1.97%), a major producer of electric vehicles (EVs) in China, has been a disappointing investment over the past few years. Its stock currently trades at about $5 compared to its initial public offering (IPO) price of $6.26 per American depositary share (ADS) in September 2018 and its record closing price of $62.84 in February 2021.
Nio initially impressed the bulls with its soaring deliveries, and the buying frenzy in meme stocks amplified those gains. However, its stock pulled back as its deliveries slowed down, and it racked up steep losses. Rising rates drove investors back toward safer investments. The trade war between the U.S. and China made its stock even less appealing.
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But as Warren Buffett famously said, investors should be "greedy when others are fearful," and there's a lot of fear baked into its current stock price. Let's take a contrarian view and see why Nio's stock could be worth buying ahead of its second-quarter report in early September.
1. Its battery-swapping network is expanding
Nio produces a wide range of electric sedans and SUVs under its namesake brand. Its newer Onvo and Firefly sub-brands sell cheaper SUVs and compact cars, respectively. It differentiates its vehicles from other Chinese EVs with its swappable batteries, which can be quickly swapped out at its power swap stations as a faster alternative to traditional chargers. Its drivers can pay for those battery swaps on an individual basis or subscribe to a "battery as a service" (BaaS) plan for lower rates.
At the end of June, Nio operated 3,445 power swap stations across China and Europe. That's up from just 777 stations at the end of 2021. Expanding that network is a capital-intensive effort, but it should increase the stickiness of its brand, widen its moat against its competitors, and plant the seeds for higher-margin recurring BaaS revenues. It's also been working with several major investors, including China's battery-making giant CATL, to fund the future growth of that network.
2. Its deliveries are rising
Nio's annual deliveries more than doubled in 2020 and 2021 but only grew 34% in 2022 and 31% in 2023. That slowdown -- which it attributed to tougher competition, macroheadwinds in China, and adverse weather conditions -- spooked a lot of its investors. But in 2024, its annual deliveries rose 39% to 221,970 vehicles. That growth was driven by its robust sales of Nio ET series sedans and Onvo SUVs in China, which boosted its domestic market share against its rivals, as well as its ongoing expansion into Europe.
Nio's deliveries rose 40% year over year to 42,094 vehicles in 2025's Q1. In the first half of the year, its total deliveries increased nearly 31% year over year to 114,150 vehicles as its new Onvo and Firefly brands attracted more budget-conscious consumers. Those rising deliveries indicate Nio still has plenty of room to expand in China and Europe in the coming years even if its days of doubling its annual deliveries are over.
For 2025, analysts expect Nio's revenue to rise 37% to 90.2 billion yuan ($12.6 billion). From 2024 to 2027, they expect its revenue to increase at a compound annual growth rate (CAGR) of 26% to 132.7 billion yuan ($18.5 billion) as it continues to roll out new vehicles.
3. Its vehicle margins are stabilizing
Nio's annual vehicle margin reached a record high of 20.1% in 2021, but it plummeted to 9.5% in 2023 as it grappled with the pricing war in China's EV market and inflationary headwinds. But in 2024, its vehicle margin rose to 12.3% as it sold a higher mix of Nio's premium sedans, diluted its production costs, and streamlined its other expenses.
Nio expects its namesake brand to maintain a vehicle margin of "around 15%" for 2025's Q2. That stability should offset some of the pressure from its lower-margin Onvo and Firefly brands. It probably won't come anywhere close to achieving a 20% vehicle margin again, but its vehicle margins should continue to stabilize as economies of scale kick in. That's why analysts expect Nio to narrow its net loss from 22.7 billion yuan ($3.2 billion) in 2024 to 7.6 billion yuan ($1.1 billion) in 2027. They also expect its earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive by the final year.
4. Its valuation looks dirt cheap
Lastly, Nio still trades at a deep discount to its growth potential presumably because the tariffs and trade tensions are driving investors away from Chinese stocks. With an enterprise value of 67.9 billion yuan ($9.5 billion), it trades at just 0.8 times this year's sales. For reference, Tesla (TSLA 3.52%) trades at 10.9 times this year's sales.
So if you expect Nio's business to stabilize with narrowing losses as the trade tensions wane, it might be a great idea to accumulate this unloved stock before it posts its Q2 earnings report. Any good news could force investors to revalue its shares and send them soaring much higher.
