After briefly surging to a high of $7.89 per share in October, the stock of Chinese electric vehicle (EV) manufacturer Nio (NIO 0.09%) has dropped 13% and is now back below the $7 mark.
NYSE: NIO
Key Data Points
Once-bitten, twice-shy investors might look at Nio's 2021 share price of $62.84 and see nothing but another failed EV stock. However, Nio has been quietly ramping up manufacturing, introducing popular new designs, and expanding its global footprint, to the point that shares have now more than doubled from their recent five-year lows.
Can Nio reclaim some of its former glory (and, better yet, its former market cap), or should investors still be steering clear?
More countries, more problems
Nio's primary source of revenue is its home Chinese market, where sales have been growing in recent years. The company's October deliveries of 40,397 total vehicles represented a 92.6% increase over the prior year. However, part of Nio's growth thesis includes market expansion into Europe and other international markets, possibly including North America.
Since entering the Norwegian EV market in 2021, Nio has expanded its sales and service networks into four additional European markets: Sweden, Denmark, Germany, and the Netherlands. It also sells vehicles in the United Arab Emirates, Israel, and Azerbaijan. In June, the company announced plans to expand into seven additional European countries. In August, it said it would introduce "right-hand drive" models of its vehicles in order to enter markets in Singapore while also expanding into Uzbekistan and its first North American market, Costa Rica.
However, European demand has been on the wane in recent years. Based on vehicle registration data, Nio's estimated European sales peaked in 2023 with approximately 2,365 vehicles sold. In 2024, that number dropped to 1,630, and it dropped still further this year, with just 833 sales recorded to date.
CEO William Li appeared to confirm these numbers during a recent visit to Norway. In response to a question about the disparity between Nio's Chinese and European software, he explained: "Validating an [autonomous driving] solution on 5,000 cars is as expensive as validating that on 800,000 cars," apparently referring to the relative sizes of Nio's European and Chinese fleets.
In addition to software challenges, Chinese EVs face European tariffs that are particularly problematic for an automaker like Nio, which has leaned heavily into low-cost vehicles. There's plenty of time for Nio to turn around its international sales slump -- especially since it has only just made its premium compact Firefly brand available in Europe. But the company clearly still has plenty of work to do to justify investor confidence around its global expansion plans.
Image source: Getty Images.
All eyes on profitability
Despite its consistently growing revenue -- which has surged 300% over the past five years -- Nio has never turned a profit. In fact, due to its new focus on manufacturing inexpensive vehicles, its losses have widened from a $1.6 billion net loss in 2022 to a $3 billion net loss in 2024. This makes sense: Selling cars at rock-bottom prices quickly eats away at profit margins, so Nio's best hope is that increased sales and economies of scale can counteract the margin compression.
While this might seem concerning, it's helpful to remember that Nio's rival Tesla (TSLA +4.02%) was once in the same boat. Tesla posted net losses for its first decade as a public company, only becoming consistently profitable after the launch of the popular Model Y in 2020. With a number of recent rollouts from its sub-brands Firefly and Onvo -- including the best-selling Onvo L90 budget six-seat SUV -- Nio could follow a similar trajectory.
There are some signs that Nio may in fact be starting to turn things around. So far in 2025, its net losses have shrunk sequentially each quarter, while its quarterly margins have sequentially improved. The company is reportedly aiming to post its first profitable quarter in the fourth quarter of this year. Nio is expected to report its third-quarter earnings later this month, and if its finances continue to improve, the current sub-$7 price tag may look like a bargain. However, if the company fails to make progress, shares are likely to decline further.
All things considered, Nio stock is still risky, but is priced accordingly. It's probably a worthwhile bet for a risk-tolerant investor looking to pick up shares in an EV growth stock.
