In April, Chinese luxury electric vehicle maker Nio delivered 15,620 vehicles, marking a 134% increase from the previous year. This growth was attributed to the recent launch of the company’s 2024 series of vehicles, which includes updated versions of popular models such as the ES8, ES6, EC7, EC6, and ET5T. Nio outperformed its rivals Li Auto and Xpeng in terms of sales, with Li Auto delivering 25,787 vehicles in April, up just 0.41% year-over-year, and Xpeng delivering 9,393 vehicles, up 32% from the previous year.
Despite its strong performance in vehicle deliveries, NIO stock has experienced a significant decline, dropping by 90% from $50 in early January 2021 to around $5 currently. The stock has consistently underperformed the S&P 500 over the past three years, with negative returns of -35% in 2021, -69% in 2022, and -7% in 2023. In comparison, the S&P 500 saw positive returns of 27% in 2021, -19% in 2022, and 24% in 2023. This underperformance raises concerns about Nio’s future performance compared to the broader market.
On the other hand, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. This portfolio has provided better returns with less risk compared to the benchmark index, suggesting a more stable investment option. The uncertain macroeconomic environment, characterized by high oil prices and elevated interest rates, raises questions about Nio’s ability to recover and outperform the market in the coming year.
While there are concerns about global EV demand, particularly with mainstream automakers scaling back on their electrification goals, the Chinese EV market may fare better due to considerable government support. China recently introduced new incentives for consumers to trade their older gasoline cars for electric and low-emission vehicles. However, the industry faces mounting competition and price wars, as evidenced by reports of Tesla scaling back production in Shanghai. Nio’s focus on premium products and recent promotions on its battery rental service may help it navigate the price war in the Chinese market.
Nio’s plans to enter the lower end of the market through new sub-brands, such as Alps, could further expand its market reach beyond the premium segment. Nio stock currently trades at around $5.30 per share, which is approximately 1x consensus 2024 revenues. The analysis of Nio, Xpeng, and Li Auto offers insights into how Nio stock compares with its competitors in the Chinese EV industry. As investors navigate the volatile market environment, evaluating the performance and potential of Chinese EV stocks becomes essential for making informed investment decisions.
