Nio Reports Steady Deliveries Amidst Competitive Electric Vehicle Market

Chinese luxury electric vehicle manufacturer Nio (NYSE:NIO) has revealed that it delivered 20,976 vehicles in October. This figure is approximately the same as September but marks a 30% increase compared to the same month last year. Over the first ten months of this year, Nio’s total deliveries reached 170,257 vehicles, showing a 35% increase from the previous year. This delivery performance surpasses that of its rivals:

• Xpeng (NYSE:XPEV) saw deliveries of 23,917 vehicles in October, up 20% year-over-year, bringing its year-to-date total to about 122,500 units, a 21% increase from 2022.
• Li Auto (NASDAQ:LI), another key player in the Chinese EV market, delivered 51,443 vehicles in October, which is a 27.3% increase from last year.

Nio’s delivery surge can be attributed largely to the performance of its budget-friendly Onvo brand. In October, Onvo sold 4,319 units and debuted its first vehicle, the Onvo L60, launched in September, which ranges in price from RMB 200,000 ($28,000) to RMB 300,000 ($42,000). Enhanced production capabilities are expected to drive these sales further. Nio is also set to introduce another brand called Firefly by the year’s end, which will aim for even lower price points, extending its market reach. Currently, Nio operates approximately 166 retail centers for the Onvo brand and provides access to 584 Nio battery swapping stations across China.

Nio’s Stock Performance Compared to Market Trends

It is important to note that NIO stock has lagged behind the broader market for the past three years: returns were -35% in 2021, -69% in 2022, and -7% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has been less volatile and has consistently outperformed the S&P 500 during the same timeframe. The HQ Portfolio provided better returns with less risk, evident in its performance metrics. With the current uncertain economic landscape, including uncertainties around interest rate cuts and ongoing conflicts, NIO could face similar challenges as in previous years, raising questions about its potential to recover in 2024.

Valuation and Growth Potential

Nio appears to have an attractive valuation at about $5 per share, equating to roughly 1x the projected 2024 revenues. This is relatively inexpensive, particularly with revenue growth expected to exceed 20% this year and 35% in the next. For context, Tesla trades at approximately 7x forward revenue, despite almost flat revenue expectations for the year. If Nio maintains its growth trajectory, its stock could see a favorable re-rating, potentially aligning it more closely with Xpeng’s valuation. For a deeper comparison of Nio with its rivals, check out our analysis on Nio, Xpeng, and Li Auto.

Market Drivers for Nio’s Future

Recent monetary stimulus measures introduced by the Chinese government may further elevate EV sales in the upcoming quarters. Nio’s financial health has remained robust; despite facing pricing pressures from competitors such as Tesla and Li Auto, which have opted to lower prices, Nio’s profit margins have shown resilience. In the second quarter of 2024, vehicle gross profit margins improved to 12.2%, up from 9.2% in Q1 and 6.2% in Q2 2023. This improvement occurred in the context of higher delivery volumes and alleviating supply chain issues, even with a 10% drop in average selling prices.

The Chinese EV market continues to present substantial growth opportunities. In October 2024, new energy vehicle (NEV) sales—a category that includes EVs and plug-in hybrids—reached a record 1.4 million units, reflecting a 58% increase year-over-year and a 14% increase compared to September, according to the China Passenger Car Association. With its premium vehicle lineup and newer budget-oriented brands, Nio is well-positioned to capture a larger market share. Furthermore, attractive EV purchase incentives, such as trade-in subsidies of up to 20,000 yuan (around $2,800) for replacing old gasoline vehicles with NEVs, could further enhance sales.

[1] Returns as of 11/5/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
Explore all Trefis Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.