YANTAI, CHINA – NOVEMBER 26, 2023 – Citizens view ET5 models at a NIO auto store in Yantai, … (+)
Chinese manufacturer of luxury electric vehicles Nio Stock delivered 15,959 vehicles for November, an increase of 12% compared to November 2022, although the numbers were slightly lower on a sequential basis. Although Nio hasn’t specified what’s driving its growth, the company likely benefited from increased sales of the updated ES6 SUV, which debuted in May, while price cuts made over the second quarter probably also helped boost demand to some extent. In total, Nio has delivered 142,026 vehicles since the start of 2023, an increase of 33% compared to last year. Nio’s growth rates continue to lag significantly compared to its competitors who saw even stronger monthly shipments. For example, Li Auto delivered a record 41,030 units, an increase of approximately 2.7 times year-on-year, driven by strong demand for its three L-series models that combine gasoline generators to extend the range of its electric vehicles. Xpeng also sold a record 20,041 units, 2.4 times more than in November 2022.
NIO stock has suffered a steep 85% decline from levels of $50 in early January 2021 to around $7 now, compared to an increase of around 25% for the S&P 500 over that roughly 3-year period. Notably, NIO stock has underperformed the broader market in each of the last 3 years. The stock’s returns were -35% in 2021, -69% in 2022, and -27% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022 and 20% in 2023. – indicating that NIO underperformed the S&P in 2021, 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult in recent years for individual stocks.
On the other hand, the Trefis High quality walletwith a collection of 30 titles, has has outperformed the S&P 500 every year during the same period. Why is that? As a group, stocks in the HQ portfolio have generated better returns with less risk relative to the benchmark; less of a roller coaster ride as evidenced by HQ Portfolio Performance Metrics.
Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could NIO face a similar situation as it experienced in 2021, 2022 and 2023 and underperform the S&P over the next 12 months – or will it recover?
Nio stock has had the worst performance of its peers, down about 25% year to date, and remains down more than 88% below all-time highs seen in 2021. There are also Concerns about global demand for electric vehicles, with most major automakers including Volkswagen, Mercedes, Ford and GM indicating smoother adoption than expected. Automotive chip suppliers also reported lower-than-expected adoption of automotive semiconductors in the fourth quarter. However, demand does not appear to be an issue at the moment in China, with overall auto sales up 10% in October, with battery electric vehicles accounting for almost 26% of total auto sales. However, competition is intensifying, leading to major price wars. Investors have been concerned about Nio’s price cuts, which have impacted average selling prices and reduced gross margins in recent quarters. In the June quarter, gross margins stood at just 1%, down from more than 13% in the year-ago quarter, although it appears things could improve in the third quarter , due to higher volumes. Nio for its part is targeting a double-digit gross margin in the third quarter and margins of 15% in the fourth quarter. It has also been reported that the company could reduce its headcount by around 10%, which could reduce costs, although this could be partly offset by higher marketing expenses, as the company makes promoting new vehicles. The stock is also currently trading at less than 1.3 times estimated 2023 revenues, which is well below other players in the electric vehicle sector such as Tesla.
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NIO performance compared to the Trefis enhanced portfolio
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