Chinese luxury electric vehicle maker Nio has entered the lower-priced EV market with its new Onvo brand, unveiling its first vehicle to compete with Tesla’s Model Y crossover. The new vehicle is priced at RMB 219,900 yuan (about $30,500), around 10% lower than Tesla’s Model Y in China. With a September release date, the Onvo vehicle offers more space and lower energy consumption compared to the Model Y, with plans to expand the brand and release new models targeting larger families in the future.
Despite recent growth, Nio has lagged behind competitors in the Chinese EV market, delivering around 160,000 cars last year compared to Li Auto’s 375,000 units. The market is crowded with over 100 brands, leading to a price war and production cutbacks. Nio’s stock has declined by 90% from early 2021 levels, underperforming the S&P 500 in the past three years with negative returns in 2021, 2022, and 2023, while the broader market saw positive returns during the same period.
For individual stocks like Nio, Amazon, Tesla, Toyota, and other consumer discretionary or tech giants, consistently outperforming the S&P 500 has been challenging in recent years. In contrast, the Trefis High Quality Portfolio has outperformed the benchmark index each year over the same period, offering better returns with less risk. As Nio faces uncertainties in the macroeconomic environment with high oil prices and interest rates, the question remains whether the company will rebound or underperform further in the coming months.
In the midst of global EV demand concerns, the Chinese market shows promise with new-energy vehicle sales, including battery-powered EVs and plug-in hybrids, increasing by 33% in April compared to the previous year. The Chinese government’s support for the EV industry includes incentives for consumers to trade older gasoline cars for electric and low-emission vehicles, benefiting mass-market EVs like Nio’s Onvo brand. Nio’s cost-saving measures, such as purchasing batteries from BYD instead of producing them in-house, and investments in EV charging infrastructure could give the company a competitive edge over rivals.
With Nio’s stock trading at around $5.30 per share, approximately 1x consensus 2024 revenues, investors are watching closely to see if the company can capitalize on the growing Chinese EV market and overcome challenges in the industry. By analyzing how Nio’s stock compares with competitors like Li Auto and Xpeng, investors can make informed decisions about investing in Chinese EV stocks. Overall, the outlook for Nio and the EV industry in China remains uncertain, with potential for growth amidst fierce competition and changing market dynamics.
