Chinese luxury electric vehicle maker Nio reported strong sales for April, delivering 15,620 vehicles, a 134% increase from the previous year. The company attributed the growth to the launch of its 2024 series of vehicles, including updated versions of popular models such as the ES8 and ES6. Nio outperformed its rivals Li Auto and Xpeng, with Li Auto delivering 25,787 vehicles (up 0.41%) and Xpeng delivering 9,393 vehicles (up 32%) in April.
Despite the strong sales performance, Nio’s stock price has experienced a sharp decline of 90% from $50 in January 2021 to around $5 now. The stock has consistently underperformed the S&P 500 over the last three years, with negative returns of -35% in 2021, -69% in 2022, and -7% in 2023. In comparison, the S&P 500 delivered positive returns in each of those years, indicating that Nio has struggled to beat the broader market.
In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 over the same period. The HQ Portfolio has provided better returns with less risk compared to the benchmark index, suggesting a more stable investment option in uncertain macroeconomic conditions. The question arises whether Nio will continue to underperform the S&P 500 in the coming months or if the company will see a recovery in its stock price.
There are concerns about global EV demand, as most mainstream automakers are experiencing tepid demand and scaling back on their electrification goals. However, China’s EV industry benefits from considerable government support, with recent incentives announced to encourage consumers to switch to electric and low-emission vehicles. Despite competition and price wars in the Chinese market, Nio’s focus on premium products and promotions on its battery rental service could help the company weather the storm.
Nio is also looking to expand its market reach by entering the lower end of the market with new sub-brands, such as Alps, which is set to begin production later this year. The company’s stock trades at around $5.30 per share, roughly 1x consensus 2024 revenues, highlighting the potential for growth. For a detailed comparison with its rivals Li Auto and Xpeng, investors can refer to Trefis’ analysis on Chinese EV stocks. Overall, Nio’s strong sales performance in April and strategic moves to diversify its product offerings suggest potential for future growth in the competitive EV market.
