Image source: Sam Robson, The Motley Fool UK
Tesla’s been a very enriching share over the past 15 years. Since 2010, it’s up about 20,500%, even after accounting for the recent 40% drop. For NIO (NYSE: NIO) however, the stock market story has been very different. It has lost over half its value since listing in 2018.
So far this year, NIO stock’s fallen 14% and now trades for just $3.75. For context, it reached $61 back in the pandemic tech bubble of 2021, meaning the peak-to-trough loss here is a staggering 93%!
However, the Chinese electric vehicle (EV) maker is still growing its sales strongly and plans global expansion. So could buying the stock at $3 be like me getting in on a young Tesla back in the day?
Things I like
NIO’s bread and butter is making smart, premium EVs. However, it’s also launched two sub-brands: Onvo, which targets the mainstream family market; and Firefly, a high-end brand focused on smaller cars. It has big plans to expand its brands internationally over the next few years, possibly emulating larger rival BYD‘s success.
The $7.8bn-capitalised company has pioneered battery-swapping technology, allowing customers to swap out a depleted battery for a new one in a few minutes. It now has 3,245 swap stations, and management says this gives it a “competitive edge” in the battery EV market.
It’s also built a number of NIO Houses, which are a blend of showroom and community hub for NIO users and the broader community. Many have libraries, cafés and conference rooms. I like distinctive companies like this, especially innovative ones run by founders (NIO’s William Li has been called the ‘Elon Musk of China’).
In 2024, revenue jumped 18.2% year on year to $9bn, with 221,970 vehicles sold (a 38.7% increase). Meanwhile, the vehicle margin improved to 12.3% from 9.5% for the previous year. And it’s targeting a doubling of NIO car sales in 2025.
And what I don’t like
On the other side of the ledger though, NIO reported a $3bn net loss last year. That was 8% higher than the year before, meaning the EV maker remains deeply unprofitable.
Moreover, it’s hard enough establishing one new car brand, never mind successfully marketing and scaling three of them. Then there are those NIO Houses, its own smartphone, a lifestyle brand called NIO Life, and more. My concern is that the firm’s trying to do far too much.
Another big fear I have is BYD’s new ultra-fast charging tech, which it says can deliver 250 miles of range in just five minutes. If so, that could one day make NIO’s battery-swap stations obsolete. This raises doubts in my mind about the strategy of continuing to roll out these costly stations worldwide.
Falling knife
Unfortunately, I would say the negatives outweigh the positives here. While NIO keeps finding ways to raise funds, it also continues to incinerate cash at an alarming rate. That cannot continue for too many more years.
If NIO can swing to a profit at some point, the stock could explode higher. But what level will it be exploding from by then? $2? $1? It’s anyone’s guess at this point.
The stock still looks more like a falling knife to me than a huge Tesla-esque winner in the making. I’m not going to buy.
