- Nio(NIO) offers Tesla(TSLA) luxury without the production volumes.
- The company has stiff competition within China, and those competitors are now exporting.
- Nio will likely remain small, and investors should demand a profit.
At this point in the game, investing in Nio$NIO Inc.(NIO)$ (NYSE:NIO) stock means investing in the China.
If you bought stock in Nio when China was arranging its bail out two years ago, your investment is in good shape. In March 2020, shares bottomed out near $3/share. It opened May 9, at about $14. If you got in late in 2020, you’re losing money. Shares peaked at over $61 each at the start of 2021.
As a Nio stockholder, your view is colored by when you got in, and what you believed at the time. Was China’s governmentthe savior of your investment, or did they take you for a ride?
That aside, looking at these numbers and competition, NIO stock probably won’t be going the distance.
| NIO | Nio | $13.64 |
Nio’s Numbers
Nio stock trades in Hong Kong as well as the U.S. Results are reported in Hong Kong dollars. These are currently trading at 7.85 HKD to the U.S. dollar.
At current exchange rates Nio lost about $1.61 billion in 2021,on revenue of $5.5 billion. Revenue was up 138% from 2020. The best news here was about $302 million in positive operating cash flow. Nio has a market capitalization of $49 billion.
Financial results for that first quarter are due May 13. Revenue is estimated at$1.54 billion with a loss of 16 cents/share. That would be an improvement over the last quarter’s 21 cents/share loss, on similar revenue.
The company reported its first quarter deliveries April 1 at25,768 cars. It delivered5,074more in April. Compare this to91,429delivered in all of 2021.
Now let’s put these numbers in context.
The Reality
Nio cars are made by JAC Motors in Hefei. JAC makes a full line of sedans, hatchbacks, and pick-ups. Think of Nio as a luxury electric brand for JAC.
Nio says it wants to be “China’s Tesla$Tesla Motors(TSLA)$ (NASDAQ:TSLA).” But based on delivery numbers, it’s not China’s Tesla. When you read that it’s coming out with a model “competitive” with the TeslaModel 3, know that it’s only making a few of them. Tesla deliveredover 300,000 carsin the first quarter of 2022.
If you want to know what globally competitive means for Nio, look at Norway, Europe’s most competitive electric car market. Nio has gotten into that market with plans to sell 7,000 cars over the next two years. Key to making that happen will be infrastructure, specificallybattery swaps, which Nio has pioneered in its home market. The idea is that as a battery’s range drops it can be quickly replaced, and the whole car serviced.
If Nio can make it in Norway, the argument goes, it can make it in the U.S. But there will be a lot of competition, including Chinese competition.Geely$Geely Automobile Holdings Ltd.(GELYF)$ (OTCMKTS:GELYF), which deliversas many vehicles in Chinaas Tesla does electrics worldwide, now owns Volvo and has a luxury electric brand calledPolestartaking orders in the U.S.
The Bottom Line on NIO Stock
Nio has a high public profile in U.S. markets because it came to the New York Stock Exchange in 2019.
That’s not the same thing as being China’s Tesla.
Nio is a luxury brand whose cars are being made by a state-backed company. It aims to export numbers measured in the thousands, while Tesla plans to produce numbers in th emillions.
While Nio is slowly ramping up its export infrastructure, better-capitalized rivals in China are doing the same. As is the rest of the auto industry worldwide. Its volumes do not justify the $49 billion market cap.
If you have a profit in Nio stock now, take it. If you don’t, I don’t think it likely you will ever see one.
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