To The Moon

Total Eclipse.

It has been a while since I last posted on NIO.

This Chinese EV maker is due to release its earnings report card today before US market trading begins, I thought I share a post on them.

If not, NIO’s spotlight will be ‘stolen’ and eclipsed by $NVIDIA Corp(NVDA)$ quarterly earnings that have already been hogging the limelight for the past few days and into Wednesday evening (US time).

Stock Take.

For October 2024, Chinese luxury electric vehicle maker $NIO Inc.(NIO)$ stock reported deliveries of 20,976 vehicles; that is roughly flat versus September.

Comparatively speaking, Nio’s deliveries has been up +30% YoY.

Deliveries for the first 10 months of 2024 came in at 170,257 vehicles. This is up +35% YoY.

Nio’s delivery performance was better than rivals ie. for instance $XPeng Inc.(XPEV)$ delivered 23,917 vehicles for October 2024, up +20% compared to last year.

Xpeng’s total YTD sales for the first 10 months of 2024 stood at about 122,500 units, a +21% increase from the same period last year.

In comparison, $Li Auto(LI)$, the largest of the emerging EV players in China, it delivered 51,443 vehicles in October 2024. This is up +27.3% YoY.

NIO’s catalysts.

(1) Onvo.

Growth for Nio was driven largely by its value-priced Onvo brand, that sold a total of 4,319 vehicle units for the month.

The brand’s first vehicle, the Onvo L60, was launched in September 2024 and is priced between RMB 200,000 (USD28,000) and RMB 300,000 (USD42,000).

Nio operates a total of over 166 retail centers for the Onvo brand and also gives users access to 584 Nio battery swapping stations in China.

Sales are expected to scale up further as production trends higher.

(2) Firefly. (coming end 2024)

Nio is also preparing to launch another brand called Firefly by the end of the year.

Firefly’s first model, which will be a mix of small and compact SUV designs, will likely target even lower price points, expanding Nio’s presence further downmarket.

Notably, NIO stock has performed worse than the broader market in each of the last 3 years.

Returns for the stock were:

• -35% in 2021.

• -69% in 2022.

• -7% in 2023.

Given the current uncertain (a) new incoming president, (b) macroeconomic environment around rate cuts and (c) multiple wars — could NIO face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months.

Will it see a recovery?

(1) Valuation.

• Nio’s valuation is attractive.

• The stock trades at about $5 per share.

• That is about 1x consensus 2024 revenues, which is not expensive.

• Taking into considering that revenues are projected to grow by over +20% this year and by over +35% next year.

• If Nio continues this pace of growth, investors could potentially re-rate the stock higher, assigning it a higher multiple of over 2x, more in line with its Chinese peer Xpeng.

In contrast, $Tesla Motors(TSLA)$ trades at about 7x forward revenue, even though revenues are likely to remain almost flat this year.

(2) Stimulus.

The Chinese government’s recent monetary stimulus measures could help to boost EV sales further in the coming quarters.

Nio’s financial performance has also been strong.

Despite facing pricing pressure from competitors like Tesla and Li Auto, that have been cutting prices, Nio’s margins have remained quite resilient.

In Q2 2024, vehicle gross profit margins improved to +12.2%, up from 9.2% in Q1 and 6.2% in Q2 2023.

• Improvement was driven by (a) higher delivery volumes and (b) easing supply chain challenges, despite a -10% drop in average selling prices.

The Chinese EV market also continues to offer considerable growth opportunities.

Based on data from China Passenger Car Association (CPCA), in October 2024, new energy vehicle sales (include EVs and plug-in hybrids) reached a record 1.4 million units, up +58% YoY and up +14% from September 2024.

What is The CPCA ? It is a social group formed by 139 automakers, and sales data are reported by its members and are divided into wholesale and retail data.

With (1) Nio’s premium lineup and (2) its new more value-oriented brands ie. Onvo and Firefly, the company is well-positioned to address a larger market.

Incentives for EV purchases also remain quite attractive.

China’s provinces have implemented car trade-in subsidy policies besides introducing other policies to promote automotive consumption.

Under the scheme, consumers replacing an old gasoline vehicle with an NEV can receive up to 20,000 yuan (about USD2,800).

Such incentives can drive sales higher.

Stock Performance.

• YTD, Nio has lost about -44.54% to it stock price.

• It started the year at $8.90 per share on 02 Jan 2024.

• And it has been trending down since, with a minor “breakthrough” on 12 Mar 2024 at $6.29.

• Thereafter, it traded “aimlessly” until 02 Oct 2024 when it came “closer” to its Jan price at $7.56.

• On 28 Aug 2024, it even fell below $3.70 per share.

• How will Nio perform on 20 Nov 2024 when it reports its Q3 2024 earnings? Brace yourself !

Is there any truth in Forbes’s post by the Trefis team about NIO becoming $10 ? Honestly I have kind of given up hope on Nio’s “greatness”, it has a great product but a super weak management team.

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