With Q2 Earnings Incoming, Nio Is Prepared for a Strong Second Act

A few months ago, Nio (NYSE:NIO) was threatening to become the dominant electric vehicle stock in China. In fact, it saw plenty of comparisons to electric vehicle (EV) titan Tesla (NASDAQ:TSLA) and NIO stock was going through the proverbial roof.

A close-up shot of the Nio (NIO) ES8 vehicle.
Source: xiaorui / Shutterstock.com

However, after a big 2020, NIO stock is now down more than 7% year-to-date (YTD) as the company wrestles with a global semiconductor shortage and the effects of the pandemic. Plus, there are two other China-based EV companies that have emerged as legitimate competitors to Nio’s superiority.

This all will make the company’s second-quarter earnings announcement — planned for Aug. 11 — even more interesting to see. In my view, this company is far from being down and out.

NIO Stock: A Look at Production

Recently, Nio released some key production numbers. Specifically, the company announced that it had delivered 7,931 vehicles in July, which was a hefty increase of nearly 125% from the previous year. It’s no small feat to churn out that many vehicles in a month, particularly when the broader automotive industry is struggling with a chip shortage.

What’s more, Nio also specified that it had built 1,702 of its flagship SUV — the ES8 — for the month. Further, it delivered 3,669 ES6s (another SUV) and 2,560 EC6s (the company’s smart electric coupes). In all, Nio says it has now delivered a total of 125,528 vehicles cumulatively. That should mean good things for NIO stock.

However, while the July numbers do represent a huge increase from a year ago, they also show a slight 1.8% decrease from just a month before. In June, the company had delivered a record 8,083 vehicles.

Even more interestingly, competitors Li Auto (NASDAQ:LI) and Xpeng (NYSE:XPEV) actually both delivered more automobiles in the month than Nio. More specifically, Li Auto delivered 8,589 Li Ones in July while Xpeng delivered 8,040 vehicles, 75% of which were its P7 sedan model. Both EV makers also set monthly records.

So, the EV market is clearly remaining hot. And that’s despite a pandemic and a semiconductor shortage to contend with, let alone a suite of other electric vehicle companies.

Earnings Are in the Spotlight

What does this mean? Well, Nio isn’t the first company to face competition. Rather, what matters most is how the company responds.

To that end, Nio is expected to report its Q2 numbers on Aug. 11. For the quarter, analysts will surely be looking for how the company measures up to Li and Xpeng’s numbers. In particular, they’ll likely want to know what kind of production numbers the company is forecasting for Q3 and Q4.

But you can also expect some additional information in the report. For instance, the company will likely discuss its recent decision to hire Ai Tiecheng to head up the its newest sub-brand. As InvestorPlace’s Brenden Rearick reported last week, Tiecheng “will be the vice president of strategic business for the unnamed sub-brand” which will represent Nio’s mid- and low-end EVs.

The first model of the sub-brand is expected to be released in the first half of 2022. And of course, tapping into the mid- and low-end EV market will be huge for NIO stock.

Finally, though, you can also expect Nio to discuss its plans to have 4,000 battery swapping stations worldwide by 2025. These battery swapping stations will allow drivers to quickly change out their depleted batteries for a fresh ones.

No doubt, Nio’s Battery as a Service (BaaS) model is something that makes it stand apart from competitors. And, as the Chinese government has announced national battery swap safety standards, the company’s efforts to increase its battery-station footprint is welcome news.

The Bottom Line on NIO Stock

After a big 2020, NIO stock has faced some challenges thanks to the pandemic and the chip shortage. Plus, it has some added competition in companies like Li Auto and Xpeng.

But I’m still bullish on Nio for a few reasons. I think its expansion into the low- and mid-income EV market will grow its customer base dramatically. Additionally, the expansion of its BaaS model will make Nio stand out from the competition.

All in all, I think this Q2 will be a stellar second act to follow up Nio’s strong 2020. At the time of this writing, NIO stock has a “B” grade and a buy recommendation in my Portfolio Grader.

On the date of publication, Louis Navellier had a long position in NIO. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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