NIO (NYSE:NIO) stock doesn’t look great following recent earnings. The main reason is Nio’s lack of foresight to drive profitability and its abysmal market share in the Chinese EV market.

Competition is heating up and the largest players are reducing prices to steal even more market share. We are already seeing the collapse of small EV makers, and this is only the beginning.

Competition Remains Fierce

Competition always exists, and they should welcome it to drive innovation and help contain prices. For instance, even Tesla is having a hard time competing with its EV rival BYD in China.

Nio only has less than 2% market share in the China EV market, and that figure might fall to under 1% in the coming years. Nio’s February 2024 delivery numbers fell 33% YOY and 18% from January. 

This poor performance is likely to persist throughout 2024, and their lack of footing in the Chinese EV market is not a great sign for the future.

Delivery Growth Doesn’t Always Mean Progress

Delivery growth has always been a major metric that will signal either success or failure for EV companies. 

If companies can deliver sequential growth in deliveries it signals the strength and resilience of the business. Additionally, it showcases management’s execution and ability to not only be a manufacturer but also deliver its product to customers. 

But now investors are seeing it for what it really is. It is simply a vanity metric for EV startups that are not profitable. This has made it easy for them to showcase delivery growth as the businesses primary objective. 

While it is certainly a part of the equation, it is at the bottom of the totem pole in terms of material progress. Wall Street is now more focused on vehicle gross margins and profitability, which has plagued the company since its IPO. 

Things might not look so pretty in the near term as well, with Tesla’s warnings of declines in deliveries and vehicle gross margins in 2024.

NIO Stock: Proceed With Extreme Caution

Nio stock was once an EV darling and attracted the attention of notable financial institutions and retail investors. However, when the market shifted to risk-off, it is no surprise that NIO is being left behind. 

The company has barely penetrated the Chinese EV market, and BYD will crush them from the inside out over the next decade. Sure, there is a possibility that they become profitable, but it’s not certain. 

What is even more confusing is that management has not signaled or instilled confidence in its shareholders for the future. Operating losses are likely to continue, and investors should proceed with extreme caution in 2024. 

On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.