Folks who invested in China-based electric vehicle manufacturer Nio (NYSE:NIO) had a great summer this year. Then, the stock had a terrible fall in both senses of the word. Some investors may consider buying NIO stock, but we give it a “D” grade. The risks outweigh the potential rewards as Nio focuses on a specific EV battery business strategy.
It is disconcerting that Nio is laying off 10% of its staff due to “intense competition” in the EV market. Nio’s management describes this market as being “full of uncertainty.” The New York Times reported Nio has lost a whopping $35,000 per vehicle. Just because NIO stock is far below its peak price, investors shouldn’t assume that there’s a real bargain here.
NIO Stock Buyers Must Believe Strongly in Battery Swapping
Before you consider investing in Nio, you’ll need to answer a crucial question: Are you willing to go all in on battery swapping? This refers to replacing depleted EV batteries with fully charged ones. It’s a proposed alternative to the prevalent practice of going to a charging station.
There’s certainly no guarantee that EV drivers will break their habit of stopping off at charging stations. Nio is taking a big risk by doubling down on battery swapping technology.
Just a few weeks ago, Nio agreed to partner with Changan Auto to develop battery-swapping EVs, according to a Reuters report. This might sound exciting, but remember that it costs a lot of money to develop a relatively new type of automotive technology.
Other EV manufacturers aren’t taking a chance on battery-swapping stations because they’re costly and because they favor other fast-charging technologies for EVs. Still, besides the collaboration with Changan Auto, Nio plans to partner with Geely Automobile (OTCMKTS:GELYY) to advance battery-swapping technology.
Nio is taking chances here and will have to commit resources to this endeavor, even while the company implements a 10% workforce reduction. Therefore, prudent investors may choose to stay away from NIO stock.
Don’t Get Excited Over Monthly Deliveries
Not long ago, Nio published a vehicle delivery update for November. At first glance, it might sound impressive that the company’s EV deliveries increased 12.6% year over year.
Yet, NIO stock actually fell in the wake of this update. MarketWatch noted that Nio’s vehicle delivery growth rate didn’t keep up with the company’s competitors.
This is a textbook example of why investors should always put data points in context. Sure, a 12.6% vehicle delivery growth rate for November may seem like a big number. Yet, it pales in comparison to the 43.8% growth in September and the 59.8% growth in October.
Again, Nio isn’t dying and we’re not currently giving NIO stock the lowest possible rating of “F.” Just be sure to conduct your full due diligence on Nio. Check all of the relevant data, and consider the competitors’ growth before making any investment decisions.
NIO Stock: Heed the Warnings
We’ve warned you about Nio before, and we’re still doing our best to prevent investors from making ill-considered decisions in December. Hopefully, people will apply the principle of prudence and consider Nio’s declining EV delivery growth rate.
Nio is apparently prepared to take risks with battery-swapping technology. There’s no assurance that this alternative to using charging stations will gain traction.
Consequently, we’re not currently prepared to give NIO stock a confident recommendation. Cautious investors can simply choose to wait on the sidelines and consider other clean energy market stocks.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
