Trade tensions can take a major toll on China-based electric vehicle manufacturer Nio (NYSE:NIO). The last thing you need to do in 2024 is add problems to your portfolio, so we’re assigning Nio stock a “D” grade and not recommending it today.
Nio is focusing on a specific type of EV-battery technology. The company isn’t hedging its bets, and Nio’s success in this battery-tech bet is uncertain. Despite the Nio share price decline, there is a high risk of further losses.
Nio’s Battery-Swap Gambit
There’s no turning back now, it seems, as Nio is going all-in on EV battery-swapping technology this year. InvestorPlace’s contributors have reported on Nio’s battery-swapping partnerships here, here, here and here.
In a June 1 news release, Nio bragged about its battery-swap partnerships with seven companies. The automaker can tout its “growing list of strategic partnerships” in this area, but having more partnerships certainly doesn’t ensure success.
Remember, battery-swapping stations are costly and most automakers favor other fast-charging technologies for EVs. Besides, advancing the research and development of battery-swap technology is an expensive proposition.
Only time will tell whether Nio’s “more partnerships equals more success” strategy will pay off. Just be aware that if you own Nio stock, you’re not only wagering on the company’s automobiles. You’re also betting on a type of EV battery technology that might not gain traction among the customers.
A Roadblock for Nio’s U.S. and Europe Aspirations
Meanwhile, in case you missed it, the Biden administration will quadruple U.S. tariffs on EVs imported from China, from 25% to 100%. Nio CEO William Li called the tariffs “unreasonable,” but don’t expect Li’s opinion to prompt any changes in U.S. trade policy.
To quote InvestorPlace contributor Thomas Niel, the tariff “changes will complicate Nio’s plans to enter the North American EV market within the next few years.” Niel is being polite when he uses the word “complicate.” To put it bluntly, Nio now has practically zero chance of successfully competing in the U.S. EV market.
As CNBC reported, the “European Union is mulling similar measures” to the U.S.’s tariffs on Chinese EVs. Hence, Nio’s management might end up having to cross Europe off its list of expansion targets for a while.
All of this adds up to more headwinds for Nio, in a year when Nio stock is already down.
Nio Stock: You Don’t Have to Hang on for This Ride
We’re not in the business of telling you to buy or sell anything. Just be aware that if anything we’ve told you about Nio today makes you uneasy, you don’t have to invest in the company.
What if you’re already invested, though? Perhaps you survived a choppy, sloppy May but you’re concerned about the future.
That’s understandable, as Nio’s battery-swap bet and Sino-U.S. tensions are potentially problematic for the company. Therefore, we’re giving Nio stock a “D” grade. With that in mind, you have every right to sell your shares if you just want peace of mind.
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.
