Right before Nio (NYSE:NIO) released its June 2024 delivery numbers, we drop a downbeat analysis of NIO stock. Although at first glance, it may seem like Nio proved us wrong, a closer look shows it is clear why the market didn’t exactly go bananas for NIO on the heels of this news.
Although sales grew impressively over the year, June sales were not significantly better than May sales on a monthly basis. The market may be setting itself up for disappointment with the upcoming vehicle launch. Even with steady growth, a major factor could limit long-term global sales.
NIO Stock: Just Holding Steady After Last Month’s Record Sales
At the start of July, Nio released the aforementioned monthly sales figures for June 2024. During the month, the EV maker delivered a total of 21,209 vehicles.
This was a 98.1% increase compared to the prior year’s quarter, and as EV publication Electrek noted, sales hit new monthly and quarterly records.
However, as mentioned above, sequential sales growth was far more modest, at just 3.24%. Hence, explaining why briefly rallied in the days following the deliveries news, but has given back some of these gains since, resulting in just a small net move higher for NIO stock.
Yes, for now shares may stay rangebound, avoiding another big move lower. The reason for this goes beyond just the well-received monthly delivery numbers. Nio is gearing up to launch a new mass market EV brand, Onvo. The first Onvo model, the L60, is set to debut this September.
Per Deutsche Bank analyst Wang Bin, expectations are for Onvo L60 sales to total 10,000 vehicles monthly. That’s not all. With the launch of this and other Onvo models, plus new Nio models, expectations are rising that companywide unit sales will hit 300,000 in 2025.
The Risk of a Growth Wall Still Looms
Nio stock analysts may anticipate another wave of high growth for the company in the months ahead, but we still believe the risk of Nio hitting a growth wall still looms. Sure, new vehicle launches, especially the launch of lower-priced vehicles, sounds like a winning move for this smaller China EV contender.
However, it still may not be enough to enable Nio to gain market share. Via the ongoing China EV price war, larger competitors have, and could continue to, stymie the growth ambitions of smaller players like Nio. Instead of hitting 300,000 vehicle sales next year, Nio’s growth in 2025 could fall short.
Worse yet, new vehicle sales could simply just replace sales of previously-launched models, resulting in little-to-no sales growth. Even if our downbeat view of Nio’s local market prospects is proven wrong, our pessimism about the company’s long-term growth potential could still prove correct.
The cost and scale advantages of China-based competitors could limit the extent in which Nio is able to expand into adjacent Asian EV markets. Rising geopolitical tensions between China and the West may limit Nio’s efforts to grow sales through expansion throughout Europe. Much less, entry into the U.S. EV market.
Bottom Line: Exit Now, While the Market Calm Lasts
Again, another major drop in the price of NIO may not happen anytime soon. Cautious optimism about the Onvo may be enough to keep shares steady for months to come. Initial success with the Onvo could also extend this bullish-leaning view by the market.
However, later this year, or in 2025, if it becomes clear that high competition will once again limit Nio’s growth potential, expect the next wave of disappointment to arrive. If Nio fails to level up, expect shares to level down, back toward prior low single-digit price levels.
You have some time to make your exit, but there’s little reason to wait. As subsequent news between now and the Onvo launch may at best only result in modest, short-lived rallies, chances are you aren’t missing out on much, if you sell Nio stock today.
NIO stock earns a D rating in Portfolio Grader.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
