Why Is Nio Stock Down 55% Despite Surging Deliveries?

Core Viewpoint - Nio's stock has significantly declined by approximately 59% year-to-date, despite strong delivery performance, indicating challenges in the competitive electric vehicle (EV) market and broader economic conditions [1][2]. Group 1: Company Performance - Nio sold a total of 107,924 vehicles year-to-date as of July, reflecting a year-over-year growth of 43.9%, outperforming Li Auto's 39% growth [1]. - The company's Q1 2024 results showed a loss of $0.36 per share on sales of $1.4 billion, with revenues declining by 7.2% year-over-year and 42% sequentially [1]. - Nio's average selling price in the last quarter was RMB 278,000 (approximately $38,850), down about 6% compared to the previous year [1]. Group 2: Market Conditions - China's GDP growth was weak at 4.7% in Q2 2024, down from 5.3% in Q1, influenced by a downturn in the real estate market and slow consumer spending [2]. - Retail sales in China fell to an 18-month low due to deflation, with high youth unemployment impacting domestic consumption [2]. - The high interest rate environment is increasing financing costs for automotive companies, further complicating market conditions [2]. Group 3: Competitive Landscape - The Chinese EV market is highly competitive, with over 100 brands, leading to intense price wars, including price reductions by Tesla [1]. - Nio faces challenges in entering new international markets due to trade barriers, including tariff hikes in the EU and a 100% import duty on Chinese EVs in the U.S. [3]. Group 4: Future Outlook - Nio is expected to see a significant revenue increase in Q2 2024, with consensus estimates suggesting about 90% growth, although unit sales may outpace revenue growth due to pricing pressures [1]. - New incentives in China for electric vehicle purchases, potentially doubling to RMB 20,000 ($2,800) per vehicle, could benefit Nio as it plans to enter the lower end of the EV market with its new sub-brand model, the Onvo L60 [5]. - Nio's stock is currently trading at under $4 per share, approximately 0.8 times consensus 2024 revenues, with projected revenue growth of over 20% this year and over 35% next year [6].