NIO Stock Is the Canary in the EV Market Coal Mine
Nio (NYSE:NIO) stock reflects the falling prospects for high-end electric vehicles (EVs).
During the last decade, the Chinese company was pitched as a direct competitor to Tesla (NASDAQ:TSLA). Its cars were sold as status symbols in “Nio Houses” to China’s millennial go-getters. Nio was also an innovator in swapping out batteries to maintain range.
But Nio has never scaled its production, producing just 160,038 cars in 2023, its best year yet.
Investors have had enough. The stock is down by half in 2024. Can things get better? Nio has a plan for that.
Nio’s New Strategy
Nio launched a “Chevy” strategy last year. It is focusing on the mid-market with new lines called Onvo and Firefly.
The Onvo is a family car like the Tesla Model Y. The Firefly (which will likely get a name change) is a sedan like the Volkswagen (OTCMKTS:VWAGY) ID.3. The Onvo will launch in the next quarter, and the Firefly next year.
The Onvo will be priced from $28,000-$42,000, while the Firefly will start at just $14,000.
The new cars respond to a new market reality. It’s not enough to make a nice car. You must scale production and deliver a price ordinary people can afford. BYD (OTCMKTS:BYDDF) now drives the market with prices of $25,000 and less.
Nio Subsidies
Nio can follow the market leader thanks to $2.2 billion raised last year from Abu Dhabi. The money comes with some strings, like a licensing deal for a new Arab luxury EV called the Forseven.
This is the second bailout Nio has taken. The first came during the pandemic, a $1.4 billion investment from a Chinese state government. Nio spent 2023 trying to become self-sufficient again.
Nio lost $756 million last year on sales of $2.4 billion. It has yet to turn a profit and losses are widening.
It ended the year with $7 billion of cash and short term investments.
What Do People Want?
It’s clear what consumers want.
We want an EV with the range and price of a gas-powered car. Nio can deliver that with the Onvo and Firefly, maintaining the range with quick battery swaps. A new battery recently let CEO William Li drive one of his cars 648 miles on a single charge. That was using a semi-solid battery that prioritizes range at some sacrifice in power output.
Nio has been talking to rivals about licensing its battery swap technology for two years. Geely (OTCMKTS:GELYF) has signed up for battery swaps with Nio, which now has over 2,300 swap stations.
But it takes money to support the technology, and the value is questionable. CATL, now the dominant supplier of EV batteries, has licensed Nio’s battery swap technology. But it’s also hoping to just make batteries last longer. Samsung (OTCMKTS:SSNLF) has a battery that lasts 20 years on its product roadmap .
The Bottom Line
Li has always compared himself to Elon Musk. He certainly has Musk’s salesmanship skills. The company’s original backer was Tencent (OTCMKTS:TCEHY), then one of China’s Cloud Emperors. Then, he got money from the government. Now, he has money from Abu Dhabi.
Li, and Nio stock are running as fast as they can to stay in the game. Analysts at Tipranks call the stock no more than a hold. As with Tesla, bulls at Stocktwits see it as more of a charging and battery technology play than a car company.
Li’s chief talent turns out to be convincing big money to lose money with him. Most investors agree with that now, which is why the stock price has been cut in half. The canary in the EV coal mine has had a great run, but it’s running out of oxygen.
On the date of publication, Dana Blankenhorn did not hold (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.
