A Glimmer of Hope for Nio Investors
As the global electric vehicle (EV) industry continues to evolve, some investors may be concerned about the impact of China’s dominance on the market. However, a closer look at Nio’s (NYSE: NIO) third-quarter results reveals a surprising silver lining amidst the challenges.
Nio’s Mixed Numbers
Despite posting strong sales since April, Nio’s momentum slowed slightly in October, which is a concern given the 11.2% growth in China’s passenger vehicle market. Nevertheless, the company still delivered an impressive 61,855 vehicles during the third quarter, a 12% jump from the prior year. CEO William Bin Li emphasized that Nio has secured the top position in China’s battery EV market for vehicles priced over RMB 300,000 ($41,400), holding more than a 40% market share in the first three quarters of this year.
The Price War Takes Its Toll
However, the ongoing price war in China has hit Nio’s revenue, which dropped roughly 4% compared to the prior year. The company reported a third-quarter adjusted loss per share of $0.31 on sales of $2.7 billion, slightly missing Wall Street estimates.
A Bright Spot: Margin Expansion
Despite the challenges, Nio’s gross margin increased to 10.7% in the third quarter, better than the prior year’s 8%. Vehicle margins also improved to 13.1% from 11% over the same period. This upward trend is attributed to the company’s cost controls and lower material pricing.
Rivals Outshine Nio
While Nio’s margin expansion is a positive sign, it still lags behind rivals XPeng (NYSE: XPEV) and Li Auto (NASDAQ: LI), which posted gross margins of 15.3% and 21.5%, respectively, during the third quarter.
Looking Ahead
Management expects vehicle deliveries to rebound to between 72,000 and 75,000 units in the fourth quarter, a 44% to 50% gain over the prior year, and forecasts revenue to jump 15% to 19%. Investors should focus on the company’s production ramp-up of its more affordable Onvo brand and the upcoming Firefly brand, which will target a larger customer base.
A Speculative Stock with Potential
Nio has shed 48% of its value year to date, making it a speculative stock that should remain a smaller position in any portfolio. However, the company is in better shape today than it was years ago, with a pipeline of new electric vehicles on the way.
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