Nio (NYSE: NIO) stock has attracted significant investor interest in recent years. In 2022, Cathie Wood’s ARK Autonomous Tech & Robotics ETF took a position in the company for the first time, although the innovation-focused portfolio manager has since trimmed her stake to buy more shares in Nio’s US competitor, Tesla.
Admittedly, the Chinese electric vehicle (EV) manufacturer staged an incredible rally during the pandemic. However, its share price has since crashed after peaking in January 2021.
So, how much would I have if I had invested £1,000 in the firm two years ago? Let’s explore.
Two-year return
Two years ago, the Nio share price stood at $59.03. Using the exchange rate at the time, I could have purchased 23 shares, leaving £9.35 as spare change.
Today, the share price has collapsed to just $12.71. This is perhaps unsurprising as the company’s had to grapple with two challenging years.
Strict Covid-19 lockdowns in China and an accompanying economic slowdown caused severe supply chain issues at the firm’s production factories in the city of Hefei, which damaged the investment outlook for the stock.
Converted back into sterling, the total value of my investment would have shrunk to £236.22. That’s a disastrous -76% return.
To add to the pain, Nio doesn’t pay dividends, so I’d have no passive income to add to my calculations.
The outlook for Nio stock today
After a massive haircut, how does Nio stock look today?
Well, there are signs of a budding recovery. The share price has rocketed in 2023, with a 32% gain this year to date. The rebound is supported by some promising financial results. Over the fourth quarter of 2022, the business delivered over 40,000 vehicles — a 60% increase on the year before.
What’s more, the company has ambitious expansion plans. After starting its 2021 European launch in Norway, Nio now offers its new models — the ET7, EL7, and ET5 — in Germany, Denmark, Sweden, and the Netherlands. It’s eyeing up an entry into the UK market by the end of this year.
The business also has a goal to operate battery swap stations across the globe, which allow for faster charging. Each station can hold up to 13 batteries and is the size of around six car parking spaces. Nio wants to implement 4,000 stations worldwide by the end of 2025, including over 1,000 outside China.
However, the company faces risks from homegrown and overseas competition. Although Nio has established itself as a market leader in the premium EV sector in China, it fell behind rival Li Auto in 2022. Li Auto delivered around 133,000 vehicles, overtaking Nio’s 122,000.
In addition, Tesla’s beginning to make inroads into the lucrative Chinese market. CEO Elon Musk recently announced price cuts between 6% and 13.5% for all versions of its Model 3 and Model Y cars in China.
Would I buy?
I think the prospects for Nio shares are improving as China reopens. This represents the removal of a major headwind to further growth and hopefully bodes well for the company’s expansion plans.
However, intensifying competition worries me. The firm faces a tough fight for market share, both at home and abroad. Overall, I’m steering clear of Nio stock for now.
