NIO (NYSE:NIO) stock is worth a fraction of what it was during the pandemic, and the company is arguably the biggest loser of the electric vehicle race. While I’d love to back NIO to make a comeback, the odds are stacked against it. The company had great promise, but under-delivered. Now I’m wondering whether its USP is really that useful.
Going cheap
NIO stock certainly doesn’t look particularly expensive compared to its peers. But that’s because the tide has turned against it and profitability looks even further away today than it did a few years back. When I started covering the stock two years ago, the Chinese EV maker hoped to start turning a profit around now. But break-even point has now been pushed back a couple of years — possibly to 2027.
NIO is now trading at just 1.01 times sales and 0.99 times forward sales, which highlights the lack of confidence investors have in the business. By comparison Tesla, which admittedly is too expensive in my opinion, trades at 5.75 times sales and 5.16 times forward sales. The big difference, however, is that Tesla isn’t losing money.
Debt is also impacting investor sentiment. Net debt has grown to $4.5bn over the past five years, and while the company has around $8.1bn in cash, it’s still a concerning position for a company that continues to lose money.
Underperforming
NIO certainly had great promise. I’ve held stock in the firm on a couple of occasions. However, it has continually under-delivered. NIO delivered 11,866 vehicles in March, up 14% over last year, but the preceding months lagged. That was up from 8,132 in February and 10,055 in January.
While increasing sales by 14% year on year might sound positive, it’s a much slower pace of growth than some of its Chinese EV peers. Li Auto delivered 80,400 vehicles in the first quarter of 2024, rising 52.9% year on year.
Of course, we could see a turnaround. That’s the unknown thing about investing. Sometimes companies surprise us positively. It hopes to strengthen its offering and competitive edge with upgraded 2024 models rolling out, including the ES7, ET7, and ET5.
USP losing value
Two years ago when I first started covering NIO, I thought it’s battery-swapping technology could be game-changing. Drivers can simply pull up at a NIO EV station and swap an empty battery for a full one in a matter of minutes. But back then, average EV charging times were considerably longer than they are today.
Considering the advancements in charging technology, I’m no longer convinced that battery swapping is the way forward. For example, Li Auto’s first fully electric vehicle can be charged in around 12 minutes. While that’s still slower than a NIO battery swap, just consider the size of the infrastructure project needed to role out these battery swapping facilities worldwide, let alone just in China.
So, while I’d love to see NIO recover, I’m no longer convinced. I’m keeping my eyes peeled for more updates.
