Can NIO finally get back on a path to profitability?

Key Points

• NIO ranked #1 in the China battery electric vehicles (BEV) market with a 45% market share in Chinese BEVs priced above RMB300,000 ($42,000).
• NIO saw Q3 2023 deliveries rise 75.4% to a new quarterly record.
• NIO Q3 2023 revenues rose 46.6% YoY, but losses grew 25.2% YoY.

Chinese battery electric vehicle (BEV) manufacturer NIO Inc. NASDAQ: NIO is trading near 52-week lows, down 23.3% year-to-date (YTD). NIO is a member of the Auto/Tires/Trucks sector. It is vastly underperforming its peer Chinese EV makers Li Auto NASDAQ: LI and Xpeng Inc. NASDAQ: XPEV, up 66.2% and 48.8% YTD, respectively.

NIO shares got a temporary boost on its Q3 2023 earnings report, which highlighted a 75.4% YoY growth in deliveries. It was also hyped up from a statement from its CEO that NIO ranked #1 in the Chinese BEV segment of vehicles priced over RMB300,000 ($42,000), commanding a 45% market share. NIO narrowed its losses in Q3, giving hope to investors who constantly ponder the question of when NIO can get on the path to profitability.

EC6 Coup EV SUV  features

NIO's cars are known for their sleek and stylish exterior and interiors. The Company has launched and started deliveries on its new EC6, a smart electric coupe SUV. It comes with 9 driving modes, including 5 basic and 4 scenario-based modes ranging from Sport+, which can go 0 to 100 km/h in 4.4 seconds, to snow, sand, wet and trailer mode for towing. It has a 1.77-meter expansive panoramic glass roof with intelligent adaptive lighting that adjusts brightness and translucency. Its seats are back. The Lounge Seat has three-zone heating with an encompassing backrest with up to 18-way adjustment capability and the ability to recline into a state of weightlessness.

The electric drive platform features a front 150 kW induction motor and a rear 210 kW permanent magnet motor equipped with a silicon carbide power module that redefines energy optimization. Its second-generation digital cockpit delivers AI computing power with faster graphic and multimedia processing.

It comes with NOMI, an AI-powered digital voice assistant. It also features NIO-assisted intelligent driving, including navigating on Pilot Plus, which assists in merging into the optimal lane, overtaking slow cars, driving on and off the ramp, and adjusting to the speed limits on highways and expressways.

The interior has waterfall ambient lighting with 256 color options and 10 color themes with calming and rhythmic effects to enhance the atmosphere. The body has steel-aluminum construction with high-performance 4-piston calipers, continuous damping control to better absorb road shocks and intelligent smooth stop, which automatically adjusts the braking force, resulting in a more pleasant driving experience.

Improving results since zero-COVID 2022

NIO released its Q3 2023 earnings report on Dec. 5, 2023. The Company reported a net loss of $624.6 million, which was 25.2% higher than the year-ago period. It's worth reminding that China had implemented a zero-COVID policy up until the end of 2022, making comparables seem better than they may appear. Revenues jumped 46.6% YoY to $2.613 billion. Non-GAAP losses were $541.8 million, up 13% from the year-ago period. NIO closed the quarter with $6.2 billion in cash and cash equivalents.

Raising expectations.

NIO expects vehicle deliveries between 47,000 and 49,000 EVs, indicating a 17.3% to 22.2% YoY increase. Total revenues for Q4 2023 are expected to be between $2.204 billion and $2.289 billion, representing a 0.1% to 4% YoY increase.

CEO Insights

NIO Co-Founder and CEO William Li commented, “According to the retail sales data from China Automotive Technology and Research Center, NIO ranked first in the battery electric vehicle market segment priced over RMB300,000 in China, with a market share of 45% in the third quarter of 2023.”

He added, “We have recently completed a thorough review of the Company’s two-year operating plans to determine our objectives, priorities, and action plans. Meanwhile, we have identified opportunities to optimize our organization, reduce costs and enhance efficiency.

Our focus remains on advancing core technologies, developing key products, and expanding sales and service capabilities. We are confident in NIO's long-term competitiveness in the smart electric vehicle market." This spurred speculation about a potential battery-swapping company spin-off.

NIO analyst ratings and price targets are at MarketBeat. NIO peers and competitor stocks can be found with the MarketBeat stock screener.

 Daily descending triangle   

The weekly candlestick chart on NIO illustrates a descending triangle pattern. The descending trendline formed after peaking at $9.19 on Oct. 11, 2023, as bounces were met to lower highs. The flat-bottom trendline formed at $7.00. The Q3 2023 earnings release initially appeared to trigger a breakout through the daily market structure low (MSL) trigger above $7.52 and stage a breakout from the descending triangle as shares spiked up to $8.28.

However, the sellers jumped back on board, sending NIO back under the descending trendline, which overlaps the daily MSL trigger as it gets closer to the apex point. The daily relative strength index (RSI) is falling back under the 50-band. Pullback support levels are at $7.18, $7.00, $6.50 and $5.94.