NIO stock analysis

Invesdea 💰 Investing Ideas
3 min readJun 22, 2022

td;dr: 🐻 Don’t buy

Products Overview

  • Assemble and sell electric vehicles
  • SUV: ES8, ES6, ES7 (unveiled in Jun 2022)
  • SUV Coupe: EC6
  • Sedan: ET7, ET5 (planned to deliver in Sep 2022)
Source: NIO.com; Comment: What are the difference between ES6 and ES7?

Latest Earnings Highlights

  • Top-line: total revenues in the first quarter were RMB9.9 billion, representing increase of 24.2% year-over-year
  • Bottom-line: net loss in the first quarter was RMB1.78 billion, representing an increase of 295.3% year-over-year

Future Outlook

  • Delivered 5,074 and 7,024 vehicles in April and May respectively.
  • Starting from June, the vehicle production have basically returned to normal.
  • Expect the total delivery in the second quarter of 2022 to be between 23,000 to 25,000 units.

Detailed Revenue

  • Vehicle sales were RMB 9,244.0 million in the first quarter of 2022, representing an increase of 24.8% from the first quarter of 2021 and an increase of 0.3% from the fourth quarter of 2021.
  • Delivered 25,768 vehicles in the first quarter of 2022, a growth of 37.6% year-over-year.

Financial Health

  • Vehicle margin was 18.1%, compared with 21.2% in the first quarter of 2021.
  • Gross margin in the first quarter was 14.6% compared with 19.5% in the first quarter of 2021.
  • The decrease of gross margin year-over-year was mainly attributed to the decrease of vehicle margin and reduction in other sales margins resulting from expanded investment in the service network.
  • Loss from operations was RMB2,188.7 million (US$345.3 million) in the first quarter of 2022, representing an increase of 639.7% from the first quarter of 2021
  • R&D expenses in the first quarter were RMB1.76 billion, representing an increase of 156% year-over-year.
  • Net loss was RMB1,782.7 million (US$281.2 million) in the first quarter of 2022, representing an increase of 295.3% from the first quarter of 2021
  • Cash and cash equivalents, restricted cash and short-term investment were RMB53.3 billion (US$8.4 billion) as of March 31, 2022.
  • Listed on the NYSE, Singapore Exchange, and Hong Kong stock exchange.

Catalysts

  • NIO is launching products and services in Europe (i.e. Germany, Netherlands, Sweden and Denmark). Evenutally, it would start to sell car in the US market.
  • New NOP plus software, which is based on the high-definition map developed together with Tencent.

Risks

  • 24.8% revenue growth rate is too slow (Tesla has 81% growth rate).
  • No sign of being profitable any time soon. Gross margin is decreasing. Operating loss increased 639% percent.
  • Margin has too many uncertainties as it is determined by volatile raw material price(i.e. battery)
  • Chip shortage couldcause production constraints.

Conclusion

Bearish for both short term and long term

  • NIO’s revenue growth is slowing down revenue and profitability is also deteriating.
  • NIO is greatly affected by the chip and battery shortage
  • NIO is also experiencing macro headwinds in China caused by COVID lockdowns.

Better Choices

  • Tesla (TSLA), which is not only profitable but also has much higher revenue growth rate (81%).

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