Nio stock crashes on weak outlook despite EV delivery surge: now what?

Nio stock price dropped below a crucial support level as demand for Chinese electric vehicle shares fell. It dropped to a multi-month low of $4.88 in New York, down by 40% from its highest point this year despite its strong delivery numbers.

Nio’s vehicle deliveries are soaring

Nio has emerged as one of the fastest-growing Chinese EV companies, helped by the traction of its newly launched vehicles. 

Data released last week showed that its deliveries jumped by 62.9% YoY in June, bringing its second-quarter figure at 107,658. Its quarterly figure was about 50% higher than where it was last year. 

Nio, its main brand, delivered 21,908 vehicles, while ONVO had 11,743. Firefly, the smaller brand delivered 6,946 vehicles during the month. This surge coincided with the launch of NIO WorldModel, which was installed to over 700k vehicles.

The ES9 model has now had over 120k deliveries, while ES9 sold 10,000 vehicles in 30 days, a sign that the brand is resonating with customers. In contrast, most Chinese EV companies like BYD, Li Auto, and XPeng continued to see weak growth. 

Li Auto delivered 98,330 vehicles, representing an 11.5% annual decline. XPeng sold 103,295 vehicles, roughly unchanged from a year ago, while BYD delivered 1.1 million vehicles.

Nio’s decline is largely due to the sector weakness

Therefore, the ongoing Nio stock plunge is likely happening as investors remain concerned about its growth trajectory. Also, there are concerns about its profitability growth. After reporting a net profit earlier this year, the recent earnings report showed that it made a $48 million loss in the first quarter.

Most of Nio’s metrics are doing well, especially in an industry that is facing substantial pressure. For example, despite the ongoing price war, the company’s gross profit margin rose to 18.8%, higher than many Chinese EV companies. This performance means that it may close the gap with Tesla, which has a margin of 21%.

Nio has other factors that could support its stock over the long term. For example, recent results showed that its research and development expenses declined by 40% year over year, mainly due to lower personnel costs. In addition, the company has largely completed the most capital-intensive phases of its R&D efforts, particularly in vehicle design and development.

Nio has also improved its balance sheet, with the amount of cash and equivalents rising to $7 billion. The management believes that it will not need to raise cash in the near term, which has been a source of concerns among investors.

Therefore, the recent weakness in Nio’s stock appears to be driven largely by fading investor enthusiasm for EV stocks rather than by deterioration in the company’s underlying business performance.

Nio stock price technical analysis

Nio stock chart | Source: TradingView

Technicals point to more weakness in the near term. It has formed a head-and-shoulders pattern, and most recently, it dropped below the neckline. Also, it dropped below the 100-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has continued falling.

Therefore, the stock will likely remain under pressure because of the general sector weakness. This retreat may see it fall to the psychological level of $4. Its strong fundamentals may help it bounce back later this year.