- Nio stock is falling behind similar EV stocks in 2023.
- Deliveries fell YoY both in June and in Q2.
- Nio shared in the fallout of weak Tesla earnings late Wednesday.
Nio (NIO) stock dropped over 2.0% after the opening bell on Thursday after feeling the ripple effects of Tesla’s (TSLA) second quarter earnings release in which it was revealed the company had missed its gross margin consensus estimates, late Wednesday.
Nio is still lagging behind the electric vehicle (EV) pack as the stock market nears the end of July. Among a handful of young EV stocks that grew in popularity in 2021 and 2022, NIO stock is one of the worst performers in 2023.
A major reason for this loss of investor interest is the drop off in demand for Nio’s models compared with its counterparts. Nio witnessed falling deliveries in both June and the second quarter, while most other competitors experienced YoY growth.
The NASDAQ also fell 0.45% at Thursday’s open.
Nio stock news: Tesla drops after margin compression
Nio’s stock price pulled back 1% in Thursday’s premarket following Tesla’s second-quarter results late Wednesday. The EV leader beat Wall Street predictions for revenue and earnings, but its stock price dropped more than 4% on slimmed-down gross margins.
Tesla spent much of the winter and spring quite publicly cutting prices across its range of models, and the sizable 10% gain in QoQ deliveries at these lower prices has predictably cut into margins.
Tesla reported an automotive gross margin of 18.2% in the second quarter, which failed to meet analyst consensus of 18.8%. Back in the early part of the year, Tesla Chief Financial Officer Zach Kirkhorn pledged that Tesla would not drop below a 20% gross margin, but here we are. As recently as the fourth quarter of 2022, the gross margin was 24%.
This relates to Nio, because the Chinese competitor bears a gross margin of just 1.5%. Low gross margins are somewhat normal when developing a company in a high capex industry like automobiles, but if the EV leader is pushing margins down, that might create more income statement pressure for upstarts like Nio.
To make matters worse, Nio has not been seeing the growth required to boost its gross margin. The Shanghai-based automaker delivered just 10,707 vehicles in June compared to 12,961 in June 2022. That amounts to a 17.4% pullback YoY.
And it wasn’t only June. For the second quarter, Nio delivered 23,520 vehicles – a 6.1% decline from Q2 2022.
That poor showing cannot be blamed on the lagging Chinese economy either. Overall automobile sales rose 4.9% YoY in June, while New Energy Vehicles sales (or NEVs, which includes Nio) rose 35%. Nio has clearly become a laggard among its competitors.
Nio stock forecast: No love for NIO
As the year-to-date chart below shows, Nio stock is the second-worst performing EV stock when compared to Li Auto (LI), XPeng (XPEV), Rivian (RIVN), Lucid (LCID) and Polestar (PSNY). Nio is up 10.5% YTD, while Li Auto stock leads the pack with a 78.4% gain. XPeng and Rivian stocks have advanced 47.2% and 43.2%, respectively. Even Lucid has gained 17.5% YTD despite its decision to raise new equity.
Of these six stocks, Nio only leads Polestar (-13.9% YTD) at this point in the year despite the fact that both Rivian and XPeng underperformed it earlier in the year.
NIO stock YTD compared to LI, XPEV, RIVN, LCID, PSNY
The daily chart does give investors some reason for hope though. First, Nio stock has overcome the range high from late March. Following an abrupt pullback last week, it looks rather likely that bulls will attempt to retest the range high from January at $13.22. NIO stock experienced a double-top at that price level last time around.
Additionally, the Relative Strength Index (RSI) is not yet overbought as it is with a number of other competitors that have experienced swifter price rallies this summer. The 9-day Simple Moving Average (SMA) has also been leading its 21-day SMA counterpart by a wide margin. It might just take longer for Nio stock bulls to reach the $13 to $14 resistance zone as shares get accumulated at a more gingerly pace.
Medium-term support remains at $9.50.
NIO daily chart
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