Chinese luxury electric vehicle maker Nio stock (NYSE:NIO) posted Q1 2023 results that were roughly in line with estimates and indicated that it would cut prices on its vehicles as it looks to stoke demand. Total revenues for the quarter stood at about RMB 10.68 billion (about $1.55 billion), a year-over-year increase of 7.7%. Vehicles related sales remained essentially flat, as uptake for Nio’s vehicle has been sluggish amid mounting competition from the likes of Tesla, which cut prices of its EVs in China back in April, and Li Auto, which has seen deliveries surge as its new models have been well received by customers. However, Nio benefited from higher sales of accessories, provision for repair and maintenance services, and auto financing services. Nio’s profitability is also under pressure, with gross margins coming in at just 1.5% compared to 14.6% in the first quarter of 2022. This was due to a less favorable product mix as well as the rising costs of batteries. The outlook for margins remains mixed. Nio is looking to rein in costs to an extent, indicating that it would end free battery-swapping services to new buyers. However, the company plans to cut prices on its vehicles by about $4,200, accounting for close to 10% of the starting price of some vehicles and this could have an adverse impact on margins.
Nio currently trades at just about $8.50 per share, over 85% off its all-time highs. Does this make the stock worth a look? We think so. Nio has also been refreshing its product lineup, with the new EC7 coupe SUV, as well as the all-new ES8 SUV, and this could also help demand to an extent. For Q2, the company has guided deliveries of between 23,000 and 25,000 vehicles, marking a decrease of as much as 8.2% from the year-ago quarter. However, it does imply that deliveries will pick up to 10,000 to 12,000 units in June, from the 7,000 average monthly run rate seen over the first five months of this year. The company also reiterated its target of selling a total of 250,000 EVs this year, although we believe that this is a lofty target considering the company’s lackluster year-to-date performance. But, we think Nio’s valuation remains relatively compelling. The stock presently trades at just about 1.2x estimated 2023 revenues, which is well below other EV players such as Tesla and Li Auto. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Nio stock compares with its rivals Li Auto and Xpeng.
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| Returns | Jun 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| NIO Return | 12% | -14% | 32% |
| S&P 500 Return | 3% | 12% | 92% |
| Trefis Multi-Strategy Portfolio | 5% | 15% | 263% |
[1] Month-to-date and year-to-date as of 6/13/2023
[2] Cumulative total returns since the end of 2016
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