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child (NYSE: NIO) stocks have attracted a lot of investor interest in recent years. In 2022, Cathie Wood ARK Autonomous Technology and Robotics ETF held a position at the company for the first time, though the innovation-focused portfolio manager has since trimmed its stake to buy more shares in Nio’s US competitor, tesla.
It is true that the Chinese electric vehicle (EV) manufacturer held an incredible rally during the pandemic. However, its share price has since tumbled after peaking in January 2021.
So how much would you have if you had invested £1,000 in the company two years ago? We are going to explore.
two year return
Two years ago, Nio’s share price was $59.03. Using the exchange rate at the time, you could have bought 23 shares, leaving £9.35 as spare change.
Today, the share price has crashed to just $12.71. This is perhaps not surprising as the company had to deal with a challenging two years.
Strict COVID-19 lockdowns in China and the ensuing economic slowdown caused severe supply chain problems at the company’s production factories in the city of Hefei, hurting investment prospects for the shares.
Converted back to sterling, the total value of my investment would have been reduced to 236.22 sterling. That’s a disastrous return of -76%.
To make matters worse, Nio does not pay dividends, so I would have no passive income to add to my calculations.
The outlook for Nio shares today
After a massive haircut, how do Nio’s stocks look today?
Well, there are signs of a recovery in the making. The stock price has skyrocketed in 2023, with a 32% gain this year to date. The rally is supported by some promising financial results. During the fourth quarter of 2022, the company delivered more than 40,000 vehicles, an increase of 60% over the previous year.
In addition, the company has ambitious expansion plans. After kicking off its 2021 European launch in Norway, Nio is now offering its new models, ET7, EL7, and ET5, in Germany, Denmark, Sweden, and the Netherlands. It is eyeing a UK market entry later this year.
The company also aims to operate battery swapping stations around the world, enabling faster charging. Each station can accommodate up to 13 batteries and is the size of about six parking spaces. Nio wants to deploy 4,000 stations around the world by the end of 2025, including more than 1,000 outside of China.
However, the company faces the risks of local and foreign competition. Although Nio has established itself as the market leader in the premium EV sector in China, it has lagged behind its rival. li car in 2022. Li Auto delivered around 133,000 vehicles, surpassing Nio’s 122,000.
Also, Tesla is starting to make inroads into the lucrative Chinese market. CEO Elon Musk recently announced price cuts between 6% and 13.5% for all versions of its Model 3 and Model Y cars in China.
Would buy?
I think the outlook for Nio shares is improving as China reopens. This represents the removal of a major hurdle to further growth and hopefully bodes well for the company’s expansion plans.
However, I am concerned about the intensification of competition. The company is facing a tough fight for market share, both at home and abroad. Overall, I’m staying away from Nio stocks for now.
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