Image Source: Getty Images
CHILD (NYSE:NIO) stocks have attracted a lot of investor interest in recent years. The Chinese electric vehicle (EV) maker has been touted as a rival to teslaAnd the company is not without ambition, with overseas expansion underway in several European markets.
However, NIO’s share price is down 52% over the past year. So could this be a rare opportunity for me to invest in a cheap stock with an eye to making big profits, or is it a value trap?
Here is my opinion.
growth potential
China is the world’s largest electric vehicle market. The unit sales growth trajectory in the country is impressive, according to figures from the China Passenger Car Association (CPCA).
| Year | Electric vehicle sales in China |
|---|---|
| 2021 | 2.99m |
| 2022 | 6.4m |
| 2023 | 8.4 m (forecast) |
NIO will benefit from strong brand recognition in a growing market, but it is a competitive field. The automaker has many national challenges, including XPeng, li carand endorsed by Warren Buffett BYD. There is also foreign competition from Tesla, which relies on China for around 40% of its sales.
Despite the crowded field, there are some positive signs for NIO in its quest for market share. Vehicle deliveries reached 122,486 in 2022. That’s a 34% increase over 2021, and fourth-quarter deliveries were particularly encouraging at 40,052.
In addition, the company advances in Europe. Following its entry into the Norwegian market in 2021, the company now sells its flagship ET7 sedan model in Germany, the Netherlands, Denmark and Sweden. Currently, the firm has access to 380,000 charging points throughout the continent.
risks
Despite a growing domestic market, there are concerns that electric vehicle sales in China could decline. Beijing is phasing out cash subsidies for electric vehicle purchases as the end of a 12-year policy incentive program. This could curb consumer demand and limit the growth prospects for NIO’s share price.
Thats not all. There are other reasons why I am concerned about the company. Vehicle margin plummeted to just 6.8% in the fourth quarter, down 14.1% from a year earlier. NIO cited inventory provisions, accelerated depreciation of production facilities and losses on purchase commitments for its generation of ES8, ES6 and EC6 models as reasons for the decline.
Perhaps my biggest concern is NIO’s net loss over the last fiscal year, which was $2.1bn, up nearly 260% from 2021. This can be partly attributed to global expansion and increased spending (for example, R&D expenses increased by 117.7%). but it seems that NIO is spending more than it can afford in my opinion.
Could NIO shares make me rich?
NIO’s share price may look more attractive than it did a year ago, but I’m still not tempted to invest. Mounting losses and shrinking margins are a vicious combination, and that’s even before you consider the competitive fight the company faces for market share.
He could be wrong, and the stock could rally if his expansion plans prove successful. But currently, I don’t think NIO shares are my ticket to golden wealth. There are many other investment opportunities in the stock market that I prefer at the moment, so I am looking elsewhere as it stands.
var config = {
apiKey: ‘1ed121d592e04642d57912bb369ef696621661a3’,
product: ‘PRO_MULTISITE’,
logConsent: false,
notifyOnce: false,
initialState: ‘NOTIFY’,
position: ‘LEFT’,
theme: ‘DARK’,
layout: ‘SLIDEOUT’,
toggleType: ‘slider’,
iabCMP: false,
closeStyle: ‘button’,
consentCookieExpiry: 90,
subDomains : true,
rejectButton: false,
settingsStyle : ‘button’,
encodeCookie : false,
accessibility: {
accessKey: ‘C’,
highlightFocus: false },
onLoad: function () { // hide Cookie Control recommended settings button.
var recommendedSettingsButton = document.getElementById(‘ccc-recommended-settings’);
if (recommendedSettingsButton) {
recommendedSettingsButton.classList.add(‘hide’);
} },
text: {
title: ‘Privacy Notice’,
intro: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
necessaryTitle: ”,
necessaryDescription: ”,
thirdPartyTitle: ‘Warning: Some cookies require your attention’,
thirdPartyDescription: ‘Consent for the following cookies could not be automatically revoked. Please follow the link(s) below to opt out manually.’,
on: ‘On’,
off: ‘Off’,
accept: ‘Accept’,
settings: ‘Cookie Preferences’,
acceptRecommended: ‘Accept Recommended Settings’,
notifyTitle: ‘Privacy Notice’,
notifyDescription: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
closeLabel: ‘Save Preferences and Close’,
accessibilityAlert: ‘This site uses cookies to store information. Press accesskey C to learn more about your options.’,
rejectSettings: ‘Reject All’,
reject: ‘Reject’,
},
branding: {
fontColor: ‘#fff’,
fontFamily: ‘Arial,sans-serif’,
fontSizeTitle: ‘1.2em’,
fontSizeHeaders: ‘1em’,
fontSize: ‘1em’,
backgroundColor: ‘#313147’,
toggleText: ‘#fff’,
toggleColor: ‘#2f2f5f’,
toggleBackground: ‘#111125’,
alertText: ‘#fff’,
alertBackground: ‘#111125’,
acceptText: ‘#ffffff’,
acceptBackground: ‘#111125′,
buttonIcon: null,
buttonIconWidth: ’64px’,
buttonIconHeight: ’64px’,
removeIcon: false,
removeAbout: false },
necessaryCookies: ( ‘wordpress_*’,’wordpress_logged_in_*’,’CookieControl’,’PHPSESSID’,’fivc’,’fivs’,’fivp’,’Ookie’,’Fool_subinfo’,’_gads’,’_gid’,’_gat’,’_ga’,’__utma’ ),
optionalCookies: (
{
name: ‘Sharing’,
label: ‘I would like content tailored to my personal preferences.’,
description: ‘We work with advertising partners to show you ads of products and services you may be interested in. You can choose whether or not to have ads delivered in a personalised way by setting this option. You can return to review this setting at any time by clicking the "C" logo in the bottom left corner of any page.’,
cookies: ( ‘_ga’, ‘_gid’, ‘_gat’, ‘__utma’, ‘_gads’ ),
onAccept: function () {
// Add Facebook Pixel
!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=();t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)(0);
s.parentNode.insertBefore(t,s)}(window,document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘901682110316659’);
fbq(‘track’, ‘PageView’);
fbq(‘consent’, ‘grant’);
// End Facebook Pixel
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, true ) ;
},
onRevoke: function () {
fbq(‘consent’, ‘revoke’);
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, false ) ;
},
recommendedState: ‘on’,
lawfulBasis: ‘consent’,
},
),
statement: {
description: ”,
name: ”,
url: ‘https://www.fool.co.uk/help/privacy-and-cookie-statement/’,
updated: ”
},
};
CookieControl.load(config);
