Why is Nio’s stock falling despite record deliveries?


What happened

Actions of the electric vehicle manufacturer Nio (NYSE: NIO) rose 3% on Friday morning before losing ground as the day progressed, trading around 0.5% at 1:40 pm today.

The weakness in the EV share price is surprising given that Nio hit a milestone and announced strong delivery numbers for September today, even beating its own forecast.

So what

Nio delivered a record 10,628 vehicles in total in September, up 125.7% year-on-year. Here’s a breakdown of the number of cars sold by model:

  • The ES8 SUV: 1,978 units.
  • The ES6 SUV: 5,260 units.
  • The EC6 coupe: 3,390 units.

Two points deserve to be noted here.

Image source: Getty Images.

First, Nio deliveries in September exceeded the monthly sales of its competitors. XPeng and Li Auto.

Second, a few weeks ago, Nio warned of lower third-quarter deliveries due to semiconductor supply constraints and said it planned to deliver 22,500 to 23,500 vehicles during the quarter ended September 30. The company is clearly handling supply issues well: it delivered 24,439 vehicles in the third quarter. This is a 100% year-over-year jump and has helped bring Nio’s total worldwide shipments over its history to 142,036 units.

Now what

These figures are extremely encouraging, especially given the supply constraints that are hurting automakers around the world. Still, investors may be weighing Nio’s growth against that of its closest rival, XPeng. Although Nio delivered a slightly higher number of vehicles than Xpeng, the latter’s September sales tripled year-over-year. This appears to have put some pressure on Nio stocks.

Still, Nio’s outlook looks good and its ES8 deliveries in September were nearly 28% higher than in August. This is particularly encouraging and is a number you should watch closely given that the company officially entered the European market on September 30 with the ES8 in Norway. If this model is well received there, Nio’s prospects as one of the best up-and-coming stocks of electric vehicles are only expected to grow stronger.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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