Is Nio Stock a buy Now?

If you've been keeping an eye on Nio (NYSE: NIO) stock, you know it's been on quite the roller-coaster ride since its initial public offering (IPO). After soaring to an impressive high of $67 per share in early 2021, the stock has investors buzzing with excitement. But since then, the narrative has shifted.

Amid the volatility, Nio is making strides in China's fiercely competitive electric vehicle (EV) market, which is poised for explosive growth, projected to grow by 16% annually by 2030.

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With the stock currently down 94% from its peak, you may be wondering: Is now the time to invest in Nio? Let's dive into the company, its growth, and competitive landscape to find out.

Nio's deliveries grew 53% in April

In April, Nio achieved impressive delivery growth, rolling out 23,900 vehicles -- a 53% increase compared to the previous year. This growth spanned its diverse brand portfolio, which includes Nio's premium smart EVs (19,269 units) and Onvo, its family-oriented line (4,400 units).

Nio also launched deliveries for its new brand, Firefly, a compact, smart, high-end EV designed for drivers seeking an affordable solution. With a starting price of $16,410, Firefly aims to compete with established European city cars like the Renault 5. It plans to launch Firefly in Europe this summer.

Looking ahead, Citi forecasts that Nio could deliver 63,000 units in the second quarter, representing 50% growth quarter over quarter. This projection highlights Nio's expansion strategy and shows it continues to capitalize on the demand for EVs.

Image source: Nio.

Nio's unique selling proposition in the competitive EV industry

Another unique aspect of Nio's business is its battery-swap service, which addresses one of the biggest concerns among EV users: charging time. While conventional charging can take anywhere from 30 minutes to an hour, Nio's battery-swap technology allows drivers to replace their depleted battery with a fully charged one in just 3 to 5 minutes.

Nio's battery-as-a-service (BaaS) model allows customers to purchase vehicles without a battery, significantly lowering the initial cost. Customers subscribe to the battery-swap program, which can provide recurring revenue for Nio while also addressing customer concerns about battery depletion.

Nio has roughly 3,100 battery-swap stations in China and plans global expansion. However, recent developments indicate a slowdown in this growth, particularly in Europe, where investment cuts have led to downsizing in its Power team. Consequently, the rollout of new battery-swap stations has been reduced, with only three projects currently under development.

Investors should monitor these risks

Nio is growing rapidly and, along with other Chinese EV makers, has received considerable support from the government through subsidies and policies that favor domestic EV manufacturers.

That said, Nio is grappling with high operating costs and has yet to achieve profitability. It also faces a fierce pricing war in the Chinese market, driven by aggressive price cuts from BYD, Li Auto, and other competitors. Last year, Nio lost RMB 22.4 billion ($3.1 billion), up from its RMB 20.7 billion ($2.9 billion) loss the year before.

NIO Revenue (TTM) data by YCharts.

There are also regulatory risks associated with Chinese companies. In April, there emerged concerns about the possibility of Chinese companies delisting from U.S. exchanges, although the chances of this happening are low.

More relevant concerns revolve around trade and tariffs. Last year, Europe imposed significant tariffs on Chinese-made EVs due to unfair competitive practices that could undercut European automakers. The two sides are negotiating a deal that could replace tariffs with minimum prices, but the question of fair trade and tariffs remains something to keep an eye on.

Is Nio right for you?

Nio is experiencing solid growth, but as losses pile up, it is exploring cost-saving measures to improve profitability and streamline operations. It faces intense competition in China and encounters uncertainty due to tariffs from the U.S., Europe, and others, which could hinder its international expansion efforts.

While Nio is growing quickly, it may not be suitable for the faint of heart. Aggressive investors may want to add it to their portfolios based on its top-line growth, but I would like to see improvements in cost management and profit margins before scooping up shares of the EV stock.

Should you invest $1,000 in Nio right now?

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Citigroup is an advertising partner of Motley Fool Money. Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.