Can Nio Stock Beat the Market Over the Next Decade?​

Nio (NYSE: NIO) goes through boom and bust cycles more often than most stocks. It was all the rage during the pandemic, with the stock gaining more than 2,000% in a single year. However, the same electric vehicle (EV) stock has lost more than 90% of its value from its all-time high.

The stock has had some meaningful rallies each year since reaching its 2021 peak, but the long-term decline is obvious. Nio has an uphill battle against the stock market, and there are better picks to consider. These are some of the headwinds Nio faces.

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EV competition is intense

Nio is far from the only EV brand in China, with BYD Company leading the way. Tesla also has a strong presence in China, with other Chinese EV brands like Xiaomi and Li Auto also competing for market share. Nio isn't even a top-10 EV seller in China, despite how heavily touted the stock was during the pandemic.

Intense competition makes it more difficult to stand out and charge premiums. This landscape has prompted some companies to cut prices on their EVs, which reduces profit margins. This isn't the type of environment Nio can operate in forever. The EV maker reported a $488.9 million net loss in Q3 2025 on $3.1 billion in revenue. Profitability has always been an issue for Nio, while competitors like BYD and Li Auto have been profitable for a while.

Nio can't compete as well in an economy with lower prices since it isn't profitable with its current prices. More competition in the EV industry will force Nio's hand, leading to lower margins.

Vehicle deliveries are growing faster than revenue

To Nio's credit, the company is growing. Revenue and vehicle deliveries were both up year over year in Q3, and the company told investors that vehicle deliveries almost doubled year over year in January.

While it sounds good, there is one glaring problem that puts more doubt on the company's long-term viability. Vehicle sales increased by 40.8% year over year in Q3, but revenue was only up by 16.7% year over year. The issue with these numbers is that Nio is making less money per vehicle at a time when profitability is a key issue.

Nio impressively improved its profit margin during this time by trimming its net operating losses. However, the inability to generate a single profitable quarter over its 11-year history is a massive red flag.

EV demand is cooling

China has been rolling back EV subsidies, making these vehicles less attractive. People can't enjoy the same incentives that were available to EV buyers last year, and that has artificially raised prices.

Nio is still reporting strong sales growth, but the changing political climate has been catching up to EV makers. Nomura analysts told investors they expect Chinese EV demand to cool further in 2026. Nio's sequential and year-over-year sales growth will be put under a microscope to gauge if it's been affected by broader policy changes.

Tariff concerns can also thwart international expansion. While the U.S. has imposed tariffs on EVs before President Donald Trump's second term, Europe also has high tariffs on Chinese EVs. Those tariffs have hurt profits, but they haven't been enough to keep automakers out of European markets. That can change at any moment if Europe ever decides to raise its tariffs.

Mexico is the best international opportunity since the country still offers an 86% tax deduction on EV purchases. However, this policy is currently set to expire in 2030. If that policy isn't renewed, it will present another headwind to Nio's growth story. An index fund looks like the better long-term bet at current levels.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company and Xiaomi. The Motley Fool has a disclosure policy.