For electric vehicle (EV) manufacturers like NIO (NYSE:NIO), vehicle delivery growth is a major indicator of the company’s health and success. I am bullish on NIO stock because it’s been beaten down for a long time, yet NIO’s results show that the automaker is selling plenty of vehicles.
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NIO is a China-based EV maker, and as you are probably aware of by now, there are trade frictions going on between China and the U.S. In fact, the White House announced tariff increases on $18 billion worth of China-made products imported into the U.S., including EVs.
Reportedly, the U.S. government plans to quadruple the tariff on Chinese-made EVs to 100%, and investors shouldn’t disregard the impact of this tariff increase on NIO. That said, a hard look at NIO’s data should convince the skeptics that this automaker is beating the odds and moving vehicle units at a rapid pace, albeit not in the U.S.
Why Did NIO Stock Jump 7% on Monday?
Monday, July 1, happened to be the first day of 2024’s third quarter and second half. That day might mark a major turnaround for NIO stock, as it jumped 7% on Monday and continued its gains yesterday and today. There wasn’t an earnings report for NIO on that day, but there was an important data release. The automaker released its EV-delivery results for June and for this year’s second quarter.
Let’s backtrack a bit, though. Earlier this year, some investors were concerned about slowing EV sales and the impact on NIO from Tesla’s (NASDAQ:TSLA) vehicle price cuts.
Those concerns are understandable. On top of those worries, investors might also now be concerned about U.S.-China trade tensions.
At the same time, investors should let the hard facts inform their assessments of NIO. In April, NIO delivered 15,620 vehicles, up 134.6% year-over-year. That’s undeniable growth, but was it just a lucky fluke?
Not at all, as NIO delivered 20,544 vehicles in May, up a whopping 233.8% year-over-year. Even the hardcore skeptics can’t pretend that this isn’t impressive.
Fast-forward to Monday, July 1, and we saw that NIO reported 21,209 vehicle deliveries for June, up 98.1% year-over-year. Notably, NIO delivered more EVs in June than in May and more EVs in May than in April.
There’s Always Something to Complain About
Now, I can imagine a critic complaining that NIO’s year-over-year vehicle-delivery growth rate fell from 233.8% in May to 98.1% in June. However, investors need to be reasonable, as NIO still almost doubled its EV-delivery growth rate in June, and that’s pretty amazing.
The market seems to agree with me on this since the stock has trended higher this week. There’s still plenty of overhead room, however, as NIO’s stock price is still down by about 50% on a year-to-date basis.
Besides, I would encourage investors to look at the big picture instead of nitpicking the small details. During the three months that ended in June, NIO managed to grow its vehicle deliveries by 143.9% year-over-year to 57,373 units. Who could possibly complain about that?
At this point, you might want to know whether NIO’s EV-delivery growth will translate to increased revenue and income. Unfortunately, you’ll have to wait a while – probably until September – to get a full report from NIO on its second-quarter Fiscal Year 2024 financial results. For the time being, however, NIO’s loyal investors can celebrate the operational data that’s already available.
Why September Could be Huge for NIO
Sure, September will be a crucial month for NIO if the company releases its quarterly results then. However, there’s another event that could make September a month to remember for NIO and its shareholders.
Some of you might have forgotten about this by now, so here’s a reminder: NIO expects to start delivering its first Onvo (its lower-priced brand) EV model, the L60 SUV, in September. This will reportedly cost $4,000 less than Tesla’s similar Model Y vehicle.
Wouldn’t it be nice if there were no trade frictions and Americans could buy an affordable NIO Onvo vehicle in September? That’s not likely to happen, but NIO can still sell plenty of them in China.
In China, NIO might actually win the EV price war that Tesla started. If Tesla’s Model Y starts at 249,900 yuan ($34,617) and NIO’s Onvo L60 starts at 219,900 yuan ($30,439) – and if China’s vehicle shoppers continue to demonstrate loyalty toward China-made vehicle brands – then the Onvo L60 could blow the Model Y out of the water, at least in China if not in the U.S.
Is NIO Stock a Buy, According to Analysts?
On TipRanks, NIO comes in as a Moderate Buy based on five Buys, six Holds, and one Sell rating assigned by analysts in the past three months. The average NIO stock price target is $6.19, implying 27.1% upside potential.
Conclusion: Should You Consider NIO Stock?
Analysts are only moderately bullish on NIO at the moment, but this could change in the coming weeks and months. NIO is set to report its quarterly financial results and start delivering its new, reasonably-priced Onvo vehicles in September, so stay tuned for major updates on those upcoming events.
Until then, there’s plenty of room for NIO shares to gain value after a probably overdone multi-month drawdown. Therefore, despite U.S.-China trade tensions, I am bullish on NIO stock and would consider taking a moderately-sized share position.
