NIO: The Downtrend Is Not Over Yet

seekingalpha01-18

NIO's outstanding Q4 2023 performance, with over 50K EV deliveries, secured a significant share in China's competitive EV segment.The company's robust revenue increase, with an 11% vehicle margin, ...

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dun吨dun
01-18
dun吨dun
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Following the pullback and even though NIO faces additional downside risk, the long-term bulls can utilize the volatility of this downtrend to accumulate more shares and apply a dollar-cost averaging approach between $6.10 and $4.35, as this zone serves as long-term support for the stock.Data by YChartsNIO's Dominance in EV Deliveries and ExpansionNIO's vehicle deliveries are a fundamental strength supporting the company's growth. In Q3 2023, NIO delivered 55,432 premium smart electric vehicles, reflecting a remarkable 75.4% year-over-year increase. One key factor contributing to this robust sales growth is the complete product lineup on the NT2 platform. NIO's strategic move to enhance self-capacity and capability, coupled with the continuous expansion of its self-service and power networks, has fueled its ability to deliver a diverse range of electric vehicles.The retail statistics from Cathart indicated that NIO secured the top spot in China's electric vehicle (EV) segment during Q3, with a market share exceeding 45% and an average construction price of over RMB300K. In September, the launch of the All-New EC6, a midsize coupe SUV upgraded to the second generation, further enriched NIO's product portfolio. Hence, the company is anticipating that the competitiveness of second-generation products will be further unleashed in 2024.Additionally, a 32.2% year-over-year increase in total deliveries for October and November, totaling 32,033 vehicles, respectively, highlights NIO's resilience. Moreover, the projection for Q4 2023 anticipates total deliveries between 47,000 and 49,000 vehicles, suggesting a growth trajectory. Specifically, there was a delivery of 18,012 vehicles in December 2023, representing a 13.9% increase year-over-year. The total deliveries for the three months ended December 2023 reached 50,045 vehicles (surpassing the outlook) with a substantial 25.0% year-over-year growth, demonstrating NIO's capacity to scale its operations effectively.Finally, a new vehicle, the ET9, may serve as a decisive technological benchmark for EVs (executive flagships). However, the deliveries of the ET9 are still far away in Q1 2025. Lastly, consistency in maintaining stable prices amid a deepening price war and intense competition for smart EVs is vital. This stability in pricing, combined with the impressive growth in vehicle deliveries, indicates NIO's capability to balance market dynamics while sustaining a solid performance.NIO Delivered 18,012 Vehicles in December 2023 (www.nio.com/news )Solid Financial Performance and Vehicle Margin ImprovementNIO's financial performance reflects another fundamental strength supporting the company's value growth potential. In Q3 2023, the total revenues for this period reached RMB 19.1 billion, marking a substantial 46.6% year-over-year increase and a remarkable 117.4% quarter-over-quarter increase. These robust financial figures underscore NIO's ability to generate substantial revenue and navigate market dynamics effectively.Vehicle sales, a crucial component of total revenues, amounted to RMB17.4 billion in Q3, indicating a substantial 45.9% year-over-year increase and an impressive 142.3% quarter-over-quarter surge. This surge in vehicle sales is attributed to higher vehicle deliveries, suggesting a direct correlation between NIO's production and delivery capabilities and revenue generation. The overall gross margin for the third quarter stood at 8%, revealing NIO's capacity to maintain a healthy margin in a competitive market.The vehicle margin, a key metric reflecting the profitability of NIO's core business, reached 11% in Q3. This improvement is noteworthy, especially compared to Q3 2022 (16.4%) and Q2 2023 (6.2%). The increase in vehicle margin is attributed to increased sales mix for higher-priced models, decreased parts costs, and improved economies of scale facilitated by higher deliveries. Therefore, NIO's strategic refinement of sales policies further contributed to this positive trend.ir.nio.comNIO's Product Mix Shift and Price Stability Impact Vehicle MarginsNIO's product mix shift is one significant factor contributing to the decline in long-term vehicle margin. The introduction of the All-New EC6, a mid-sized coupe SUV upgraded to the second generation, altered the overall product mix. New models often come with different production costs, and their impact on the average selling price can influence the overall margin.Additionally, NIO's decision to maintain price stability in the face of a price war and intensified competition is another factor affecting the vehicle margin. While stability in pricing is a strategic move for brand image and customer loyalty, it may have led to reduced profit margins, especially when competitors aggressively slashed prices to gain market share.The declining vehicle margin raises concerns about NIO's overall profitability in the presence of impressive year-over-year growth in vehicle deliveries and market share. Lastly, a sustained decline in profitability can continue to impact market valuation and growth.Data by YChartsEnergizing the Future: NIO's Innovation Drive and Infrastructure ExpansionNIO's emphasis on research and development (R&D) is evident in its initiatives at events such as NIO IN and NIO's Innovation and Technology Day held on September 21. During this event, NIO introduced its 12 full-stack technology capabilities, encompassing holistic business scenarios for smart EVs across multiple brands and platforms. The unveiling of China's first vehicle operating system, SkyOS, and the in-house developed LiDAR SoC named Yang Jian underscore NIO's systematic research capabilities, positioning it as an industry leader.Additionally, the release of Power Swap Pilot for Highway Beta on November 15, integrating Natural Language Processing (NLP) and Power Swap technologies, exemplifies NIO's focus on providing users with a hassle-free, automated, intelligent highway driving and battery-swapping experience. The presence of 29 Power Swap stations on highways supporting this feature further emphasizes the practical implementation of these technological advancements.Furthermore, NIO's rollout of NLP+ for urban traffic further showcases its dedication to providing users with a seamless driving experience in highway and city settings. The gradual release of NLP+ in major cities, surpassing targets announced at NIO IN, suggests NIO's focus on user-centric technological deployment.At ground level, the extensive reach of NIO's sales and service network, with 468 new houses, new space, and pop-up stores in 152 cities, along with 314 service centers and 62 delivery centers in 217 cities, underscores the company's commitment to providing comprehensive support to its growing customer base. The focus on expanding the charging and swapping network with over 2,226 power swap stations, over 9,400 power chargers, and over 11K destination chargers worldwide further solidifies NIO's facilitation of a convenient and efficient charging experience for its users.However, challenges lie in expanding the adoption of premium EVs, compelling users accustomed to internal combustion engine (ICE) vehicles. NIO's strategy to focus on infrastructure coverage, exemplified by installing over 2,000 power swap stations, addresses one of the barriers to wider EV adoption. This infrastructure investment may propel NIO's sales volume in regions like the Yangtze River Delta.Moreover, the introduction of the \"Charge Up to Free\" program, offering users 1,000 kWh of complimentary charging credits for every new vehicle delivered, further incentivizes using NIO's charging infrastructure. Hence, this strategic move may attract and retain a loyal customer base. Finally, the collaboration with Changan Automobile and Geely Holdings (OTCPK:GELYY) on battery swapping aims to contribute to developing and adopting battery swap technology.carnewschina.comTechnical Take: The Downtrend Is Not Yet OverFollowing the previous coverage, the average number of outstanding shares was boosted in Q3 2023 with a drop in net income. This massive divergence led to a fundamental deterioration and caused the stock price to fall below the critical support range ($7.25-$8.55). For risk-averse investors, a stop-loss has been hit.However, as expected, the rapid delivery growth and improved vehicle margin (sequential) are the bullish factors that may support the stock. With an improved bottom line, the stock may stabilize, find support, and enter an accumulation phase.tradingview.comNIO's stock price is currently in a downtrend, as observed in the 13-week (green line) and 52-week (red line) exponential moving averages. Projecting the price levels through Fibonacci retracement and the current momentum, the price may reach $6.10 in the coming weeks. However, for the bulls, it offers the opportunity to accumulate NIO's stock, using the dollar average between $6.10 and $4.35, as this zone serves as long-term support for the stock.On the other hand, the relative strength index (RSI) is currently at 40, which indicates the stock is not yet oversold, indicating more downside potential. The long-term support zone, as mentioned, is also near the lifetime lows of the stock. On the upside, the price and 13-week EMA need to close above the 52-week EMA to confirm the upper trajectory. Thus, this price ascension will break the trend of lower highs and lower lows.tradingview.comTakeawayNIO's stock is navigating a challenging downtrend, presenting risks and opportunities. Investors bullish on NIO's long-term prospects might consider accumulating shares in the suggested range, as historical data suggests strong support in this zone. In this evolving market, prudent and strategic investing in NIO can capitalize on its long-term growth potential while managing short-term volatility.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":264389876551928,"gmtCreate":1705570657522,"gmtModify":1705570658743,"author":{"id":"3566775503291979","authorId":"3566775503291979","name":"dun吨dun","avatar":"https://static.tigerbbs.com/15b4aeaf7219c2e2b9c1f980d422d3c1","vip":1,"crmLevel":8,"crmLevelSwitch":1,"idStr":"3566775503291979","authorIdStr":"3566775503291979"},"htmlText":"**","listText":"**","text":"**","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/264389876551928","repostId":2404364961,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":0,"commentSize":1,"repostSize":2,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.29.4","shortVersion":"4.29.4","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2404364961"}