Picture supply: Sam Robson, The Motley Idiot UK
This 12 months has seen electrical automobile producer NIO (NYSE: NIO) each delight and disappoint shareholders. The delight has come from some durations of NIO inventory surging: by early October, it was up over 80% for the reason that begin of the 12 months.
Since then, although, the share value motion has been extra disappointing, falling 35%.
Nonetheless, that leaves NIO inventory 18% up up to now this 12 months. Not solely has the share value improved general this 12 months – so have gross sales.
May now be the time for me to tuck some NIO inventory into my portfolio, hoping for long-term acquire?
A altering market
The gross sales figures have been spectacular in a number of methods.
In the newest quarter, NIO’s gross sales volumes grew 41% 12 months on 12 months. I regard that as a formidable quantity in itself.
However what can also be spectacular to me is that the quarterly gross sales quantity was over 87,000 automobiles. Positive, that falls properly wanting what rivals like Tesla and BYD obtain. However it’s nonetheless a sizeable quantity.
This means that NIO is not only some dinky start-up with formidable plans. It’s a giant firm working at scale and already promoting 1000’s of vehicles every week.
The electrical automobile market has been evolving, with competitors getting extra pronounced. Tesla’s efficiency this 12 months has been combined. In contrast, NIO is shifting ahead at velocity, albeit from a decrease base.
What’s holding me again from investing
There have been different items of promising information this 12 months as properly.
For instance, that leap in NIO inventory over the summer time adopted information that it deliberate to broaden its product vary, opening up new market segments. That might be good for gross sales volumes and revenues.
However it isn’t revenues which were holding me again from shopping for some NIO inventory for my portfolio. In spite of everything, they’re already substantial and rising handily.
What has been protecting me from investing up to now is income – or, fairly, the dearth of them. NIO has been constantly loss-making up to now.
The corporate’s web loss in its most up-to-date quarter was markedly smaller than in the identical quarter final 12 months – however it nonetheless got here in at round £365m.
Retaining an in depth eye on issues
May that change?
Definitely. In spite of everything, making vehicles is capital-intensive however will also be profitable.
Organising operations can imply spending lots of money. However hopefully as soon as volumes get sufficiently big, economies of scale may help flip a loss right into a revenue.
That’s what occurred with Tesla, for instance.
It might but occur with NIO too. I feel the corporate has quite a bit going for it, as its rising gross sales volumes reveal. The model is gaining traction with some automobile patrons, it has pricing energy because of its premium positioning and better volumes might assist wring out manufacturing efficiencies.
Nonetheless, the continuing losses concern me as a possible investor. NIO has not but confirmed its enterprise mannequin could be worthwhile.
So, though I’ll maintain an in depth eye on it, I can’t be shopping for any NIO inventory simply but.
