Nio Stock Forecast: NIO advances on Li Auto's coattails

Nio (NIO), a Chinese electric vehicle (EV) maker, benefited on Monday after the previous week's pullback. More successful competitor Li Auto (LI) trounced the earnings forecast for its most recent quarter on Monday, sending Nio stock up more than 4%.

In addition to Nio, Li Auto's success helped XPeng (XPEV) rise 6.8%, sector leader BYD (BYDDY) add 4.6.%, and Tesla (TSLA) rise 3.9%. Tesla CEO Elon Musk has spoken glowingly about competition from Chinese automakers in the EV realm. Li Auto stock itself rose 18.8%.

This upswing follows last week when Nio shed more than 12% as a result of receiving a major downgrade from Wall Street, as well as worries over reduced demand for lithium.

The stock market in the US was largely lower on Monday. The S&P 500 lost 0.38%, while the NASDAQ and Dow Jones receded more moderately. 

NIO follows on the coattails of China’s Li Auto

Li Auto reported diluted net earnings per American Depository Share (ADS) of $0.75 in the fourth quarter, greatly surpassing the figures from one year prior. Net income rose over 2,000% from a year ago. 

Revenue of $5.88 billion surged 136% from a year ago as the company continued to ramp up its operations. Total vehicle deliveries soared 185% from the final quarter of 2022 to 131,805 in the fourth quarter.

Besides the extreme increase in vehicle deliveries, Li Auto’s operating margin increased from -0.8% to 7.3% in just one year, allowing the company to translate the increase in revenue to the bottom line.

"According to China Automotive Technology & Research Center's insurance registration data in China's NEV market of RMB200,000 and higher, Li Auto's market share increased from 10.9% in Q1 2023 to 16.0% in Q4, making us a leading Chinese automotive brand by market share," said CEO and Chairman Xiang Li.

Nio investors will have to ask themselves if their investment in NIO stock is benefited by Li Auto’s success. Nio has experienced a trying time over the past year, while Li Auto has appeared to eat its electric lunch. This may be because Nio is a pure EV play, while Li Auto offers a suite of hybrid vehicles.

Nio stock sank last Friday after receiving a downgrade from JP Morgan. The investment bank lowered its price target on NIO stock to just $5 a share, and the once-prized company now trades at one-tenth of its value during the pandemic equity bubble. The company is no longer prized by Wall Street as China’s economy wades through an era of difficulty in the property market that has caused pessimism to spread throughout other domestic industries. 

EVs more generally experienced risk-off sentiment last week after an Albemarle (ALB) executive lowered his outlook on lithium demand in 2030 due to the current leveling off of demand seen by multiple electric automakers.

NIO FAQs

What is Nio?

Nio is a designer and manufacturer of electric vehicles based in Shanghai, China. Formerly known as NextEV, the company changed its name to Nio in 2017. Nio trades under the NIO symbol on the New York Stock Exchange (NYSE) and under the 9866 tag on the Hong Kong Stock Exchange. The company was incorporated in 2014 but went public on the NYSE in September 2020 with a $1.8 billion initial public offering. William (Bin) Li is the CEO of Nio, which he co-founded with President Lihong Qin, another Chinese business executive.

How is Nio different from other EV manufacturers?

The main difference with other major EV brands like Tesla is that Nio offers battery swapping technology in addition to normal charging options. These swap stations allow drivers to switch out their batteries for fully-charged, identical batteries in less than five minutes, which allows owners to drive long distances without needing to stop for an hour to recharge like most other EVs. At the end of 2022, Nio had 1,305 battery swap locations and built its first swap station in Norway in May 2022. The goal for the customer is to reduce range anxiety.

What vehicles does Nio offer?

Nio began its reign with the EP9 sport car back in 2016, and the vehicle is still being produced on a small scale. Since then, Nio has branched off into more mainstream fare. The ES8 was introduced in 2018. It is a full-size SUV with a range of 311 miles. The ES6 SUV dropped the following year and has a range of 379 miles. The smaller EC6 SUV arrived in 2020, and the ET5 and ET7 sedans were released in 2021 – the latter two with versions capable of achieving 621 miles of range. The ES7 and EC7 arrived in 2022 and 2023, respectively.

Are Nio vehicles sold outside China?

Yes. While the vast majority of Chinese automakers focus wholly on the Chinese market, Nio began its foray into Europe in late 2021. After beginning in Norway, Nio began entering the German, Danish, Dutch and Swedish markets in 2022 with plans to expand throughout the rest of the decade. Although they are not yet sold in the US, Nio vehicles are being tested in California under that state’s autonomous driving program.

Nio stock forecast

Nio stock closed up 4.6% to $5.65 on Monday. The stock is certainly in a downtrend and will be until the February 16 range high at $6.34 is overcome. For now, the February 5 low at $5.30 is the place of near-term support. 

On the Moving Average Convergence Divergence (MACD) indicator, a bullish crossover has been in tow for most of February, but it looks unappealing due to its sideways action and latitude below the zero threshold. 

Bulls need Nio stock to confidently surmount the 20-day Simple Moving Average (SMA) just above $5.80. Holding above this SMA for several sessions could allow more bulls to daydream about the 50-day SMA at $6.90. For any of that to happen, Nio stock requires a larger catalyst than living vicariously through Li Auto’s earnings.

NIO daily stock chart