NIO Inc. (NYSE: NIO) saw its American depositary receipts slide 8.0% for the week, closing at $4.49 on Friday. The decline marked the seventh consecutive session of losses, with the stock falling 3.2% on the final trading day. This performance sharply underperformed the Nasdaq Composite, which dropped just 2.1% over the same period, indicating that investors are applying more stringent criteria to the electric vehicle maker.
Delivery Growth Fails to Impress
Despite reporting a 62.9% year-over-year increase in June deliveries to 40,597 vehicles, the highest growth rate among U.S.-listed Chinese EV rivals, the stock price continued to slide. The company also posted a 49.4% increase in second-quarter deliveries to 107,658 units, but that figure fell 2.1% short of management's lower-end guidance of 110,000 vehicles. This delivery miss has kept the issue of margin sustainability unresolved.
Competitive Landscape
NIO's June deliveries narrowly beat XPeng Inc. (NYSE: XPEV) by just 471 units, while Li Auto Inc. (NASDAQ: LI) sold 9,702 fewer vehicles. However, Li Auto's stock only fell 2.2% for the week, demonstrating a more stable performance. The data suggests that while NIO leads in growth, its market premium is under pressure.
ES8 Margin Assessment
Investor caution is partly driven by the launch of the new ES8 five-seater model, which began deliveries on July 10. Priced at 382,800 yuan, or 274,800 yuan with battery rental, the entry-level price is 5.9% less than the three-row variant. This lower price point raises questions about its impact on vehicle margins. Preliminary first-quarter figures showed a vehicle margin of 18.8% and a gross margin of 19.0%, with adjusted operating profit of 66.8 million yuan. The effect of the more affordable ES8 on these gains will become clearer with July's product mix.
June deliveries of the ES8 dropped 21.9% from May to 8,969 units, as some customers delayed purchases awaiting the new model. However, NIO reached its 130,000th delivery of the third-generation ES8 on July 22, delivering the most recent 10,000 units in just one month, indicating solid initial demand.
Analyst and Market Outlook
Goldman Sachs (NYSE: GS) analyst Tina Hou upgraded NIO to Buy on July 13, setting a price target of $7, implying a 56% upside from Friday's close. However, shares have since given up those gains. Deutsche Bank (NYSE: DB) analyst Wang Bin's team estimates that new orders for June were close to 77,000, down 8% from May, though NIO has not verified this figure.
Two key deadlines loom this week: the Federal Reserve's meeting on July 28-29 and the expiration of NIO's ES8 purchase-benefit period on July 31. Risks persist, as CEO William Li noted that raw material inflation has increased the cost of each ES8 by nearly 20,000 yuan. While he stated this is currently within the company's capacity to absorb, prolonged price competition could further compress margins.
