3 Reasons Why It’s Time to Hit the Brakes on NIO Stock

Stocks to sell

As the company continues to falter, it’s time to reevaluate any bullish Nio (NYSE:NIO) stock forecast. The Chinese EV market has become very competitive. So much so that it may be hard for Nio to compete in the future.

Below are three reasons why I believe NIO is a sell.

Nio Stock Forecast: Look at the Competition

NIO is playing in a hypercompetitive space, and the company will need to grab market share from both smaller competitors like Xpeng and massive ones like BYD, the world’s top EV maker in 2023.

In Q4 2023, BYD sold 526,409 electric vehicles, while Tesla sold 484,507. Moreover, BYD also dethroned Volkswagen (OTCMKTS:VWAGY) as the number one selling car brand in China.

It’s difficult to see how NIO will be able to tackle the market when much of the performance and sales is being generated by the largest major players.

Unimpressive Deliveries

The Chinese EV maker, NIO, has also experienced sluggish delivery growth in respective to its competitors. EV deliveries in 2023 came in at 160,038, up only 30% on a year-over-year basis. BYD, for example, saw a 62% surge in full year EV deliveries.

XPeng also saw EV deliveries only climb 17% of the number from 2022, underscoring how difficult it is for smaller players to compete in the space.

Not to mention, China is still going through an economic recovery, and folks are feeling risk averse in terms of spending. This will affect all EV makers operating in China, but it will likely impact the smaller, lesser-known players the most. Nio saw January deliveries plunge 44% from December, which already isn’t a good sign for the year.

The EV Slump Could Smart

There has been much talk about the electric vehicle slump. It’s not just a phenomenon particular to China’s economic slowdown. Inflation and high interest rates in the West have done well to temper consumer sentiment.

Analysts are predicting EV sales to struggle in 2024. Elon Musk, warned of slower growth in 2024 during Tesla’s earnings call.

As said before, NIO will likely struggle if these larger players begin to see growth slowdown. At some point, the EV market will be dominated by just a few key players, and I doubt NIO will be one of them.

On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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