Here’s Why Nio Stock Is a Buy Before September

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Over the past few years, investments in Nio, a significant Chinese electric vehicle manufacturer, have been underwhelming. At present, its shares are valued at approximately $5, significantly lower than their initial public offering (IPO) price of $6.26 per American depositary share (ADS) back in September 2018 and their peak closing price of $62.84 in February 2021.

Initially, Nio’s surging shipments captivated the bullish investors, and the buying craze in meme stocks boosted those returns. However, the company’s deliveries subsequently decreased, causing a retreat in its stock price and significant losses. The increase in interest rates enticed investors to opt for safer investments. Moreover, the trade dispute between the U.S. and China further diminished Nio’s attractiveness as an investment choice.

Instead, following the advice of Warren Buffett who emphasized being “opportunistic when others are apprehensive,” let’s explore the reasons that suggest Nio’s stock might be a good buy before its Q2 report due in early September.

1. Its battery-swapping network is expanding

Nio, the company, manufactures a variety of electric sedans and SUVs under its own label. The more affordable SUV models are sold through the Onvo sub-brand, while compact cars are marketed under Firefly. What sets Nio’s vehicles apart from other Chinese electric vehicles is their swappable batteries. These batteries can be swiftly replaced at power swap stations, offering a faster option compared to conventional chargers. Drivers have the choice to pay for battery swaps individually or opt for a “battery as a service” (BaaS) plan, which offers lower rates on a subscription basis.

By the close of June, Nio had established a total of 3,445 power swap stations in both China and Europe. This is a significant increase from the 777 stations at year-end 2021. Expanding this network requires substantial investment, but it could strengthen the recognition of its brand, fortify its competitive advantage, and pave the way for more lucrative recurring revenues in the BaaS sector. Moreover, Nio has been partnering with key investors such as China’s prominent battery manufacturer CATL to finance the expansion of this network in the future.

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2. Its deliveries are rising

2020 and 2021 were years of phenomenal growth for me, with my annual deliveries more than doubling each time! However, things took a slight turn in 2022 and 2023, growing by 34% and 31% respectively. This slowdown, due to intensified competition, challenging macroeconomic conditions in China, and unfavorable weather events, had many of my investors feeling uneasy. But guess what? In 2024, I managed a remarkable comeback! My annual deliveries soared by 39% to an impressive 221,970 vehicles. This growth was fueled by the robust sales of my Nio ET series sedans and Onvo SUVs in China, strengthening our position in the domestic market against competitors. Moreover, our strategic expansion into Europe continues to bear fruit!

In Q1 2025, Nio’s vehicle deliveries saw a 40% increase compared to the previous year, totaling 42,094 units. Over the first half of the year, this figure grew by nearly 31%, reaching 114,150 vehicles. The introduction of its new Onvo and Firefly brands has drawn in more cost-conscious consumers, suggesting that Nio still has significant potential for growth in China and Europe in the upcoming years. Although it may no longer be possible for Nio to double its annual deliveries, these rising figures indicate a promising future ahead.

Looking ahead, I anticipate that Nio’s revenue will surge by approximately 37% to reach around 90.2 billion yuan ($12.6 billion) in the year 2025. Over the period from 2024 to 2027, analysts predict a robust compound annual growth rate (CAGR) of about 26%, which could potentially elevate its revenue to approximately 132.7 billion yuan ($18.5 billion). This projection comes as Nio continues to introduce new vehicles into the market.

3. Its vehicle margins are stabilizing

In the year 2021, Nio achieved an unprecedented annual profit margin of 20.1% for its vehicles. However, this figure dropped significantly to 9.5% in 2023 due to intense competition in China’s electric vehicle market, resulting in a price war, and the impact of inflation. But by 2024, Nio managed to boost its vehicle margin to 12.3%, thanks to an increase in sales of premium sedans, cost reductions from manufacturing, and efficiency improvements in other areas.

Nio anticipates that its self-titled brand will keep a profit margin on vehicles of approximately 15% for Q2 of 2025. This consistency should help alleviate some of the strain from its lower-margin brands, Onvo and Firefly. It’s unlikely to reach a 20% vehicle margin again, but the automaker is predicted to steadily improve its margins as economies of scale take effect. This improvement is why experts forecast Nio’s net loss to decrease from 22.7 billion yuan ($3.2 billion) in 2024 to 7.6 billion yuan ($1.1 billion) in 2027. Moreover, they predict that the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) will become positive by its final year.

4. Its valuation looks dirt cheap

In summary, it appears that Nio is currently undervalued in comparison to its growth potential, possibly due to concerns over tariffs and trade disputes causing investors to shy away from Chinese stocks. With an enterprise value of approximately 67.9 billion yuan ($9.5 billion), the company is trading at a multiple of only 0.8 times this year’s sales. For comparison, Tesla (TSLA) trades at 10.9 times this year’s sales.

If you anticipate Nio’s business to stabilize with decreasing losses as trade tensions ease, it could be a smart move to gather this underestimated stock prior to the release of its Q2 earnings report. Any positive news might prompt investors to reassess its share value and propel them significantly higher.

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2025-07-25 12:09