Nio stock has continued its downward spiral this month after a report showed that the company’s business is slowing. The shares fell to HK$26.95 in Hong Kong on Monday, more than 50% below their peak for the year. Its US-listed ADRs have also been caught in a heavy sell-off, wiping billions of dollars from the company’s market value.
Nio stock drops as its growth slows
The most recent delivery numbers showed that Nio’s deliveries are slowing. It delivered 37,408 vehicles in September, an increase of 7.7% from the same period last year. Its Nio brand sold 21,318 vehicles, while its Onvo and Firefly delivered 8,763 and 7,327 vehicles, respectively.
The 7.7% annual increase is good considering that the Chinese EV industry is going through a challenging time. However, it is significantly lower than what the company delivered in the previous month. Its deliveries in August rose by 14% from a year earlier.
The delivery numbers came as the new ES8 vehicle reached its 150,000 delivery milestone, ranking first in cumulative sales among large SUVs and vehicles priced above RMB400,000. Similarly, the recently launched ES9 vehicle crossed its 30,000 delivery milestone, a major achievement for a vehicle that went to market in May.
Still, these numbers mean that Nio’s revenue growth may start to decelerate, which is in line with what other Chinese EVs are doing. Top companies like Li Auto and XPeng delivered fewer vehicles than expected in September.
Nio reported strong quarterly results
The most recent results showed that Nio’s revenue growth soared in the second quarter as its deliveries soared to 107,658 from 72,056 in the same period a year earlier. Its vehicle revenue soared by 80% to $4.287 billion, with its margins rising to 18.5%. Combined with its other businesses, Nio’s gross margin rose to 18.45 in the second quarter.
The challenge, however, is that this growth may have peaked, with analysts expecting the third-quarter revenue growth figure to come in at 51.49%. If this estimate is correct, then its revenue will jump to 33 billion yuan. Its fourth-quarter revenue growth is expected to be just 1.54%.
Worse, there are signs that the European Union is working to reduce the flood of cheap European vehicles in the bloc. It has already placed a limit of hybrid vehicle imports from China. This is important for Nio because it is betting on the international market to boost growth.
Nio stock technical analysis
Nio share price chart | Source: TradingView
The daily chart shows that Nio shares have been in a strong sell-off in the past few months. It dropped from a high of $54.90 in Hong Kong to the current $27.12.
The stock has remained below all moving averages and the important support level of $34.96, its lowest level in February and March. It has also remained below all moving averages, a sign that short-sellers have prevailed.
Therefore, the path of the least resistance for the stock is downwards, with the next target to watch being at $25. A move below that level will point to more downside towards $20.
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