NIO: A Strong EV Rebound Play For 2022

Summary

• NIO delivered more than 10 thousand EVs in December, the second straight month of deliveries exceeding this threshold.
• NIO delivered 91,429 EVs in FY 2021, showing 109% year-over-year growth.
• NIO is ripe for a recovery after an undeserved sell-off pushed shares of the EV maker from $55 to $30.

Andy Feng/iStock Editorial via Getty Images

Shares of NIO (NYSE:NIO) surged toward the end of the year as part of a wider rally in beaten-down Chinese stocks. NIO, although facing a slew of risks in 2022, could be set for a major rebound this year if the Chinese EV maker gets its delivery growth rates under control and catches up to its rivals XPeng (XPEV) and Li Auto (LI)!

Disappointing performance in FY 2021

The last fiscal year presented numerous challenges for the EV sector in general and for NIO specifically. A crushing semiconductor supply shortage, COVID-19 outbreaks and related factory shutdowns, lowered production forecasts, a disrupted supply chain and a massive property crisis in China that is threatening to spiral out of control were all major challenges in 2021 that affected NIO's commercial performance.

The biggest challenge for NIO, however, is that its closest EV rivals in the market, XPeng and Li Auto, have pulled ahead of NIO regarding delivery growth. If NIO wants to see a major revaluation of its stock in FY 2022, NIO needs to start delivering its electric vehicles at similar rates than its rivals. XPeng and Li Auto both regularly generate monthly delivery growth rates surpassing 100%. XPeng is performing in a category of its own with delivery growth rates between 200 and 300% year over year.

The latest monthly sales report from NIO was mixed and it shows that the company has a lot of work to do this year, besides rolling out new products and adjusting manufacturing lines. In total, NIO delivered 10,489 electric vehicles in December, which was the second straight month of deliveries surpassing the 10 thousand mark.

However, total monthly deliveries fell 389 units compared to November, meaning NIO didn't generate positive month over month delivery growth in the last month of 2021. The decline was caused by a drop in EC6 output as NIO's production lines pumped out 717 fewer EC6 models than in November. In December, NIO delivered 4,939, 2,768 and 2,782 ES6s, EC6s and ES8s.

NIO's EV Deliveries	October	November	December	Q4'21
ES6	2,528	4,713	4,939	12,180
EC6	921	3,482	2,768	7,171
ES8	218	2,683	2,782	5,683
Total	3,667	10,878	10,489	25,034

Click to enlarge

(Source: Author)

NIO's December deliveries bring total Q4'21 deliveries to 25,034 which calculates to a 44.3% growth rate year over year. The total quarterly delivery volume in the fourth-quarter was the highest delivery volume in NIO's history. NIO ended FY 2021 with a total of 91,429 electric vehicles delivered, showing 109.1% year over year growth. My most recent delivery estimate for November called for a total of 91,095 EV deliveries for the year.

While the delivery report was good news in the sense that NIO once again exceeded 10 thousand units in monthly deliveries, NIO failed to generate strong year over year growth. This is partly due to the fact that NIO is still adjusting its production lines, but its factories are set to get a whole lot more busy this year. NIO is launching new EV products throughout the year, the ET7 and the ET5, which will go on sale in China in 2022.

Cheap sales growth

I estimate that NIO and its manufacturing partners will be able to deliver approximately 190 thousand EVs in FY 2022 which calculates to a delivery growth rate of 108% year over year. Revenues in 2022 should increase by approximately 74% year over year, if you want to believe market predictions for NIO's sales growth. I believe NIO will generate stronger sales growth of between 80% and 85% in FY 2022 because production and deliveries sharply snapped back in Q4'21 and new EV models will be launched this year. NIO's ET7 sedan will be launched in the first-quarter 2022 with reservations expected to open in Mid-January. ET5 deliveries are expected to begin in the fall of 2022.

New product launches represent catalysts for additional delivery and sales growth that the market may not fully consider yet. For that reason, I expect NIO's sales estimates to continue to increase throughout 2022. Because NIO's valuation has seen so much pressure in the second half of 2021, the firm's commercial growth prospects are now very attractively valued.

Data by YCharts

Risks with NIO

There are many risks affecting the Chinese EV sector and NIO. The unresolved supply chain crisis is lingering over the industry and new Covid-19 outbreaks may lead to new factory shutdowns. Additionally, China is working its way through a major crisis in the property market which could create spill-over effects for financial markets. While these are chiefly macro risks, they represent significant risks for shares of NIO. On a micro level, I see ramp up risks for NIO as dominant in FY 2022. If NIO falls further behind its rivals regarding delivery growth, shares of NIO could get into even bigger trouble this year.

Final thoughts

NIO's delivery report for December was mixed. The good part was that overall deliveries were holding up near the November level and NIO once again cracked the 10 thousand unit mark for deliveries. However, EC6 production unfortunately dropped and while 44% year over year delivery growth is not bad in a quarter that saw limited production due to manufacturing adjustments, NIO is still at risk of falling behind its EV rivals in 2022. If, however, NIO manages to scale up production in a significant way this year, shares could also revalue materially higher!

Analyst’s Disclosure: I/we have a beneficial long position in the shares of NIO, XPEV, LI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[nela1872]

To invest in NIO, do I use US stock valuation (33 some dollars) or Chinese stock valuation? Can't seem to get a straight answer.

[UNCLEJUNIORSOPRANO]

GOOD ARTICLE. I TOO BELIEVE THAT 2022 WILL BE A GOOD YEAR FOR NIO. THANKS.

[The Asian Investor]

@UNCLEJUNIORSOPRANO As always, Uncle, you are correct :)

[Kelly's Stocks]

@UNCLEJUNIORSOPRANO - any NIO dealer showrooms in the US?

[Edwin Wingo]

we need to pump Nio more

[The Asian Investor]

@Edwin Wingo Who is pumping?

[sho1]

TSLA has $1T market cap, deliver about 1 million cars. NIO has $50B mc, deliver about 100k cars. TSLA x10 the delivery in unit, x20 mc. NIO will be profitable soon, close to break even, smaller revenue can do exponential growth for realistic. TSLA will saturate easier. So I stay with NIO long.

[The Asian Investor]

@sho Given the choice between NIO and TSLA, I would choose NIO (or XPeng) any day of the week!

[Smoothcello]

What effect will increased capacity have. (Unfortunately not before 3rd quarter).

cnevpost.com/...

[JohnnyXY]

@Smoothcello it refers only to the Neo Park. Besides Neo Park, additional capacity increase is coming to ramp up production to 240.000 cars per year: "NIO is expanding massively to accommodate its outsized market. It’s signed an agreement with Jianghuai Automobile Group (JAC) to expand its car production capacity to 240,000 per year. And it’s building a second manufacturing facility to beef up production even further." Source: www.ig.com/...

[jjoserr]

If you did your DD and like NIO, just hold ! It’s a matter of time before that exuberant Growth, Expansion, Auto pilot, BASS, = 💰💰 I’m a proud 💼💼💼 Holder of NIO 💰💰💰💰

[The Asian Investor]

@jjoserr You speak my language. Thank you very much!

[unbob]

"... 109.1% year over year growth... NIO failed to generate strong year over year growth."

C'mon man! Really? 109.1% YoY growth is not strong growth?

"If NIO falls further behind its rivals regarding delivery growth, shares of NIO could get into even bigger trouble this year."

Again, I call BS. As others have pointed out, NIO is selling into a higher market tier. Agree with other poster: "Like comparing Toyota sales numbers to BMW". Totally different market level products! Duh!

[Smoothcello]

@unbob also their manufacturing capacity will increase when new plant comes online.

[The Asian Investor]

@unbob NIO's delivery growth rates were below group average

[doubleE]

"The biggest challenge for NIO, however, is that its closest EV rivals in the market, XPeng and Li Auto, have pulled ahead of NIO regarding delivery growth."

NIO sells at a completely diffeent price point from Li and Xpeng. It's like noticing toyota sells more cars than BMW. Duh ?

[Djreef1966]

Did it really surge?

[EverydayTrader]

I think a major point that is often overlooked is NIO’s average sale price. While XPEV and LI are indeed surpassing NIO in terms of deliveries, their ASP’s are much lower. For instance, NIO’s 91k deliveries for 2021 brought in revenues greater than $6B, while XPEV’s 98k deliveries brought in less than $4B in revenue. So I’m short, each companies ASP’s need to be taken into account - not just their delivery numbers.

[The Asian Investor]

@EverydayTrader Thank you for adding this in. I will see how I can include this next time.

[goodwell111]

In 2021 XPEV production is up 260%. LI up 130%. NIO up 109%.

It would be very interesting to see BYD report. BYD should delivery many times more than NIO+XPEV+LI combined.

Also BYD should reported about 100,000 times more than Rivian + Lucid combined.

[xmlstarks]

@goodwell111 Yes, everyone is hyped by those three because they are listed on the U.S. stock exchanges. BYD is listed in Hong Kong, so folks assume that is bad. I buy it OTC (BYDDF) all day long. However, BYD is or soon will be the largest EV seller in China, not TESLA. And, Toyota just partnered with them to make a "corolla" type EV for them for the Chinese market, i.e., manufacture the vehicle and place a Toyota badge on it. BYD exported the Tang SUV to Norway in June, 2021, before NIO to prove their vehicle to European buyers. BYD is the largest vertically integrated vehicle manufacturer in the World, they make the best EV batteries and only Contemporary Amperex Technology Co., Limited (CATL) of China competes with them for the LPF type battery. Oh, and they have a manufacturing plant (Union Shop) in the Los Angeles area for Buses and Commercial Truck EVs.

[katmandu100]

Good commentary.

[pulga]

NIO has an excellent product and thanks to this it has created a powerful brand, although it has been relegated in production, it earns more money than its competition, but with neo park that begins in the 3rd quarter with the manufacture of its flagship product according to orders higher anticipated to all the models that the company has, there really the measurement of production + profit ... it will be incredible

[motto5448]

there is nothing cheap about this company!!!!!! single digits in 2022.

[The Asian Investor]

@motto5448 Why do you say this?

[pulga]

The problem that NIO has is that it grew 109% but its competition grew much more and especially in the last 3 months, LI 130 $ year, Xpeng 160% year ... the growth of companies is measured by their growth and the comparative of its market ... however something very important that investors do not contemplate since they are only interested in the number of deliveries and that is why the shares are depressed, it is the profit margin ... $ NIO the average price is $ 65,104 and a gross margin of 19%, resulting in a profit of $ 12,369 per car $ Xpeng the average price is $ 37,270 and a gross margin of 12% leading to a profit of $ 4,472 per car 12. 369 / 4,472 = 2.76 So Xpeng needs More than 27,600 cars sold for every 10,000 NIO

[The Asian Investor]

@pulga Thank you for sharing this. I will see if I can make a comparative analysis of sales, deliveries and margins next time.

[SavvyOrBroke]

" If NIO falls further behind its rivals regarding delivery growth, shares of NIO could get into even bigger trouble this year. "

For once, there is something we can agree on. At least for the first quarter, nio look to fall even further behind XPEV and LI.
XPEV will be the best choice of the three.

[SavvyOrBroke]

" NIO delivered more than 10 thousand EVs in December, the second straight month of deliveries exceeding this threshold. "

Why would anyone use 10,000 as a monthly delivery threshold?

Yet, you paid no attention to the fact that December's number is slightly lower than November numbers despite an extra day in December. Normally, that won't be a big deal, but if you were priced to perfection, then it is something to think about. And this is in the backdrop where XPEV and Li both break their monthly record.

[Orr77]

@SavvyOrBroke NIO isn't priced at a level of perfection - far from it. And it has lagged badly for a reason. 2021 was not a good year from an execution standpoint for sure but 2022 rolls out 2 new models and NIO also serves a somewhat different market than do LI and XPEV.

[Ramon Serrano Bejar]

I consider that the sales analysis for 2022 is incomplete, since it does not mention the expansion in Europe in 5 countries and already started in Norway. Likewise, this article does not mention the positive effect that it will have: the number of stations that the change of batteries will offer with its corresponding differentiation with its competitors and its positive effect on sales; Likewise, this article does not indicate the estimated positive effect of its association with an international oil company in 2022. I would appreciate the author's support for my observations and concerns in this regard, wishing him a happy 2022 and the readers of SA.

[Dr John Smith]

stop burning my illuminated logo....when u write ur articles..nio isnt going nowhere...its lordstown that will make u rich. why because of a thing called valuation. Once production hits the value of lordstown will be 4 billion minimu thats almost 8 x times your money. Easy 10 bagger like good old peter lynch used to say 🥳🎉🥳🎉🥳

[Orr77]

@Dr John Smith Lordstown likely does not survive. Weak company that is grossly undercapitalized. Stick to medicine and keep your $$$ in the S&P 500.

[Eli.Dichter]

@Orr77 somebody's doesn't like Nio :)

[Dr John Smith]

@Orr77 maybe you dont know who foxconn is? worth 10 more than tesla? partner...and with no more over head and plenty of capital how are they under capitalized...these are 10 bangers kid...havent u read and Peter Lynch books?

[cd7707]

I don’t see NIO management delivering what was promised. So thumbs down plenty of better EV to invest in. The downside risk for NIO is still strong

[Bigleftfin]

@cd7707 ‘21 was disappointing with the chi shortage (NIO did not do well here), COVID, China selloff, etc but management has delivered on virtually all metrics. Not sure what you even mean here?