Nio Stock Soars On Surge In Deliveries but April growth is not sustainable

$NIO Inc(NIO.US)$ $Tesla(TSLA.US)$ $BYD COMPANY(01211.HK)$ $XPeng(XPEV.US)$ The article reported that Nio stock just popped 20%, according to CNBC but Nio share price is a whopping 92% below their all-time high of $67. The question of whether Nio share is a bargain depends on its reported 134% vehicle delivery growth in April is sustainable at such rapid growth.
My Take : The analysts think Nio will face significant challenges sustaining its growth for 3 reasons:

1. Fierce price competition from Xiaomi and Tesla

The low entry barriers attract rivals willing to compete on price. For example, in early April, Chinese smartphone maker Xiaomi launched its SU7 EV priced about $4,000 less than Tesla’s Model 3. Xiaomi CEO Lei Jun said the SU7 would have a longer driving range and the company expects to break even sooner, despite a lower price than the Model 3, noted CNBC.

2. Nio is still losing money

Nio competes in an inherently unprofitable industry and there is no guarantee the company can sustain its rapid growth. Due to low barriers to entry in the Chinese EV market, the average participant is losing money, noted researcher Frost & Sullivan.

3. Nio's high cash burn rate

Nio’s ability to prevail in a price war is unclear. In 2023, the company burned through $2.3 billion worth of free cash flow — ending the year with $5.5 billion in cash and $3.3 billion in long-term debt, the Journal notes.

Nio Stock Soars On Surge In Deliveries but April growth is not sustainable

Source:

Nio Stock Soars On Surge In Deliveries — Still 92% Below 2021 High - Forbes

$BYD COMPANY(01211.HK)$ $BYD Co.(BYDDF.US)$ $S&P 500 Index(.SPX.US)$ $Nasdaq Composite Index(.IXIC.US)$ $Tesla(TSLA.US)$ $VOLKSWAGEN A G(VWAGY.US)$ $NIO Inc(NIO.US)$ $Li Auto(LI.US)$ $XPeng(XPEV.US)$ $General Motors(GM.US)$ $Ford Motor(F.US)$ $Rivian Automotive(RIVN.US)$ $MERCEDES-BENZ GROUP AG(MBGAF.US)$ $TOYOTA MOTOR CORP(TOYOF.US)$ $GEELY AUTO(00175.HK)$ $Stellantis NV(STLA.US)$

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ZnWC

I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.

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