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Is there a Twist in NIO’s Tale Despite Regulatory Fears?

NIO (Ticker: NIO) stock has been underperforming in 2021 during which the stock fell by 31%. Shares are down 25% in the last month due to a combination of factors, including the fear of delisting from the US for Chinese stocks and a generally difficult environment for growth companies.

After the Securities and Exchange Commission (SEC) recently decided to tighten its grip on foreign companies listed in the United States, investors are becoming more skeptical about investing in shares of Chinese companies. The SEC will enact legislation requiring foreign companies to submit their financial statements and other documentation for audit. Noncompliant foreign companies risk being barred from trading on US stock exchanges. As China persists on disregarding US disclosure rules compliance, the threat is particularly serious for Chinese stocks.

However, NIO may have something that can help turn the tide in its favor. The EV manufacturer will hold its fifth annual NIO Day on Saturday (18 December, 2021). At least one new model, the ET5 mid-size sedan (the company’s fifth model), will be unveiled, according to Deutsche Bank’s Edison Yu, and will be NIO’s “highest volume vehicle thus far.” Its starting price is expected to be in the low 300,000 RMB ($46,000) range, and it will target the mid-size premium segment, similar to the Tesla Model 3, BMW 3 series, and Audi A4.

The vehicle will be the first to be produced at NEO Park, NIO’s second plant, and Yu anticipates that production will begin by the end of 3Q22. According to the analyst, only 9,000 units will be delivered next year, but this figure will rise to 65,000 by 2023E.

NIO has reported high growth in vehicle deliveries. The company reported a 100.2 percent year-over-year increase in deliveries to 24,439 vehicles in the third quarter of 2021. Deliveries increased by 105.6 percent even for November 2021.

NIO, total liquidity of $9.3 billion, is well positioned to invest in growth initiatives next year.
Importantly, NIO reported $7.3 billion in cash and equivalents at the end of Q3. In addition, in November 2021, the company completed an at-the-market stock offering, raising another $2 billion.

So despite the regulatory fears, NIO’s fundamentals may help it drag out of the rags. Let’s see how things pan out.

Written by Masud

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