NIO’s Stock (NYSE:NIO) Meets Resistance as EV Market Shakeup Intensifies

NIO's stock price (NYSE:NIO) is facing headwinds today, down 7.68% through the early part of the day as slumping July deliveries, and that stubborn $5 resistance level have hit sentiment to start the week.

In amongst a broader reshuffling of the Chinese electric vehicle (EV) market, new entrants like Xiaomi are making significant strides while established players are seen to be grappling with shifting consumer preferences and an ongoing price war.

Nio reported 21,017 vehicle deliveries for the month, a significant drop from 24,925 in June, which had marked a year-high. This represents a 2.7% year-over-year decline, with drops across all three of NIO’s main product lines.

Conversely, Xiaomi is rapidly gaining traction in the EV space. The tech giant reported over 30,000 EV deliveries in July, a notable increase from 25,000 in June. This growth spurt, Xiaomi's strongest since March, is attributed to the successful launch of its YU7 SUV earlier in the month. Initial demand for the YU7 was overwhelming, with approximately 289,000 orders placed within the first hour. However, this high demand has also led to extended delivery times of up to 60 weeks, sparking customer complaints.

BYD, the dominant player in the Chinese EV market, also experienced a slowdown.

The company shipped 341,030 units in July, down from 377,628 in June. This marks BYD’s first monthly decline this year and represents near-flat growth compared to the same period last year. The decline comes after months of steady growth since January, partially fueled by aggressive price cuts of around 30% on several of its lower-end battery-only and hybrid models in May. This sparked a price war across the industry, prompting Chinese authorities to issue warnings to automakers to curb excessive competition.

Li Auto is also feeling the pressure, reporting 30,731 deliveries in July, down from 36,279 in June, and a significant 39.7% year-over-year decline. This was the company's second consecutive monthly decline and among the steepest across Chinese EV makers.

The intensified competition and price wars are weighing heavily on the profitability of many EV manufacturers. NIO, for instance, reported a net loss of $3.15 billion over the last fiscal year, with trailing 12-month revenue of $9.13 billion and a negative EPS of -$1.63. Analysts anticipate continued operating losses in the upcoming earnings report, with revenue projected to remain near $9 billion annually.

Despite the headwinds, NIO launched its new SUV model, the L90, on July 31st, with deliveries commencing in August. The company hopes this new model will help revitalize sales and regain market share. However, the broader market conditions remain challenging.

The Chinese EV market is clearly undergoing a period of significant transformation. While companies like Xiaomi are capitalizing on the growing demand for EVs with aggressive strategies and innovative products, established players like NIO, BYD, and Li Auto are facing increasing challenges in maintaining growth and profitability.