Last year will be remembered as the year the market experienced great volatility.But for longtime investors Nio (NYSE: NIO) Stock, it probably wasn’t anything out of the ordinary.
That’s because Chinese electric vehicle (EV) makers have had a tough time since entering the public market in 2018. In fact, the popular roller coaster metaphor fits the bill.
Because the five-year NIO stock chart looks like a theme park attraction.
So if I put £1,000 in the so-called “Tesla China in early 2022?
At the beginning of last year, NIO’s stock was over $30. They started at under $11 this month. This means that the stock will fall about 66% in 2022.
So a £1,000 investment at the beginning of 2022 would be around £340 today. I would drop 660 pounds or so. This is assuming I didn’t pay any fees to buy the shares. If so, I would have obviously been a little more depressed.
That’s obviously not good. The company also doesn’t pay dividends as it invests all (and some) of what it generates into the business to drive further growth. In today’s situation, only significant capital losses remain.
why did this happen?
Determining exactly why stocks have fallen can sometimes be a difficult task. But for NIO stock, it seems very likely that two big issues have worked against them.
The first and most obvious is that the market is turning its back on unprofitable growth companies. This certainly applies to NIO, as he reported a net loss of $582 million in the third quarter of 2022.
A second factor weighing on NIO’s stock price is ongoing problems in China’s economy. The government’s (now abandoned) ‘zero Covid’ lockdown policy continued to disrupt normal economic activity.
China retail sales fell 5.9% year-on-year in November. This suggests that many Chinese consumers are currently struggling financially and are less likely to shell out big bucks for one of NIO’s luxury EVs.
In addition to this, government subsidies for Chinese EV buyers expired late last year.
do you buy stocks?
Despite these headwinds, NIO recently announced that it delivered 15,815 vehicles in December. That was a 50% year-on-year increase and a monthly record.
In the fourth quarter (through December 2022), 40,052 EVs were shipped. That’s a 60% increase, a record quarter. In total for 2022, NIO will deliver 122,486 vehicles, a 34% increase over 2021.
China accounted for more than half of all EVs sold globally in 2022, despite the ongoing coronavirus crisis. I think this shows how strong the EV trend is now. It is unstoppable and will continue for decades.
Well then, do you want to buy it? No, not yet.
The growth story here is intriguing, so I’ll keep NIO stock on my watchlist for now. I think it will.
Post If you had £1,000 invested in NIO shares at the beginning of 2022, here’s how much it would have first appeared on The Motley Fool UK.
Ben McPoland has a position at Tesla. The Motley Fool UK recommends Tesla. The views expressed about the companies mentioned in this article are those of the author and may differ from official recommendations on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
Motley Fool UK 2023