Stocks in Chinese electric-vehicle manufacturer NIO were falling on Tuesday morning as the company reported second-quarter sales that were better than expected. Despite the backlash, the report is another good data point for the EV industry, indicating that Chinese EV demand and EV penetration rates continue to improve epidemic-induced lows.
NIO (ticker: NIO) lost a stake of about 16 cents — NIO reported figures in Chinese currency — about $ 526 million in sales. Both numbers are better than analysts expected. NIO is not yet profitable The company has less earnings than sales at the moment in its history. Sales exceeded estimates by about 6%.
NIO shares were down 3.1% at $ 13.77. Expectations were higher after a 280% gain in the previous three months. Year over year, the shares are about 250% better than the comparable returns of the S&P 500 and the Dow Jones Industrial Average. Other EV stocks have also done. Tesla (TSLA) shares are almost 240% year to date.
Gaines has made Tesla the most valuable car company in the world, and its success has helped all EV stock, including the NIO.
Looking ahead, NIO expects delivery of 11,000 to 11,500 vehicles in the third quarter, up 125% over the year. NIO only sells cars in China and is covered by analysts stationed abroad. This makes it difficult to obtain vehicle-delivery estimates and provides guidance rather than figures. It is easy for US based companies to come by number. For example, Tesla analysts believe that Elon Musk’s company will deliver 146,000 vehicles in the third quarter of 2020.
The question-and-answer period during the earnings conference call did not cover much of the new base. Analysts asked about autonomous-driving technology, overall demand — which company management called strong — and profit margins.
An interesting question was asked about foreign expansion. Management said it would like to expand overseas, but would not provide details.
NIO vehicles use battery swap technology in addition to traditional plug-in EV charging. Being able to swap the battery pack allows owners to keep one charge at all times, essentially reducing the time the vehicle is charged for recharging. The EV swapping infrastructure is not required to sell NIO vehicles overseas, but it may represent a small planning headwind for the company to consider.
Overall, investors have little to complain about. Nevertheless, the stock’s response can be difficult to estimate, although with NIO it is quite predictable. Shares have declined in five of the last seven quarterly reports.
In the short term, Wall Street — or the Chinese equivalent of Wall Street — is an expectation game.
Write Al Root at [email protected]