Has Nio Turned A Corner With Q3 Delivery Beat?

Shares of Chinese electric automaker, Nio Inc – ADR NIO, which fell following weak second-quarter results reported Sept. 24, are regaining some of their momentum on the back of strong third-quarter delivery numbers. 

After the shares dropped to a record low of $1.19 Oct. 2, bargain-hunting buyers emerged. 

The stock consolidated around the $1.50 level before taking off on Tuesday's third-quarter delivery report. 

Sales Rebound

Nio, popularly known as China's Tesla Inc TSLA, said Tuesday that it delivered 4,799 vehicles in the third quarter, up 35.1% quarter-over-quarter.

The deliveries exceeded the midpoint of Nio's guidance range of 4,200-4,400 vehicles by 499 vehicles, or 11.5%.

In the first quarter, Nio's vehicle deliveries fell by about 50%, and that was followed by an 8% drop in the second quarter.

A reduction in subsidies for EVs in China, a battery recall and general macroeconomic and broader auto industry weaknesses were blamed for the prior shortfalls. 

Nio said it sold 4,196 of its five-seater ES6s 603, seven-seater ES8s in the third quarter. The ES6 model was launched June 18.

Weathering Macro Weakness

Nio's product and service focus has helped to counter the weakness arising from soft macroeconomic conditions and a downturn in the auto industry, the company said. 

The launch of the ES6 standard version at more competitive retail prices has helped, Nio said. 

"September deliveries in particular were positively impacted by expedited shipments ahead of China's national day holiday," CEO William Li said in a statement. 

In September alone, the company delivered 2,019 vehicles, a number comprised of 1,726 ES6s and 293 ES8s.

"In addition to the solid sequential improvement in our delivery numbers, we have seen accelerated growth of our order backlog since September supported by a more expansive sales network."

Nio is also planning to begin deliveries of the ES6 and ES8 models with an 84-kWh battery pack that extends the NEDC driving range to 510 km and 430 km, respectively.

Nio said it plans to enhance its offerings going forward in an effort to accelerate orders and deliveries. 

Nio also recently announced restructuring initiatives, including trimming its global workforce and spinning off of some non-core businesses.

Stock Take

At last check, Nio shares were slipping 4.79% to $1.62, reversing some of the gains made Tuesday, when the stock jumped 9.68%.

About 21% of Nio's float is held as short, with a short ratio at 6.1, suggesting increased bearish bets on the stock.

Technically, a break above the $2.40-$2.50 area could impart some momentum to the stock.

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Photo courtesy of Nio.