Niu Charges Into Global Markets, Sputters in China

Key Takeaways:

• Niu Technologies’ electric scooter sales fell for a second consecutive quarter in the three months to September, dragged down by a 33% decline in its home China market
• The company’s international sales rose more than 10-fold during the quarter, but even after the explosive growth still account for just 18% of its total unit sales

By Doug Young

After more than a year of laying the groundwork for a global expansion, electric scooter maker Niu TechnologiesNIU appears to have found a winner with its popular electric kick-scooters, based on newly released preliminary third quarter sales data. Now the company just needs to regain traction in its home China market, where its sales continued to skid in the three-month period due to near-nonstop measures to control the Covid virus.

The bigger third-quarter picture for Niu wasn’t too pretty, but still held room for optimism. Like many Chinese companies, Niu is quickly discovering that overreliance on its home market carries huge risks recently due to the government’s “zero Covid” policy that places paramount importance on virus control – even at the risk of economic growth.

Niu and many of its consumer-facing peers have received a rude awakening to that reality that has resulted in forced closures of their stores and partial and complete citywide lockdowns, sending a chill through their sales. The hit has been especially hard for companies like Niu that derive a huge portion of their sales from top-tier cities like Beijing and Shanghai, which have been most affected by Covid-control measures.

Niu’s shares tumbled 10% on Friday after it announced its preliminary sales data for the three months through September, though they rose slightly in Monday trade. Still, they are down about 8.7% over the two trading days, and have lost 80% of their value since the start of the year.

Despite that, the company’s shares still trade a surprisingly strong price-to-earnings (P/E) ratio of 19, roughly the same as where they were when we last wrote about the company in July. That’s because the company’s profit has also tumbled in tandem with its stock slide, including an 84% decline to 14.4 million yuan ($2 million) in the second quarter as China’s Covid restrictions took their toll.

Even after that decline, the company, whose name means “bull,” is itself still a relative bull among its peers. Its current P/E is ahead of the 7 for domestic peer Kandi KNDI and 13 for Italy’s Piaggio (PIA.MI), though it’s a bit behind the inflated 66 for Ninebot (689009.SH), maker of the popular Segway brand of kick scooters.

Truth be told, the strong P/E looks relatively justified in this case, as Niu does appear to be making strong gains in the international market that is both more reliable than China and also typically offers better margins due to higher prices for comparable models. Having cultivated the necessary sales channels and other infrastructure to distribute its products globally, the company now just needs to start moving more expensive, higher-end products into those channels.

Right now, Niu’s global business is all about electric kick-scooters, which entered the U.S. Amazon best-seller list for electric bicycles in April and have stayed there ever since, currently ranked at No. 26. But those scooters start at a modest $799, compared with price tags that typically top $1,000 for even the most basic traditional e-bike models.

Bicycle boost

Niu said in its latest release it began shipping some of its higher-priced traditional electric bicycles to North America during the third quarter, specifically mentioning models from its BQi series. Its U.S. website shows the BQi-CE model carries a retail price of $1,999, nearly triple the price of its kick- scooters, though the model isn’t available yet on Amazon.

Here we should point out that Niu’s global push into these higher-end bicycles could get a boost from the recent big drop in global shipping prices. Last year the company noted that high shipping rates – which first soared toward the end of 2020 in the pandemic’s first year – were putting a damper on efforts to develop its international sales.

That’s not surprising since its products are typically quite bulky and relatively low-cost, meaning high global shipping prices would significantly add to the cost of selling them abroad. Thus, with prices now finally dropping back to pre-pandemic levels, the company can afford to sell the models at significantly lower prices than it would have needed to charge just year ago. 

Next, we’ll take a closer look at the actual figures in the preliminary third-quarter data that illustrate the many trends we’ve just discussed. The company’s overall sales fell 19% year-on-year during the period to 320,789 units, extending a 17% drop in the second quarter that represented the first decline since the company went public in 2018.

The company’s China sales fell 33% to 263,189 units, accounting for 82% of its total unit sales. By comparison, China accounted for the big majority of nearly 99% of unit sales just a year ago, showing how much the company’s international sales have grown over the last year.

That leads into Niu’s international sales, which rose more than 10-fold to 57,609 in the third quarter from just 4,967 a year earlier when most western markets were still grappling with the pandemic. Notably, 95% of the international sales were for kick-scooters in the third quarter, and kick-scooters have accounted for 85% of the company’s international sales so far this year.

In addition to poor consumer sentiment in China, Niu also blamed high lithium battery costs for the slowdown in its home market, reflecting soaring prices for the key component of many electric vehicle batteries.

The company was far more upbeat on its overseas situation. “As we have started to offer our kick-scooters in North America and major EU countries, and have established an extensive distribution network, we expect sales of our kick-scooters will keep growing at a high speed with the coming of the holiday season,” it said. “We believe that a more diversified product portfolio addressing different needs of customers for urban travel will help us capture more growth opportunities, and reinforce Niu as a leading urban mobility solution provider and brand.”

All that said, we do expect the company will report another big profit decline when it releases its complete third-quarter results next month. But a rebound looks likely starting toward the end of the year, as international sales continue to boom, and could quite possible account for more than half of Niu’s total by the end of 2023 if current trends continue.