Nio Inc's Desperate Price Incentives Boost Sales - But Is It Sustainable?

Well it's official: Nio Inc., the EV company who takes “Made in China” to a whole new level, is throwing a discount party, and everyone with a driver's license is invited. Because now, with a slew of new end-of-quarter incentives that scream desperate “Buy Our Cars!”, Nio is bundling deals all across its lineup of premium electric sedans and SUVs. Because, you know, nothing gets tree huggers more excited than a discount on a $45k electric sedan, amirite? 

(Source: Electric-Vehicles) 

But hey, guess what? Apparently the market absolutely loved it as the stock not only popped 3.51% to $10.92 on news, but it's also given investors a teeny tiny ray of hope after a brutal -40% nosedive this year within a struggling EV industry.

(Source: Market Watch) 

Now for those of you who don’t look past Elon and Tesla when reading about the EV market, this sector is basically the Hunger Games right now, and Nio’s tribute is this latest promotional blitz.  

According to William Bin Li, Nio’s CEO and the guy who somehow manages to look calm while piloting a ship through the EV warzone, these incentives are supposed to “enhance competitiveness” and “draw more customers to Nio’s products.” Translation: Please, for the love of all things electric, buy our cars instead of Tesla’s.

(Source: Giphy) 

The crown jewel of this promotional onslaught? Nio’s flagship ET5 sedan is getting a price drop. And if that’s not enough to get silent riders up and running, they’re also throwing in some complimentary charging vouchers. Because, who doesn’t love free 35 minute breaks? 

(Source: Electrive) 

Oh and for you broke people who can’t afford the luxuries of all things electric, Nio has got you covered as the company has just revealed plans for a new budget-friendly brand called Onvo to target the cost-conscious crowd. Meaning, if you can’t afford a Nio or a friggin Tesla, you can still buy an Onvo and brag to all your friends that you’re part of the EV revolution.

(Source: Cnev Post) 

So clearly, as we can all see Nio is definitely trying to catapult itself in front of Elon's Tesla fanboy base. And while I (and others) can joke about how these discounts make Nio look somewhat of a cringey, clingy, and desperate significant other…

What’s interesting here, is that Nio’s Q2 earnings showed investors what’s up during their last earnings report. For instance, the company delivered 57,373 vehicles—a 144% jump over the same period last year. Revenues almost doubled to $2.4 billion, and their margins fattened up by +12.2%. 

(Source: MorningStar) 

Meanwhile, some critics are looking at these numbers and scoffing. One of them being Michelle Krebs from Cox Automotive who basically said, “Yeah, that was cute, but can they keep it up?”. Which, to some extent, she has a point on. 

Again, the EV market is a bloodbath, and Nio is up against heavy hitters like Tesla, XPeng, and a bunch of legacy automakers who woke up one morning and decided they wanted to save the planet too. And while discounts may prop Nios demand in the short term…

(Source: Inside EVs) 

Let’s not forget that Tesla too has been playing the game of pricing limbo all year long. First, they cut prices by 20% to juice sales, then realized they were hemorrhaging money faster than a crypto startup and hiked prices again. The message? No one knows what the hell is going on, but everyone’s slashing prices and praying for the best.

(Source: Giphy) 

Meaning, with that kind of volatility, it’s no wonder Nio is scrambling to stay in the game. Sure, they’ve made some gains in China—the world’s largest EV market—but let’s be real, they’re still miles behind Tesla globally. Nio delivered just under 190,000 vehicles in 2022, while Elon and Co. pumped out over 1.3 million.

But, but, but… here’s where things get interesting for Nio. You see, the company knows that if it’s ever going to catch up to Tesla, it can’t just hang out in China forever. They’ve already started shipping cars to Europe. And rumor has it they’re scouting locations for a factory in the U.S. or Mexico.

(Source: Nikkei Asia) 

Of course, if they can actually pull this off, then Nio may have a better chance of taking some more market share in the future. But still, even though Nio has shown that it has ambition, the billion dollar question is if the company has the staying power?

Especially with all these discounts and incentives (that end up cutting into profit margins). Sure these strategic moves are good short-term sales boosts, but they could just be a Band-Aid on a gaping wound. Plus, let's say that Nio’s promotions juice up deliveries over a quarter or two, which would be great… 

(Source: Giphy) 

But let’s be real here - the long term success doesn’t come from who can throw out the most discounts, it’s about who can build a brand that people trust and want to be seen driving. And right now, Elon has the majority of the market on lock. 

(Source: Giphy) 

At the end of the day, Nio is roaring nearly 11% today as it tries to recoup its massive YTD losses. So obviously the sentiment here is bullish as the consensus price target is sitting at $20.75, indicating a +271.86% upside. But still, with negative net income sitting in the $4-$5 billion range, while net profit margin is nestled around -25%, the fundamentals are definitely lagging on this company going forward. 

Now of course, do what you will with that information, but regardless, discounts and incentives are just a temporary solution to a more seismic problem. And until, Nio figures out how to be “profitable”... well, it’s a no for me. 

At the time of this writing, Nio Inc. is up +10.35% on the day, (down -33% YTD). 

P.S. While traders and investors are partying on Nio’s +11% gain today, our last Stocks.News alert catapulted +162% in less than 24 hours. And guess what? We are about to release another explosive alert soon - click here for the details. 

Stocks.News holds positions in Tesla as mentioned in the article.