Nio (NYSE: NIO) electric vehicle (EV) sales are booming, margins are improving, and consumers are queueing up for its newly launched mass-market EV brand, Onvo. By all logical metrics, the Chinese EV maker is executing well and bucking the slowdown in China’s overall automotive industry. Yet, the stock fell 12.4% in May, according to data provided by S&P Global Market Intelligence.
To understand why Nio fell, you probably have to look beyond its EVs and toward a shifting global landscape.
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Nio’s numbers reveal solid growth
Nio released its first-quarter numbers last month. Q1 deliveries jumped 98% year over year to 83,465 units. Vehicle sales more than doubled to $3.3 billion, while gross margin improved from 7.6% to 19%, driven mainly by higher average selling prices. Nio reported a net loss of only $0.03 per share, crushing analysts’ estimates.
It was also an aggressive launch period for the company, with Nio launching Onvo L80 SUV in mid-May and the Nio ES9 SUV later in the month. Importantly, it began deliveries immediately, providing an instant volume boost.
Additionally, Nio’s ultra-premium ES8 continued to dominate, holding the number one sales spot in China for all vehicles priced above RMB 400,000 for five consecutive months.
With everything seemingly working in Nio’s favor, why did the stock still fall in May?
The biggest cloud hanging over EV stocks was a slowdown in China’s auto market, with car sales falling for the eighth straight month in May. Nio’s CEO William Li even said that China’s automotive market has likely moved past its “golden era.” EVs and plug-in hybrids made up 62% of total car sales in May, but their sales were also down for the fifth straight month.
In what may have also come as a surprise to Nio investors, the company is pulling back on its international growth plans. Nio is not exiting any market, but is planning to adopt partnership models instead of direct sales to cut costs, according to CnEvPost. This is in sharp contrast to rival Xpeng‘s business strategy. Xpeng plans to double overseas sales in 2026. It already operates in 60 countries and regions and is targeting the Latin American market next.
Should you buy Nio stock now, or avoid it?
Nio is flush with cash and has the capital runway to keep expanding its massive battery-swapping infrastructure, also one of its biggest competitive advantages. It projects Q2 deliveries of 110,000 to 115,000 vehicles, representing nearly 53% to 60% growth year over year. Nio’s shift toward an asset-light business model overseas is also a smart move.
