Image courtesy of 123rf.com

This year has been challenging for the broader electric vehicle (EV) market, with the Chinese automaker Nio (NYSE: NIO) grappling with especially intense pressure. The company’s stock fell more than 5% on Tuesday, hitting a 52-week low.

Nio Shares Hovering Above 3.5-Year Support

Nio stock fell 5.7% on Tuesday to $5.79, a fresh 52-week low.

The downswing represents the latest blow for the EV maker, which has been on an overall downtrend since the start of 2024. Year-to-date, the stock plummeted more than 31%, making it one of the worst-performing EV stocks.

Overall, the broader market has been trading in the red this year, with the industry leader Tesla (Nasdaq: TSLA), BYD, and Li Auto (Nasdaq: LI) all seeing double-digit losses since January 1.

At the current share price, Nio is trading well below its 100-day and 200-day moving averages (MA), which are located at $7.98 and $8.95, respectively.

On the downside, the stock is hovering above $5.5, a level not touched since June 2020. On the upside, Nio faces a resistance zone between $6.9 and $7. Clearing this barrier would allow the bulls to attack the resistance at the 200-day MA.

What’s Next for Nio?

Nio’s recent downturn was quick and painful, yet its path to recovery appears considerably more challenging. A significant factor is the EV maker’s difficult journey toward profitability, among other things.

In the 12 months leading up to September 30, Nio reported a significant loss of 21.4 billion Chinese yuan ($3.02 billion) against revenue of 54.6 billion Chinese yuan ($7.70 billion), translating to 39 cents lost for every dollar earned.

The company’s vehicle margin declined to 11% in Q3 2023, down from a peak of 20.1%, while Tesla’s automotive gross margin also dropped to 18.7% from 27.9% in the same quarter the previous year.

This contrasted with Tesla’s $1.76 billion operating profit in Q3 2023 and Nio’s $664 million operating loss. To break even in Q3 2023, Nio would have needed 6 billion yuan in vehicle sales, more than double its sales for the quarter.

Still, it’s not all doom and gloom. The carmaker ended 2023 on a high note, delivering 18,012 in December, up around 13% from a month prior. During Q4, Nio delivered 50,045 units, just below its quarterly high of 55,432.

Looking ahead, the company is broadening its manufacturing scope by introducing sub-brands, targeting the more affordable vehicle segments. Nio estimates it holds a significant share of over 40% in the ultra-premium market.

More By This Author:

Fed Meeting Preview: Investors Eager For Rate Cut Clues
Boeing Q4 Earnings: -$0.47 EPS And $22B In Revenue
Mastercard’s EPS Climbs to $3.18 in Latest Quarter, $6.5B in Revenue