2022 has been far from a smooth ride for NIO (NYSE: NIO) stock. The Chinese electric vehicle manufacturer grabbed headlines with its monumental 1,100% rise in 2020. Yet since then, it’s struggled to keep up the impressive momentum.
The NIO share price is down nearly 50% this year. Across the last 12 months, the stock has fallen 54%.
So, where will NIO stock go next? Should I be steering clear of it? Or at $17 is this an opportunity for me to grab some cheap shares? Let’s find out.
Latest results
Yesterday saw the release of the firm’s Q2 results. Within the update, there were encouraging signs. Vehicle sales rose by 21% year on year to $1.43bn, and 3.5% compared to Q1. On top of this, total revenue rose by 21.8% compared to Q2 2021 to reach $1.53bn.
Despite this, NIO shareholders will no doubt be focusing on the fall in gross profit. This dropped 14.8% on the year. And compared to Q1, the figure fell 7.4%. What will also be of concern is the firm’s net loss, which widened by a massive 369.6% against a year ago.
2022 struggles
These results paint an accurate picture of NIO’s struggles this year as rising inflation across the globe has pushed up costs. As the business said itself, 2022 has been plagued by “tremendous challenges and cost volatilities.”
NIO has also faced a string of supply chain issues. With China in a continuous battle to eliminate Covid infections, the firm has seen its production halted for stretches.
Despite this, it still predicts it will deliver between 31,000 and 33,000 vehicles in the third quarter, showing it has no plans to slow down.
Electric transition
Even with the above, the biggest issue I see surrounding NIO is the inevitable transition to an electric world, which will have both its benefits and drawbacks.
First, there’s no doubt that governments across the globe will magnify the emphasis placed on the transition to renewable energy. This has already been taking shape. And with the Russia-Ukraine conflict proving it, a reliance solely on conventional energy sources is unsustainable.
For NIO, this is clearly good news. As electric cars become more mainstream, hopefully, the business will see demand for its vehicles increase.
However, this does also alarm me. That’s because I can see a surge in competition in the years ahead as established manufacturers accelerate in the attractive EV market. NIO is expanding in Europe, which should provide the firm with a boost. But how the Chinese firm fares in what’s set to become a saturated market is of concern to me.
Where next?
So, where does the business go from here? And should I be buying NIO stock?
I won’t be buying today. As inflation continues to rise this may further hinder NIO’s operations. And despite it having unique selling points such as its battery-swapping technology, I’m not confident in judging how NIO will stand up against the unavoidable competition. Its share price is low, but right now, it’s not for me.