NIO (NYSE:NIO) is one of my favourite electric vehicle (EV) stocks, but in recent weeks the share price has been pushing lower. Last week, geopolitical concerns led to many US-listed Chinese stocks sinking. The US has continued to reiterate its support for Taiwan and the threat of sanctions is very real as tensions worsen between the two superpowers.
But let’s take a closer look at this stock and explore whether it is right for my portfolio.
Five-year trend
Over the past five years, the NIO share price has risen 73%. But as a British investor, I need to take into account currency fluctuations.
Five years ago, a pound was worth $1.32. Today, it is worth $1.07 — that’s an 19% depreciation. So back then, £1,000 was worth $1,320, while today $1,000 would be worth £934.
So today my original investment would be worth $2,238 which, in turn, would be worth £2,129. That’s a pretty good return.
Although I’d be kicking myself if I hadn’t sold out earlier. Today, the share price is around $17. But in early 2021, NIO shares were trading for over $60.
What’s been moving the share price?
Between 2018 and 2020, the NIO share price gradually pushed downwards. But as the pandemic hit the rest of the world — and China emerged from its long lockdown — the NIO share price rocketed. In just a matter of months the stock rose from a little above $3, to more than $60, as the company emerged as a possible contender to Tesla.
NIO stock collapsed along with other growth stocks in late 2021 and early 2022. And, throughout the course of 2022, the stock has been pretty volatile.
There are several reasons for this. Chinese EV stocks were hit hard by Covid lockdowns that hampered production in Q1 and Q2 and now, with geopolitical tensions simmering, there are increasing concerns about sanctions and state meddling. These geopolitical concerns have been exacerbated by economic issues in China.
This time I’m saying ‘no’
I’ve been very bullish on NIO for a while. I think its a really strong brand with some great USPs. For one, NIO employs battery-swapping technology that allows drivers to turn up at a NIO garage and swap their empty battery for a full one in a matter of minutes.
The Shanghai-based company also has a range of vehicles to buy — and this is particularly important as choice is normally positive for sales. Equally, NIO utilises tech in novel ways. The vehicles are fitted with a voice-controlled device called Nomi that can even open the windows and boot.
However, on this occasion, I’m not buying NIO shares simply because of currency depreciation/future appreciation. When I first bought NIO shares, the pound was worth around $1.28. But today it’s worth $1.07.
I’m an optimist and, one day, I see the pound being back around $1.20/1.30 — quite frankly, all it would take is some sensible fiscal policy. The thing is, if I buy NIO now, and the pound appreciates to $1.30, it will wipe 17% off my investment.