This was after President Xi Jinping won an historic third term as China’s leader over the weekend. He immediately called for regulation of wealth accumulation, singling out private capital in particular. Like clockwork, NIO stock was sold off in response.

Of course, all this is nothing new to investors in the electric vehicle (EV) company. Double-digit moves in the share price, one way or the other, have become routine. But I think the serious political risks now surrounding this growth stock just cannot be ignored any longer.

My own history with NIO stock

I first bought shares of NIO soon after it went public in 2018. Then, a few months later, the company’s cash balance dwindled seriously as it incinerated money in its pursuit of growth.

I waited patiently for news about the company recapitalising itself. But there was only silence from NIO’s investor relations department. Meanwhile, the stock price dipped as low as $1.50.

Reluctantly, I sold my shares and went away nursing my 50% or so loss. Then the company announced a bailout from a government-backed fund. The stock shot back up and I bought in again.

Fast-forward a couple of years, and US regulators once again announced that Chinese stocks listed in the United States were to be delisted if the companies did not comply with auditing requirements. I thought it unlikely that the government in Beijing would ever fully allow US auditing of Chinese companies.

I sold my shares again, though thankfully for a profit this time. My eventful history with NIO stock left me break-even, give or take.

The market opportunity remains enormous

The reason I invested (twice) in NIO was that my imagination was captured by the enormous growth potential of the industry the company was operating in. China has the largest and fastest-growing electric vehicle market in the world. Accelerated by supportive government subsidies and infrastructure, this EV market is only going to get much larger.

And NIO has certainly been capitalising on this opportunity. The company delivered a record 31,607 vehicles in the third quarter of this year, an increase of 29.3% year on year. It has expanded outside China to a number of EU countries, including Germany, Sweden, Denmark, and the Netherlands.

But various tensions between the US and China have overshadowed this operational progress. Some US military chiefs now believe China might invade Taiwan before 2024. If this occurs, I think US-listed Chinese stocks could totally collapse in much the same way Russian stocks did this year following the invasion of Ukraine.

No third time lucky

As a long-term investor, I like to repeatedly add to my holdings over time as my conviction in them grows. But I cannot risk adding new money into a stock I feel has the chance of being delisted.

I think NIO has the potential to become an exceptional company. But, as an investment, there are just too many political risks surrounding the stock for me to invest in it again.

Is this a great buying opportunity for me? Or is NIO stock a risky proposition from here? Let’s discuss.

The NIO growth story

The long-term growth story here is still very much intact. This is illustrated by the fact that in the third quarter of 2022, NIO delivered a record 31,607 vehicles, an increase of 29% year on year. As of 30 September, cumulative deliveries were 249,504 compared to 142,036 at the same stage last year.

What’s exciting is that the electric vehicle (EV) company is currently in the process of launching in a number of European countries, including Germany, the Netherlands, Sweden, and Denmark. In these countries it’s set to offer three vehicles – the ET7, ET5 and EL7. This should give growth a boost.

However, it’s worth noting that NIO plans to operate its business in these countries on a corporate leasing and subscription model. In other words, it will not actually be selling cars. It believes this business model will give it more flexibility. “Flexibility is the new premium,” said CEO William Li in a recent interview.

In light of this growth story, NIO stock could still be a good bet for long-term investors like myself.

Could the share price fall further?

Having said that, there are quite a few risks here that could potentially put pressure on the near-term share price.

One is production challenges, which is an industry-wide issue right now. At the moment, all EV companies are suffering from supply chain issues, battery sourcing problems, higher costs, and logistical issues. Earlier this week, Tesla said it would miss yearly delivery growth targets due to logistical challenges.

Another issue is auto sales growth in China, which appears to be slowing. In September, year on year sales growth was 25.7%, down from 32.1% in August when EV sales grew at a faster rate due to government incentives.

“The recovery trend is far lower than our expectation. The market is overall relatively weak,” commented China Passenger Car Association (CPCA) secretary general Cui Dongshu.

A third issue is competition from rivals. Right now, NIO is facing intense competition from start-ups and established automakers, both in China and Europe. In Europe, for example, its cars are up against the likes of Mercedes’ EQS and BMW‘s i4.

Finally, there’s the fact that the company is losing money. This year, analysts expect NIO to post a net loss of around $1.1bn. That’s not ideal from an investment perspective. In the current environment, unprofitable companies are very much out of favour.

My move now

Given these risks, and the fact that the company’s market-cap is still quite high, at around $19bn, I’m going to leave NIO stock on my watchlist for now.

In my view, there are safer growth stocks to buy for my portfolio today.

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.

Today, I’m looking at two firms poised to benefit from the green revolution. Can these stocks be the next big winners?

Ceres Power

Ceres Power (LSE:CWR) is pretty expensive, according to a number of metrics. In fact, it has a price-to-sales (P/S) ratio of 33 and is yet to turn a profit.

But this rather expensive valuation is reflective of the considerable potential of this clean energy stock. The company is developing fuel cell technology, and this is an area of immense potential as fuel cells could be used to power everything from cars to factories and even homes.

Ceres’s value to date very much lies in the technology it develops. But that could be about to change. The firm expects the completion of joint venture contracts with Bosch and Weichai in China in the second half of the year. The associated licence fees would also be forthcoming in H2.

Ceres, which operates through a licensing model, also expects its venture with Doosan Fuel Cell to start bearing fruit in the near future. Doosan’s 10kW Solid Oxide Fuel Cell (SOFC) — advertised as the world’s most efficient — is expected to soft launch this year. The Korean firm is also planning to open a 79,200 sq m plant in 2024 to scale up production.

While I’m bullish on this technology, I have some concerns about uptake. After all, there is no guarantee this technology will take off in a big way.

Having said this, I’d still buy Ceres shares. Its technology is certainly receiving a lot of interest — its even collaborating with Shell — and its business model delivers impressive margins, currently standing at 66%.

NIO

NIO (NYSE:NIO) is a Chinese electric vehicle (EV) manufacturer. It has a P/S ratio of around six, making it considerably cheaper than its American peers — notably Lucid at 146.

It’s got an impressive range of EVs on sales, and that’s good for reach and growth. And it’s also launching in Europe, which will provide the firm with access to a higher wealth market for its range of premium vehicles.

There are several reasons why I’m bullish on NIO, including the sector-beating performance of its cars, its use of innovative technology, including voice activated windows, and its swappable battery technology. The latter allows drivers to turn up at a NIO station and swap the battery in a matter of minutes — much faster than conventional charging.

One thing that does concerns me is sanctions. Several manufacturers, including Stellantis, have shut production facilities in China due to concerns over sanctions and meddling relating to geopolitical issues between the West and Beijing. NIO is opening a battery station plant in Hungary, but I still have some concerns about Chinese-made car having access to Western markets should the geopolitical situation get worse.

Despite my concerns, I’m backing NIO to succeed. There’s a sizeable Chinese market, and NIO is expanding one area of production into Europe. I already own NIO shares but would buy more today.

So here are two stocks that I think could be huge winners over the next decade and beyond.

NIO

NIO (NYSE:NIO) is a Chinese electric vehicle (EV) manufacturer based in Shanghai and there are several things I like about this stock that have made me buy.

Firstly, despite not yet being profitable, the firm has been on an impressive growth curve. The firm doubled revenue in each of the years between 2018 and 2021. However, 2022 might be different as the company has been impacted by Covid-19 lockdowns and supply constraints. But it will be opening its second factory this autumn.

NIO also has an impressive range of models, and that’s positive for future growth. The vehicles have impressive ranges utilising larger batteries than industry-leader Tesla. The Shanghai-based firm also has unique battery-swapping technology, allowing drivers to pull up at a NIO service station and exchange their empty batteries for a full one in a matter of minutes. That’s far quicker than conventional charging.

The vehicles are also packed full of gadgets, including a voice-controlled gismo for window opening and selfie taking.

In a fairly novel move, NIO also offers customers the chance to buy everything from groceries to clothing from its online store. The brand clearly recognises that people buy groceries more frequently than cars.

I’m aware that further lockdowns and worsening geopolitical tensions wouldn’t be good for NIO. But that’s a risk I’m willing to take in the long run. I’d buy more today.

Sociedad Química y Minera de Chile

Sociedad Química y Minera de Chile (NYSE:SQM) is a mining company focusing on lithium — the metal used in batteries that power everything from phones to EVs.

The stock has being on a bull run this year as lithium prices surged from $10,000 per tonne to around $70,000 this summer. In fact, the stock is up around 90% over the past 12 months as profits soar.

However, many analysts have forecast that lithium prices will fall towards the end of this year amid a global economic slowdown and less demand for iPhones and new EVs.

And this is why I’m not buying SQM stock just yet as I think there will be better entry points later in the year.

But I think the long-term outlook is very positive. I also see that we’re entering a period of scarcity defined by intense competition for resources — particularly lithium — and higher commodity prices.

SQM is a low-cost producer of the metal that is central to the electrification revolution and has a 25% share of the global lithium market. It also has 20+ years of reserves. 

I am concerned about the impact of currency fluctuations and the weak pounds on my USD investments, but I do see plenty of growth with SQM.

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.

Chinese electric vehicle (EV) companies are among my top growth picks. And there are several reasons for this. There is clearly a trend towards electrification — especially in China where the state is looking to take pollution outside city boundaries. But Chinese EV firms, which have sizeable indigenous markets, also trade with valuations that are just a fraction of their US peers.

So let’s take a look at two Chinese growth stocks.

NIO

NIO (NYSE:NIO) shares are down 49% over the past 12 months, but have risen from lows around $13 in May. What’s behind the volatility? The shares plummeted along with other growth stocks towards the end of 2021, and the downward track was extended by Chinese lockdowns which hurt production.

But this volatility belies a considerable potential. NIO is among the most technologically advanced EV makers in the world, delivering class-topping range, innovative battery tech and plenty of gadgets. It also has a wide range of models on sales.

Despite the positives, NIO trades with a price-to-sales (P/S) ratio far below its US peers. The stock’s ratio is 5.2, versus Tesla‘s 12.5, Lucid‘s 131 and Rivian‘s 38.

NIO is yet to make a profit and is unlikely to do so until 2024, but it has been on a Tesla-esque growth curve. The Shanghai-based firm doubled revenue in each of the years between 2018 and 2021.

2022 might be different, given the impact of lockdowns, but growth will be enhanced by the opening of its second factory. I am aware that this year’s disruptions may push back profitability, but I’ll await updates on that.

I already own NIO shares, but would buy more after the recent dip. For me, this stock is dirt-cheap and there’s huge growth potential in the EV market — Tesla’s market-cap is currently 30 times higher than NIO.

Li Auto

Li Auto (NASDAQ:LI) hasn’t experienced quite the same volatility as NIO over the past year. It’s down 7% over the 12 months, and 16% over the past month. The stock really gained earlier in the summer after Li launched its L9 model — a six-seater, full-size flagship SUV — but has subsequently fallen.

There are several reasons for the recent dip (NIO experienced it too). These include concerns about Chinese and global economic growth, but also power outages. Li actually started delivering the L9 as the power crisis heated up.

But there are plenty of positives to look at with Li. Firstly, it’s cheap like NIO, with a P/S ratio of just five.

It’s L9 — which was long awaited — also looks set to really disrupt the EV market. The $70,000 SUV comes with two electric engines and one petrol, providing 1,100km of range. Equipped with sizeable infotainment displays, passengers can easily control displays via 3DToF hand/finger tracking cameras.

The growth curve is also impressive, with 140% year on year revenue growth registered in the last quarter. Li only has two models at the moment, and that could hold it back. But, in the long run, I’m bullish on Li. I don’t own this stock but would buy it today.

With inflation rising, central banks are hiking interest rates. This is placing big pressure on growth stock valuations, as people pull their money out of speculative assets. At historically low prices, I’m looking for bargain growth stocks that could land me some big returns in the future. Below are two stocks I currently have my eye on.  

NIO

NIO (NYSE: NIO) is a Chinese electric vehicle manufacturer. It had a standout year in 2020, when its shares climbed over 1,100%. However in 2022, things haven’t been as easy with the shares falling 40% year-to-date. Over 12 months, the shares are down 47%.

The reason I like the look of this stock is due to its remarkable results. In Q1, the firm saw its year-on-year deliveries rising by 29%, with revenues climbing by 24%. Although NIO is still loss-making, its losses shrank 10% compared with the previous quarter, which is a good sign. In 2021, revenues soared by over 122%!

NIO also boasts some market-leading tech when it comes to battery charging. Its cars feature unique battery swapping technology that can be applied in a matter of minutes. Being the only manufacturer to offer this service, I think the stock is well poised to capture market share.

Rolls-Royce

Rolls-Royce (LSE: RR) is a UK-based civil engineering and defence company. It was hit hard by the pandemic in March 2020 and recorded a hefty £4bn loss for that year. However, recently the firm reported a profit for the first time since then, signalling a strong recovery so far in 2022.

Rolls makes the majority of its money from servicing aeroplane engines. With global travel increasing, I think Rolls could be in a great spot for growth this year. In 2020, just 1.8bn travellers boarded planes. Fast forward to 2022, and it’s predicted that 3.5bn customers will board flights. This should help boost revenues so the group can keep delivering profits.

Rolls is also leading the stride in small-to-medium-sized nuclear reactor technology. It expects to receive clearance to roll out these reactors by 2024 and has already signed contracts with governments around the world to implement them.

The caveat

I think that both of these companies exhibit some great fundamentals. However, no matter how these firms perform over the coming year, rising inflation could continue to plague their stock prices. If this is the case, then they could fall even lower – regardless of their encouraging results. However, adopting a long-term view, I think these stocks could be great additions to my portfolio at their current prices.

Now at $18, I’m seeing this as an opportunity to buy more NIO stock. Here’s why.

Valuation

NIO is yet to make a profit and is unlikely to do so until 2024. In fact, Tesla is only EV company to be truly profit-making. However, the Shanghai-based company has demonstrated its ability to continually grow revenue. The firm doubled revenue in each of the years between 2018 and 2021, but 2022 might be different.

There’s also a possibility that profitability might be pushed back by the lockdowns and zero-tolerance to Covid-19 that we’re seeing in China this year.

The firm currently has a price-to-sales (P/S) ratio of five. To me, that looks remarkably cheap. By comparison, Tesla has a P/S ratio of around 15.

But that’s nothing compared to the other American peers. Lucid has a P/S ratio of 153 while Rivian has a P/S ratio of 45.

Growth prospects

I actually believe NIO’s EVs are market-leading. The issue is they’re not produced or sold as widely as Tesla. But that’s something the company is looking to remedy. A second factory is opening in China this year and NIOs are now been sold in Germany, the Netherlands, Denmark, Sweden and Norway.

Unfortunately, I haven’t driven a NIO, but numerous car review videos have led me to believe it can rival Tesla outside of China. For one, the long-range version of its new ET7 can go as far as 1,000km on a single charge, putting it some distance ahead of its Tesla equivalent. 

NIO’s vehicles also possess unique battery-swapping capabilities. This allows drivers to pull up at a NIO garage and swap their empty battery for a full one in a matter of minutes — far quicker than conventional charging.

And compared to Chinese peers XPeng and Li Auto, NIO has an impressive range of vehicles and this is key to growth. Li has only just launched its second vehicle — albeit a very impressive one.

Risks

While NIO certainly has some impressive credentials there are, of course, risks, some of which are geopolitical.

For one, China’s economy appears to be entering a period of slower growth. In fact, there are some big concerns around liquidity and debt amid ongoing lockdowns, power shortages and a housing crisis. A slower economy is unlikely to be good for indigenous consumption.

But it is also worth considering the impact of Western sanctions on China. We saw these develop with the US under Trump. NIO naturally has a sizeable audience in China, but the biggest markets still lie in Europe and the US.

Despite this, I’d still buy more shares at $18. I think the future is bright for this nascent EV firm.

The lowdown

A major driver behind NIO’s poor share price performance has been the state of the macroeconomy. Inflation has been soaring across the globe, caused by a combination of Covid-19-related supply bottlenecks and soaring energy prices stemming from the tragic Russia-Ukraine conflict. Central banks across the globe have been hiking interest rates in an effort to curb this red-hot inflation. When rates rise, it weighs on growth stock valuations as investors shy away from speculative assets and pour money into safe ones. Evidently, this has been bad news for NIO.

Another threat the company has been battling is supply issues caused by a series of lockdowns in Shanghai. The lockdowns forced NIO — along with other Chinese-based EV companies like Li Auto and Xpeng — to slow down or even halt production. This resulted in a series of disappointing monthly delivery figures that seemed to have tipped investors’ sentiment away from the stock.

The firm has also been facing domestic pressure from Chinese regulators. The Chinese government aimed to curb the power of US-listed Chinese companies, and NIO has faced delisting fears as a consequence. The EV giant has undertaken secondary listings in Hong Kong and Singapore to mitigate this risk, but the threat has put serious pressure on the share price in recent months.

Electric results

In the company’s Q1 2022 results, it outlined some encouraging metrics. Year-on-year deliveries rose by 29%, with revenues climbing 24% to $1.5bn. In addition to this, the firm’s losses shrank 10% compared to the fourth quarter of 2021. This highlights the encouraging move towards profitability. In its full-year results for 2021, NIO outlined it had increased its sales by 118%, with revenues climbing a staggering 122% compared to the year prior. If it can continue this trajectory in 2022, then I think it could have a rosy stock exchange future.

A product-specific standout that entices me to buy the stock is its unique battery switching technology. Users can swap out their battery within minutes, making it super convenient. At present, NIO is the only manufacturer offering this service in the EV market. This edge could help the firm keep its market share in the extremely competitive industry.

The verdict

NIO has experienced astronomic growth in the last few years and has some market-leading tech behind it. However, for me, the macro-outlook is just too risky to invest in growth stocks at the moment. In addition to this, the supply issues and Chinese regulatory threats could continue to plague the firm. As such, I won’t be buying any shares at $19.