The Speed Bump That Sent Nio Plunging 51% in 2024

Nio (NYSE: NIO) has always been an intriguing stock. It's a large player in the Chinese electric vehicle (EV) market, but also positions itself as a lifestyle brand with leisure stores and its own line of smartphones, while also developing technologies such as solid-state batteries. The company also pioneers battery swapping stations as a method to avoid charging.

Nio has always been a roller-coaster ride, and 2024 wasn't much different as the stock shed 51% of its value throughout the year, according to data provided by S&P Global Market Intelligence. But the question is why? And was the sell-off warranted? Let's dig in.

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What have you done for me lately

The company missed estimates during the first quarter with earnings per share checking in far below Wall Street forecasts. That was of course followed by a second quarter where the company posted record-high EV deliveries, gained market share, and topped earnings estimates. And then, wouldn't you know it, Nio reported weaker-than-expected third-quarter earnings but its stock managed to sneak a small gain for the day anyway.

It serves a good reminder to investors that Nio remains a speculative stock and will have wild swings in financials as well as stock price movements.

What's the real problem?

But a brief recap of the company's financial results won't give you answers for why the stock is down 51% during 2024. That answer will come with a closer look at its home market, China, where there's a vicious price war and automakers are racing to the bottom to remain competitive.

The price war is so vicious that in a note leaked from Chinese EV juggernaut BYD showed that it was pressuring suppliers to cut prices by 10% in 2025, as market competition was expected to become even more intense.

Let's also surround this price war with context. China heavily subsidized its EV makers, which gave them a leg up on developing EV technology, and it's paying off in some ways as the country has produced some of the most affordable and advanced EVs on the planet.

It's even driven electrified vehicles to account for more than half the vehicle market in July. The competition is so intense that Bank of America analyst John Murphy said at his annual "Car Wars" presentation, "I think you have to see the [Detroit Three] exit China as soon as they possibly can."

But Nio's problems in 2024 didn't end with its domestic price war. The company also exports its vehicles, and Europe's tariffs presented a significant hurdle. Consider that Nio's vehicles in Europe now meet a 31% tariff in the European Union, up from the previous 10%.

What it all means

There is a silver lining in Nio's third-quarter results and December sales. Despite the vicious price war, which hindered the company's third-quarter vehicle sales revenue by 4%, compared to the prior year, its vehicle margin actually increased over the same time period from 11% up to 13%. If the company can continue to offset margin pressure, it will go a long way to convincing investors it's a long-term buy.

Further, December sales gave investors a sneak peek at the next phase of growth that will include its Onvo brand, which just began logging deliveries. And don't forget it just launched its third brand, Firefly, in late December, which will also add incremental sales in 2025.

Data source: Nio press releases. Chart by author.

Ultimately, investors can expect more swings in the company's financials as it drives toward future profitability -- at least investors hope -- and that will bring more massive price swings including 2024's 51% decline. Investors looking at Nio as an opportunity to buy on the dip have a compelling argument with its top-line and vehicle sales poised to boom in the year ahead, likely doubling to roughly 440,000 vehicles in 2025. But investors have to understand this stock will require much near-term patience as it navigates a tricky price war and tariff scenarios. Stay tuned, 2025 will most likely be another roller-coaster ride for the stock.

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Bank of America is an advertising partner of Motley Fool Money. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.