NIO Stock Plummets 17.7% in March Despite Early Rally Hopes

Chinese electric vehicle maker NIO (NYSE: NIO) saw its stock tumble sharply in March, dashing investor hopes after a brief mid-month recovery.

NIO (NYSE: NIO) Delivery Numbers Present Mixed Signals

After rallying 12% by March 18th, investors thought NIO stock had finally found its bottom. Unfortunately, this optimism was short-lived as the electric vehicle manufacturer's shares quickly reversed course, ultimately hitting a 52-week low and ending March down 17.7%, according to data from S&P Global Market Intelligence.

The trouble began on March 1st when NIO announced its latest delivery numbers, which presented a complicated picture. While year-over-year deliveries increased an impressive 62% in February, they showed a concerning 4.8% sequential decline from January. This mixed performance raised questions about NIO's growth trajectory in an increasingly competitive Chinese EV market.

More troubling was the performance breakdown between NIO's vehicle lines. While deliveries under the flagship NIO brand actually rose 15% over January figures, the company's mass-market sub-brand Onvo experienced a sharp 32% sequential decline in deliveries, suggesting potential challenges in NIO's expansion strategy beyond premium vehicles.

NIO Reports Record Quarterly Losses Despite Sales Growth

Days after the delivery announcement, NIO released its fourth-quarter financial results, which revealed a record net loss of $974 million. This represented a 33% increase in losses year-over-year, despite the company achieving 13% growth in vehicle sales during the same period.

There were some positive signals in the financial report. NIO's gross margin improved significantly to 11.7% in Q4 from 7.5% in the year-ago quarter, demonstrating better manufacturing efficiency and pricing power. However, these gains were more than offset by substantially higher operating expenses as the company aggressively invested in marketing its new brands and expanding its sales network throughout China.

NIO (NYSE: NIO) Share Sale Announcement Drives Stock to 52-Week Low

The final blow to NIO's stock price came in late March when the company announced plans to sell nearly 136.8 million shares in offshore transactions at a price of 29.46 Hong Kong dollars per share. This offering represented a steep 9.5% discount to the previous day's closing price on the Hong Kong stock exchange, a move that typically signals financial pressure.

Investors reacted negatively to this dilutive capital raise, sending NIO stock tumbling to a 52-week low of $3.57 on March 31st. The timing of the share sale, combined with the company's growing losses, intensified market concerns about NIO's cash burn rate and path to profitability.

Future Growth Strategy for NIO Focuses on Sub-Brands

Despite these short-term challenges, NIO is pursuing an ambitious growth strategy centered on its sub-brands. Onvo, which began deliveries of its first model (the L60 SUV) in September 2024, is already preparing to launch its second model, the L90, in the coming weeks. While Onvo deliveries declined in March, this may reflect seasonal patterns rather than fundamental issues, as the period around Chinese New Year typically sees weaker auto sales.

Meanwhile, NIO's second sub-brand, Firefly is scheduled to launch its first model—a compact hatchback—on April 19th. This multi-brand strategy aims to help NIO capture different market segments across the electric vehicle spectrum.

NIO (NYSE: NIO) Provides Optimistic Q1 Guidance Despite Financial Concerns

In terms of the near-term outlook, NIO's guidance remains relatively optimistic. The company expects to deliver between 41,000 and 43,000 vehicles in the first quarter, which would represent year-over-year growth of approximately 36% to 43%. Similarly, its Q1 revenue guidance suggests potential growth of around 23% to 30% compared to the same period last year.

NIO Valuation at Historic Lows Amid Cash Burn Concerns

From a valuation perspective, NIO stock is currently trading at nearly its lowest price-to-sales ratio ever, potentially presenting an opportunity for investors with high risk tolerance. However, prospective investors should closely monitor the company's costs and financial position, as these factors will likely determine the stock's future trajectory.

NIO stated that it is selling shares to raise funds for research and development of EV technologies and new products, as well as to strengthen its balance sheet. The latter purpose deserves particular attention, as NIO continues to burn through cash at a concerning rate. In fact, the company's current assets failed to fully cover its current liabilities as of the end of the fourth quarter, highlighting potential liquidity challenges ahead.