Should You Buy Nio Stock While It's Below $5 a Share?

• Although Nio has seen immense year-over-year income growth, profitability remains elusive.

• Upcoming changes to Chinese EV acquisition incentives complicate the company's outlook.

• European Union tariffs whitethorn upend the automaker's planetary enlargement efforts.

• 10 stocks we similar amended than Nio ›

The stock terms of Chinese electrical conveyance (EV) shaper Nio (NYSE: NIO) has fallen to $4.95, much than 35% disconnected its 2025 precocious and little than $2 distant from its all-time lows.

Given however rapidly the automaker has been increasing its sales, it mightiness look similar a no-brainer bargain astatine the existent banal price. But determination are 3 large risks up for Nio. Investors should see them cautiously earlier buying the stock, adjacent astatine this discounted price.

Nio's gross has been soaring arsenic its income person grown by awesome double-digit percentages. In November, the institution made 36,275 conveyance deliveries, a year-over-year summation of 76.3%. That's not acold disconnected from its record-setting October deliveries of 40,397 vehicles, a 92.6% year-over-year increase.

Despite these grounds transportation numbers and awesome year-over-year growth, Nio isn't profitable. In fact, the much vehicles it sells, the worse its profitability numbers look to get. After posting a nett nonaccomplishment of $813.6 cardinal successful 2021, its nett losses grew to $1.6 cardinal successful 2022, $2.2 cardinal successful 2023, and $3 cardinal successful 2024, each portion its gross soared from $5.6 cardinal to $9.1 billion.

However, the institution mightiness beryllium turning things around. Its quarterly nett losses shrank sequentially implicit the past 3 periods, and absorption reportedly aims to marque the 4th fourth the first-ever profitable quarter. If it succeeds, shares volition apt rise; if not, they are apt to autumn further.

Even if Nio manages to eke retired a azygous profitable quarter, contention successful the Chinese EV marketplace is continuing to vigor up, truthful maintaining that profitability whitethorn get adjacent much hard arsenic clip goes on.

The Chinese authorities pulled retired each the stops to assistance jump-start the country's electrical car industry, offering important acquisition subsidies for EVs done 2022 and presently offering afloat taxation exemptions for purchasing a vehicle. However, those exemptions are gradually being phased out, starting adjacent month.

Instead of offering a taxation exemption connected the afloat acquisition terms of an EV up to RMB 30,000 (about $4,260), the authorities volition lone connection a 50% exemption worthy up to astir $2,130 successful 2026 and 2027. After that, the exemptions are acceptable to expire.