Where next for Nio’s stock in 2022?

Nio’s [NIO] stock skidded last week as omicron fears spread across global markets. In Nio’s case, the electric vehicle (EV) manufacturer had already been hit hard by semiconductor shortages so news that global supply chains could once again be affected was particularly unwelcome.

Friday was particularly nasty for Nio as the stock slipped over 11% as news that another US-listed Chinese company, Didi [DIDI], would be delisting from the New York exchange and relisting in Hong Kong following government pressure. Rival Xpeng also saw the price of its US-listed shares slump.

Still, deliveries doubled in November - a relief for shareholders following October’s decline, which the company pinned on upgrading manufacturing facilities and supply chain problems.

After an extremely volatile year can the EV manufacturer turn it around in 2022?

What’s happening with Nio’s share price?

Nio’s stock grew 1,500% in 2020, but it's been a different story this year. Since the start of 2021, Nio’s stock is down over 34%. Having started January around the $51 mark, Nio’s stock raced to a high of just over $62 by 9 February. However, just under a month later on 8 March, the stock closed at just over $35. Since then the stock has had a volatile ride, and despite hitting $50 at the end of June closed Friday at $32.15.

When compared to Xpeng gaining 2.26% this year and Tesla’s 43.8%, Nio’s stock has certainly underperformed. However, the EV market in China continues to accelerate and Nio managed to deliver some impressive numbers in November.

Can a growing China EV market help Nio’s share price?

According to data from the China Association of Automobile Manufacturers (CAAM) overall car sales in China came in at 2.33m vehicles in October, down 9.4% from the same period last year and the sixth month of consecutive declines as the semiconductor shortage affects production.

Yet despite the overall drop in vehicle sales, the country's EV market is growing. Between January and October 2.41m EVs have been sold in the country, up 241.3% year-on-year. During October, 383,000 new energy vehicles were sold in China, a 142% jump year-on-year, according to CAAM data.

In November Nio’s sales shifted gears with the company unloading 10,878 vehicles, more than twice the number sold the same time last year, as well as the previous month. While that’s still behind local rival Xpeng’s 15,613 EVs for the month, it’s certainly an improvement on October’s 3,667 deliveries.

According to a KPMG survey of auto executives, electric vehicle sales could make up half of all automobile sales in the US and China by 2030. Behind the numbers are varying opinions. Some executives expect EV sales to be less than 20% of the market by 20%, others 80%. 53% of those surveyed expected the market to be profitable within the next five years. 77% say that mass adoption of electric vehicles could happen within ten years without government incentives thanks to a drop in battery costs.

Where next?

Should investors buy now, hoping Nio’s stock performance changes in 2022? Certainly if supply chains stabilize, then production numbers could continue to grow. The fact that Nio’s stock has lagged behind its competitors means there could be more upside in the company should it manage to deliver consistent growth.

However, anyone interested in investing in China needs to be comfortable with the risk after regulator intervention in Chinese companies listed overseas. The example of Didi is a stark reminder of the dangers posed by state intervention.

As it stands Nio has a $58.43 price target from analysts tracking the stock on Yahoo Finance - hitting this would see an 81.7% upside on Friday’s close.