Under $5 and Down 20% YTD, Is NIO Stock a Bargain Buy Now?

NIO Inc. NIO is a notable name in the Chinese EV market with several growth drivers in place. Vehicle deliveries are rising, new models are being rolled out, its battery swap technology gives it an edge, and the company continues to make progress in smart driving and operational efficiency.

Despite these, NIO shares have been down 20% so far in 2025 and are currently trading below the $5 mark. That’s around 94% off its all-time high levels. So, should you scoop up the shares now on the hopes of a potential rebound? Or are there still enough challenges that outweigh the positives? Let’s break down.

NIO’s Expanding Portfolio Faces Fierce Rivals

In the first quarter of 2025, NIO delivered 42,094 vehicles, up 40.1% year over year. For the second quarter, it expects 72,000-75,000 deliveries, signaling growth both on a year-over-year and sequential basis.

New model launches are fueling momentum. In late May, NIO rolled out ES6, EC6, ET5, and ET5T. Its next-generation ES8 SUV is slated for launch in the fourth quarter of this year.

The company is also banking on its sub-brands to expand market share. ONVO, which targets the mainstream market, and Firefly, which is focused on smaller premium EVs, are starting to gain traction. Since April, ONVO has made several operational and organizational adjustments that have boosted productivity and improved the sales team’s efficiency. Orders for ONVO vehicles have been rising steadily since late April.

ONVO’s first model, the L60, is off to a solid start. The second model, the L90, is set to begin deliveries in the third quarter of 2025. Meanwhile, Firefly’s first model began deliveries in late April.

However, competition is intense. NIO’s closest peers, Li Auto LI and XPeng Inc. XPEV, continue to outpace it in deliveries. In the last reported quarter, XPeng delivered 94,008 vehicles, while Li Auto sold 92,864. NIO still has quite a bit of catching up to do.

How NIO’s Tech Could Fuel Its Next Growth Phase

NIO is making strides in smart driving technology with its NIO World Model (NWM), a core part of its NADArch 2.0 architecture. NWM allows real-time decision-making directly from raw sensor data. Since late May, NWM has been rolled out to vehicles on the Banyan platform. NIO’s in-house smart driving chip, the NX9031, is now used in the flagship ET9, as well as ES6, EC6, ET5, and ET5T, and will power more upcoming models. These vehicles also feature NIO's full-domain SkyOS operating system and an intelligent chassis system, boosting both performance and cost efficiency. NWM powers features like Navigate on Pilot Plus, which guides cars through tollgates, parking lots, and highways, even without maps or prior memory.

NIO’s battery swap technology gives it a key edge in the EV space. Drivers can replace batteries in minutes, avoiding long charging times. The company operates 3,408 swap stations globally, including 989 on China’s highways, and has completed over 35 million swaps.

NIO Chasing Efficiency But Breakeven Still Elusive

NIO is taking steps to boost operational efficiency and control costs. The company has created the new Veeco product line, merging R&D resources across its NIO, ONVO, and Firefly brands. This consolidation will help it cut R&D expenses while streamlining logistics, quality control, and supply chain functions. Sales and service operations have also been optimized.

The company also expects its SG&A expenses to reduce from the second quarter of 2025, with a target to bring non-GAAP SG&A costs to within 10% of revenues by the fourth quarter, supporting the company’s breakeven target.

The launch of new NIO models, along with the company’s in-house chip, is expected to cut costs by about RMB 10,000 per vehicle and lift NIO brand’s gross margin to around 15% in the second quarter of 2025.

In the last reported quarter, NIO’s overall vehicle margin was 10.2%, up from 9.2% a year ago, but down from 13.1% in the fourth quarter of 2024. Meanwhile, rivals Li Auto and XPeng continue to post stronger margins. Li Auto reported a first-quarter 2025 vehicle margin of 19.8%, while XPeng reached 10.5%, both showing year-over-year and sequential improvements.

NIO’s targets are bold, but its path to breakeven is far from certain. NIO’s margin pressure, especially when rivals are expanding theirs, raises questions about its pricing power and cost control. The fierce price wars in China’s EV market aren’t easing, and any further discounting could erode profits even more. For now, profitability remains an uphill battle.

Take a look at the consensus mark for NIO’s 2025 and 2026 bottom line.

How to Play NIO Stock Now

NIO’s turnaround efforts are clear, from product expansion to cost optimization and tech advancements. Yet, the company remains in a tough spot. Margin pressure persists as rivals like Li Auto and XPeng pull ahead both in terms of deliveries and profitability. The ongoing EV price war in China adds further uncertainty to NIO’s breakeven timeline.

That said, valuation could offer some cushion. NIO currently trades at a forward price-to-sales ratio of just 0.44 — not only below industry peers but also well under its own five-year average. For long-term investors with a high-risk tolerance, this may present an early entry point if the company executes on its growth and margin targets.

Still, given the competitive landscape and near-term headwinds, a wait-and-see approach seems more prudent for now. It makes sense to stay on the sidelines and wait for clearer signs of sustainable growth and profitability. Investors should watch how the next few quarters play out and whether NIO can meet its ambitious targets.

NIO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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