Shares of Chinese electrical vehicle (EV) company NIO Limited have been punished over the past six months, falling 17% YTD. The company’s inability to grow its vehicle delivery rate has alienated investors, which are concerned that larger EV automakers such as Tesla have begun to squeeze NIO’s profit margins particularly in its own Chinese market.

The U.S.-listed shares of NIO Inc. dropped Friday, after the China-based electric vehicle maker reported first-quarter revenue that missed expectations, amid a decrease in average selling prices, and warned of a big miss in the current quarter.

NIO’s losses have widened, but beat expectations, while gross margin contracted. In its unaudited financial result on Friday NIO reported a net loss attributable to ordinary shareholders of US$699.5 million in Q1 2023, up from its net loss of $287.9 million in the prior year.

For the quarter vehicle sales were $1.34 billion falling 37.5% from Q4 2022. NIO said the sales took a dive along with a drop in delivery volume and average selling price of its EVs.

Total revenues in the first quarter of 2023 were US$1.55 billion (well below consensus), representing an increase of 7.7% from the first quarter of 2022 and a decrease of 33.5% from the fourth quarter of 2022. For the second quarter of 2023 total revenue is expected to come between $1.27-1.36 billion.

NIO delivered 31,041 vehicles in the first quarter of 2023. For the second quarter of 2023, the company expects deliveries to be between 23,000 and 25,000 vehicles, down from 25,768 a year earlier.

Source: Tradingview

The share price rallied on Friday as results came better than feared. While the current rebound could extend a bit further, it is likely to turn out to be short-lived. The RSI indicator has been firmly in the bear market range since October 2021 and at this juncture in time there are no signs of picking up. Until the leading RSI indicator remains below the current 60%-70% range, the primary down trend is intact and it’s premature to speculate about a turnaround.

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