Image source: Sam Robson, The Motley Fool UK
As a long-term investor, I see patience as a crucial attribute for any stock market investor. But the patience of investors in carmaker NIO (NYSE: NIO) has certainly been tested in recent years. NIO stock has fallen 67% over the past five years.
From hitting a stock price of over $60 in 2021, NIO has fallen as low as close to $3 over the past year. Overall though, 2025 has so far seen the price revving up.
NIO now trades for 61% higher than at the beginning of the year. But it is still a long, long way below its 2021 price. So could it just be getting started?
Fast-growing business with wind in its sails
It is not only NIO’s stock price that now looks very different to 2021. The business – and its marketplace – have also evolved a lot.
The marketplace for electric vehicles (EVs) has changed because demand has grown but heightened competition has put pressure on profit margins.
A growing market size presents an opportunity for all car makers, including NIO.
Lower profit margins however, are a risk. NIO’s long-term focus on building a premium brand can give it some insulation here. So too can its launch of innovative vehicles, including several large models it announced over the summer.
In the last quarter, NIO delivered over 72,000 vehicles. That represents volume growth of 329% compared to the equivalent quarter in 2021. With a growing installed user base, wider model range and increased demand, I see NIO as having the wind in its sails.
Lots still to prove when it comes to profitability
NIO has recently taken advantage of that – and its booming stock price – to boost liquidity by selling more shares. That helps it buy time, as it continues to burn cash.
While a lot has changed for the company since 2021, one thing that has not is its consistent inability to turn a profit.
In fact, its net loss in the most recent quarter was dramatically higher than the equivalent figure for 2021.
Watching without investing… yet
That concerns me as a potential investor. The startup costs of ramping up production can make car manufacturing an unattractive proposition. But the ideal is that, as sales volumes grow, losses reduce due to economies of scale – and eventually a company can turn a profit. That is what happened at Tesla, for example.
So far, profits have been elusive at NIO. In the short-term, I think a strong newsflow and any more positive sales updates could potentially push NIO stock even higher.
What about the long term? I think NIO could soar even from here – or fall a long way. What happens, in my view, will likely ultimately depend on whether NIO can turn the corner when it comes to profitability.
Investors remain patient. If NIO can become consistently profitable, I think its share price could potentially end up far above today’s level.
For now though, I see the ongoing lack of profitability as a risk. So I will not be buying NIO stock without evidence that the company’s business model can be profitable on a sustained basis.
