Should I buy NIO stock for 2023?

NIO (NYSE: NIO ) shares have fallen sharply this year. Back in January, the stock was over $30. But today, it’s almost $11.

Should I buy Chinese electric vehicle (EV) stocks for 2023? Or are there better options for my portfolio? Let’s talk about it.

Bull case

There are several reasons to be bullish on NIO today. For starters, the new results show that the group continues to grow at an impressive rate.

For the third quarter of 2022, NIO delivered 31,607 vehicles, up 29% year-on-year. Vehicle sales totaled RMB11,933m, up 38% year-on-year.

Second, the EV market in China is expected to grow significantly in the coming years. According to Mordor Intelligence, it will grow by more than 30% annually between 2022 and 2027. This is an incredible growth rate and should provide a huge headwind for NIO.

Third, NIO branched out to Europe. Back in October, the company unveiled its products and services for Germany, the Netherlands, Denmark, and Sweden at the NIO Berlin 2022 event. The company said that “complete confidence“in future performance in Europe.

Finally, sentiment towards Chinese growth stocks appears to be improving. This is a result of the easing of the Covid-19 lockdown and China-US tensions.

The case of the bear

But at the same time, there are some risks to consider. One of them is the current economic slowdown in China. In November, retail sales in China fell 5.9% year-on-year. This shows that consumers are struggling.

The problem here is that NIO vehicles are expensive. So we could see EV buyers turning to cheaper alternatives in 2023, for example Xpeng G9 SUV or Hongguang Mini.

It’s worth watching here Teslawhich also sells relatively expensive EVs, recently cut its prices in China.

Another risk is production and delivery issues. Earlier this week, NIO revised its Q4 delivery outlook down to supply chain constraints and delivery challenges.

Of course, there is also the fact that NIO will not be profitable in the long run. For 2023, analysts expect the company to post a net loss of RMB6,976m.

Unprofitable companies are unpopular with investors in 2022 and I think it will be the same story in 2023. With interest rates rising, investors want to see profits now.

The only thing related to the profit is the fact that the gross profit has decreased. For Q3, it was 13.3% versus 20.3% the previous year. That’s a significant reduction.

I’m moving now

Weighing the bull case against the bear case, I would leave NIO stock on my watch list. I like the long-term growth story here. However, the lack of profit is a turn-off for me.

All things considered, I think there are better growth stocks to buy in my portfolio right now.