Nio Stock under $5: Is It a Good Investment Or a Potential Loss?

TradingKey - The global electric vehicle (EV) market has matured, and competition is increasing. As Nio's stock (NYSE: NIO) price continues to trade below $5 per share after hitting $8 earlier this year, it has become an important indicator of how investors feel about Chinese EV manufacturers. Nio's recent share price movement shows both potential for continued growth and challenges that may prevent it from reaching its full potential. 

The fact that Nio has had record-high vehicle delivery numbers in 2025 but has continued to lose money while the political climate in China changes creates uncertainty for an investor in 2026 about whether or not investing in Nio at this moment represents a strong opportunity.

Background/Event Core: Falling Share Prices in a High-Growth Industry

Nio was once one of the brightest stories in the electric vehicle space around the world; however, Nio's stock price has decreased dramatically since it reached its highest share price in 2025. This decline has continued despite increased vehicle delivery numbers for Nio in 2025; therefore, the volatility in Nio's share price continues. Nio's current trading range fluctuates between $4.00 and $4.50. 

Additionally, due to high levels of volatility in the sector as a whole, this drop in Nio's stock price represents a recalibration of the market based on Nio's status as an upgrade from growth company to a company focused on making a profit within one of the most competitive electric vehicles' markets globally.

Nio Continues to Show the Momentum of an Expanding Company

The record delivery numbers achieved by the company demonstrate that there is a substantial appetite among consumers for Nio's vehicles, with multiple months showing an increase in deliveries of over 70% compared to a year ago.

The business differentiates itself from its competition through its BaaS and battery swap network. Not only does this help lower the customer's purchase price for their car but it provides the company with a recurring revenue stream. While delivery growth rates can vary from each quarter, growth has outpaced the growth of revenue by a considerable amount, indicating a high degree of acceptance for Nio's vehicles in price-sensitive categories of consumers.

Nio's international expansion further expands the potential customer base. Nio has established sales and service centres in numerous European countries, and it plans to enter additional European markets in 2026. However, the European Union has imposed significant tariffs on the importation of new Chinese electric vehicles ranging from approximately 17% to over 35%. As a result, it is likely that Nio will not be able to achieve competitive pricing in those markets.

Issues Surrounding Profitability and Financial Stability

Persistent Losses Despite Growing Sales Revenues

Although there are increasing deliveries, Sales Revenue, etc., Nio's profitability has still not been achieved. The company has experienced sequential quarterly losses that have widened year over year since its inception, while its annual net losses have escalated from hundreds of millions of dollars to several billion dollars each year, even while the company continues to grow at an impressive pace.

However, this may not all be bad news for Nio shareholders; there are indications that a change may be coming: In the most recent quarter, the company is reporting that net losses decreased compared to previous quarters, and the management has publicly stated that they are targeting to achieve their first-ever profitable quarter during the fourth quarter of 2025. If Nio is successful in achieving profitability, it is expected to provide a tremendous boost to investor confidence and the stock price will likely increase significantly.

Nio's recent capital raising efforts and new equity offerings to support the development of R&D, Charging Infrastructure, and the expansion of their swap stations indicate that the company is in need of more financial resources as they attempt to expand globally. These efforts to raise new funds will assist with Nio's liquidity position, but will also create concerns regarding dilution and the longer-term efficiency of Nio's capital structure.

Strategic Circuitry: Battery Swap and Recurring Revenue

Diversity in Product and Ecosystem Strategy

Battery Switch Technology clearly distinguishes Nio from its competitors with the ability to quickly change batteries. Due to the speed of changing batteries, Nio's battery swap technology reduces the time needed to refuel and increases convenience for the consumer. Early adopters of the technology have also distinguished them from other electric vehicle manufacturers in China, where the majority of EV manufacturers are competing on the basis of price.

The Battery as a Service Business Model creates a unique revenue opportunity not dependent on the sale of cars and thereby provides a steady stream of income. Additionally, because of the high volume of vehicles sold and the associated deliveries, the re-occurring nature of this revenue stream is expected to increase significantly over the next several years.

Even with signs of it increasing in value, there are notable risks that should be considered regarding the investment in Nio.

Uncertainty around Profitability: Half of Nio's major monetary losses have contracted since their previous peak point and whilst Nio still has negative annual earnings, they have improved over recent years so in-may 2022 they have not recorded consistent annual profits. However, in order for Nio to provide a sustainable long-term return on investment, they must carry out additional cost control measures and scale their business operations easily.

Changing Policies and Incentives for Purchasers: In China, consumer purchase incentives for EV purchasers that were once robust will be diminished in 2026 and 2027, resulting in a slowdown in potentially retail demand and a drop in vehicle deliveries.

Tariff Structures: Tariffs imposed by the European Union on imported Chinese-produced EVs represent a significant barrier for Nio's international sales strategy, especially with their desire to enter price-sensitive markets.

Intensity of Competition: The Chinese EV market is an extremely competitive sector with local competitors (BYD, Xpeng, and others) often outgrowing profitability and margins faster than Nio.

The above factors lead to a depressed valuation for Nio stock with it currently trading at a trailing sales multiple of approximately 1.1 and indicates that the markets have priced in a considerable amount of uncertainty about the company's future prospects.

Investor Takeaways: Positioning and Fundamentals

For those investors who would like to invest in nio stock at under $5, there is a thesis around growth versus execution risk.

For growth-oriented investors, the current stock price could be seen as an opportunity to invest in a long-term growth story related to scaling its delivery volume, monetizing its battery swap network, and expanding across international markets.

For risk-averse investors, consider the completed history of the company's unprofitability, the current or anticipated policy headwinds, and its execution risks, along with the consequent probability of stock price volatility caused by quarterly results and macroeconomic conditions.

Therefore, the overall outlook for Nio has to do with whether the company can generate consistent profits and sustainable cash flow from a growing volume of deliveries. The ability to achieve its first profitable quarter, structure some level of incentives that could change, and continue to grow indicates a major opportunity to significantly impact the stock valuation and investor perception over the next three years (by 2026).