Tesla’s struggling. Could NIO stock benefit?

Tesla, it’s honest to say, has had a tough 2025 up to now. The stock worth is up 443% over the previous 5 years, however has tumbled 36% because the begin of 2025. In contrast, electrical automobile rival NIO (NYSE: NIO) is up 1% up to now this yr. 1% is hardly the stuff of investor desires – however it’s a lot higher than business big Tesla has managed. So, may now be the time so as to add NIO stock to my portfolio?

A difficult market

For now, I believe the reply is not any.

Tesla’s challenges, because the model reels from its chief government’s excessive political profile, are partly self-inflicted. However solely partly.

The fact is that the electrical automobile market has moved on considerably from the place it was even just some years in the past.

Demand is larger. However there are additionally a number of credible electrical automobile firms promoting automobiles. That has had an influence on costs as these makers attempt to compete. In flip, revenue margins have taken successful throughout the business.

So from NIO’s perspective, there’s each good and unhealthy information.

The excellent news is that the electrical automobile market is in development mode. The unhealthy information is that that has come on the worth of decrease revenue margins, one thing which generally tends to learn giant companies which have better economies of scale.

As I see it, although, NIO has one other particular problem: advances in battery expertise.

Dramatically quicker claimed battery charging occasions might be a boon for rivals like BYD (and its long-term investor Warren Buffett) and Tesla. However they threaten to make NIO’s battery swapping expertise largely out of date. Up to now, that had been a key aggressive benefit.

Nonetheless some causes for hope

Nonetheless, NIO stock has carried out markedly higher than Tesla stock up to now this yr. So may my considerations be overdone?

Whereas Tesla stock has crashed in 2025, BYD is up a storming 54%. Positive, NIO stock just isn’t performing as poorly as its US rival – however its 2025 share worth development has lagged far behind that of its native Chinese language competitor.

In the meantime, within the first quarter, BYD’s income grew 36% yr on yr to round £17.6bn. Examine that to NIO. It has not but launched first-quarter numbers, however within the fourth quarter, revenues have been round £2.0bn, a 15% year-on-year development.

Winners pulling forward

That’s not an apples-to-apples comparability, as the primary quarter of this yr noticed vital geopolitical danger escalation.

However clearly, NIO is way behind each BYD and Tesla by way of absolute gross sales revenues. Nonetheless, these revenues are substantial – and development charges could lag BYD badly, however are far forward of Tesla at present.

Nonetheless, a key aggressive benefit NIO has invested closely in is now below risk. In the meantime, it lacks the huge scale of BYD and Tesla because the market consolidates.

By itself, that doesn’t essentially put me off shopping for NIO stock, although I believe the funding case has weakened given what I discussed above.

What does put me off, nevertheless, is that whereas BYD and even Tesla stay firmly worthwhile, NIO stays firmly loss-making.

A weaker Tesla share worth doesn’t essentially assist NIO. NIO must be judged by itself deserves. Till it has confirmed it may possibly make cash, I cannot be investing.