Image source: Sam Robson, The Motley Fool UK
Tesla, it is fair to say, has had a rough 2025 so far. The stock price is up 443% over the past five years, but has tumbled 36% since the start of 2025. By contrast, electric vehicle rival NIO (NYSE: NIO) is up 1% so far this year. 1% is hardly the stuff of investor dreams – but it is a lot better than industry giant Tesla has managed. So, could now be the time to add NIO stock to my portfolio?
A challenging market
For now, I think the answer is no.
Tesla’s challenges, as the brand reels from its chief executive’s high political profile, are partly self-inflicted. But only partly.
The reality is that the electric vehicle market has moved on substantially from where it was even just a few years ago.
Demand is higher. But there are also multiple credible electric vehicle companies selling cars. That has had an impact on prices as those makers try to compete. In turn, profit margins have taken a hit across the industry.
So from NIO’s perspective, there is both good and bad news.
The good news is that the electric vehicle market is in growth mode. The bad news is that that has come at the price of lower profit margins, something which in general tends to benefit large businesses that have greater economies of scale.
As I see it, though, NIO has another specific challenge: advances in battery technology.
Dramatically faster claimed battery charging times could be a boon for rivals like BYD (and its long-term investor Warren Buffett) and Tesla. But they threaten to make NIO’s battery swapping technology largely obsolete. To date, that had been a key competitive advantage.
Still some reasons for hope
Still, NIO stock has performed markedly better than Tesla stock so far this year. So could my concerns be overdone?
While Tesla stock has crashed in 2025, BYD is up a storming 54%. Sure, NIO stock is not performing as poorly as its US rival – but its 2025 share price growth has lagged far behind that of its local Chinese competitor.
Meanwhile, in the first quarter, BYD’s revenue grew 36% year on year to around £17.6bn. Compare that to NIO. It has not yet released first-quarter numbers, but in the fourth quarter, revenues were around £2.0bn, a 15% year-on-year growth.
Winners pulling ahead
That is not an apples-to-apples comparison, as the first quarter of this year saw significant geopolitical risk escalation.
But clearly, NIO is far behind both BYD and Tesla in terms of absolute sales revenues. Nonetheless, those revenues are substantial – and growth rates may lag BYD badly, but are far ahead of Tesla currently.
However, a key competitive advantage NIO has invested heavily in is now under threat. Meanwhile, it lacks the massive scale of BYD and Tesla as the market consolidates.
On its own, that does not necessarily put me off buying NIO stock, though I think the investment case has weakened given what I mentioned above.
What does put me off, however, is that while BYD and even Tesla remain firmly profitable, NIO remains firmly loss-making.
A weaker Tesla share price does not necessarily help NIO. NIO needs to be judged on its own merits. Until it has proven it can make money, I will not be investing.
