Once riding high, NIO (NYSE: NIO) has been a disappointment for many investors more recently. NIO stock is now 30% lower than it was a year ago. It is 93% below its 2021 highs, which must now seem like a distant dream for some long-term shareholders.

What has gone wrong – and ought I even to think about adding NIO to my portfolio in hope of possible future gains?

2021 versus 2025

Looking back, that previous price looks pretty ridiculous to me. It was based on a very high degree of optimism about how fast the electric vehicle market could grow and what market share NIO might be able to gain. From today’s perspective, it looks wildly optimistic.

However, given the massive fall in NIO stock, the company now commands a market capitalisation of under $9bn.

As of the end of September, the company had a balance of cash and cash equivalents, restricted cash, short-term investment and long-term time deposits standing at around $6bn. That suggests the market is currently assigning the firm an enterprise value of roughly $3bn to $4bn.

NIO does have some real strengths

That is a substantial number. Still, could there be value here?

NIO has established a brand and high-end positioning I think could help insulate it from some of the downwards pricing pressure rivals may face thanks to the number of competitors in the space. Another potential game-changer the firm has is its proprietary battery swapping technology, which helps allay a key concern of many electric vehicle users: range.

Last year saw vehicle deliveries of 221,000, or well over 4,000 each week on average. That represented growth of 39% year on year. December saw 73% year-on-year growth.

Yes, those numbers are a fraction of rival Tesla’s. But they are substantial nonetheless.

Plus, Tesla’s deliveries last year actually contracted slightly. Compared to that, NIO’s sales are on fire.

Can the finances ever be made to work?

But what Tesla does have, unlike NIO, is a business model that it has proven can be consistently profitable (albeit it took many years of losses to reach that point).

By contrast, just in the third quarter of last year, NIO saw year-on-year net losses grow 11% to $721m.

The quarterly statement was not so vulgar as to use the phrase “cash burn”, but  carmaking is a very costly business and at close to three-quarters of a billion dollars in three months, even that $6bn cash pile could be gone in little over a couple of years.

That raises the risk that the company could need to boost liquidity over the next several years, potentially diluting existing shareholders in the process.

All is not lost!

As a potential shareholder shareholder, that concerns me.

But my main concern is the lack of a profitable business model.

However, rivals have shown it can be done. Positively, NIO’s sales are now substantial and growing. If sales keep going up and a credible pathway to profitability becomes clearer let alone established, I think NIO stock could move higher from its current level – perhaps substantially.

But while the losses remain large, for now I am not ready to invest.