What a couple of months it has been for electric car maker NIO (NYSE: NIO). NIO stock has leapt 53% over the past two months.

That is the stuff of investor dreams, although in fairness it still leaves NIO 91% below its 2021 high.

From a long-term perspective, though, I would also point to the five-year share price performance. During that period, NIO stock is up 271%.

Here I want to dig into what has been going on with the share price — and whether it may signal a turnaround for the share price that could justify buying NIO for my portfolio.

Massive sales growth

The key trigger for the surge in NIO stock, as far as I am concerned, was the quarterly results statement it released last month.

Vehicle deliveries during the quarter were over 57,000. That represented 144% growth compared to the same period the prior year.

I see that as good news in two ways.

First, the growth is spectacular. It suggests that NIO has established an increasingly credible position with at least some customers in what is a competitive market. Secondly, in absolute terms, I think the sales figures are respectable.

Sure, they are a long way behind rival Tesla. In its latest quarter, it delivered 463,000 vehicles. NIO’s deliveries were under one-eighth of Tesla’s. But they still equated to over 4,000 vehicles per week on average. I see that as substantial.

I think the sales volumes are significant – and help explain the recent surge in NIO stock – because car manufacturing and distribution is a game of scale. There are large fixed costs, so ramping up volume is important for spreading those costs.

NIO has strengths – but weaknesses too

So far, so good.

NIO is building a customer base. It has proven that its vehicles, which are not cheap, can attract customers at scale. It also has a number of competitive advantages, including its proprietary battery swapping technology. I see that as resolving a key complaint many people have about rival electric vehicles, namely their limited range.

However, it has yet to prove that it can turn that positive sales momentum into a profit.

Yes, its net loss in the most recent quarter was 17% lower than in the prior year period. But it still came in at over half a billion pounds. That is a lot of money, in my view.

To assess whether or not NIO stock is attractively valued, I consider its long-term financial outlook. But as I see it, a key piece of the puzzle is still missing. NIO has yet to prove that it can be profitable, let alone consistently so.

Tesla also made losses for many years before breaking into the black. The same could yet turn out to be the case for NIO. But it faces risks including a very competitive market and an uncertain geopolitical climate that could hamper the Chinese company’s international expansion plans.

For now, given those risks, I do not plan to invest.