Electric scooter maker’s international sales more than double in the fourth quarter, even as its domestic growth slowed sharply amid rising competition

Key takeaways:

  • Niu Technologies’ domestic sales growth slowed to 49% in the fourth quarter, even as international sales surged on strong demand for its new kick scooter models
  • Company’s shares sank 5% after release of the fourth-quarter data, though stock still remains relatively strongly valued compared with peers

By Doug Young

The latest quarterly update issued Wednesday by electric scooter maker Niu Technologies (NIU.US) looks quite encouraging at first glance, including two major milestones.

One of those saw the company sell more than 1 million of its electric bikes and scooters in 2021, marking its first time crossing that key threshold. The other saw its global sales suddenly kick into high gear after years of disappointment, most recently due to disruptions created by the global pandemic over the last two years.

But a closer look at the numbers revealed a more worrisome trend in slowing growth for its key home market, which still accounts for a big majority of its sales. China is famous as a land of copycats, and Niu’s slowing domestic growth is almost certainly the result of others encroaching on its territory in this sector with relatively low barriers to entry.

As a case in point, one of those newcomers, mini electric car maker Kandi Technologies (KNDI.US), reported in November that sales for its newer line of electric scooters soared nearly sevenfold in last year’s third quarter to $6.3 million from less than $1 million a year earlier.

The latest evidence of growing competition at home hit Niu’s stock to the tune of a 5.1% decline after the release of its update. The company’s shares have lost more than half of their value over the last 52 weeks, including a 40% drop since early November. But even after that selloff, they are still priced relatively high compared with a handful of publicly traded peers in the fragmented global market for its products.

All that said, the company’s longer-term prospects still look relatively bright due to the growing global emphasis on clean-energy transport. While most of that has focused on electric cars, electric scooters are also receiving growing attention in many developing markets where cars remain beyond the reach of most consumers. Europe and North America are also proving fertile ground as national governments try to slash their carbon emissions.

But for now, at least, Niu’s latest report is showing a slightly bumpy road ahead for the company in China, where Beijing is also aggressively aiming to reach peak carbon emissions by 2030 and to go carbon neutral by 2060.

Niu’s latest data show its China sales rose 49% year-on-year to 205,239 units during the fourth quarter. While that kind of growth would normally look quite strong, it’s actually quite weak when compared with the 80% growth in its China sales during the first three quarters of the year.

The slowing growth came even as Niu continued an aggressive expansion of its domestic retail network with the opening of 422 stores during the quarter, a big increase from the 320 stores added in the third quarter, bringing its national count to 3,108 stores at the end of 2021. The company tried to put a positive spin on the figures by pointing out that cheaper models that typically carry lower margins accounted for just 21% of its China sales in the fourth quarter, down from 41% in the previous three-month period.

Surging Kick Scooters

Next, we’ll look at the company’s international picture, which will play an increasingly important role as Niu tries to diversify beyond an increasingly competitive China market. After staying stuck at 5% or less of its total sales for years, Niu’s international business suddenly surged by 156% in the fourth quarter year-on-year to reach nearly 33,000 units.

That huge surge, coupled with the slowing growth in China, pushed the international figure to 14% of the company’s total unit sales, crossing the 10% milestone we mentioned earlier. The international surge also helped push Niu’s total sales for all of 2021 to 1.03 million units, passing the other milestone we mentioned.

But again, a closer look reveals that a big factor behind the global surge was the company’s latest line of kick scooters that hit the market in September. Of Niu’s 32,949 units shipped outside China in the fourth quarter, nearly half – or 14,916 to be precise – were kick scooters that typically carry far lower prices and slimmer profits than more advanced bikes and motorcycles.

That “going down-market” theme is repeated in the company’s latest quarterly results, which show its revenue rose just 37% in the third quarter to 1.23 billion yuan ($194 million) – far slower than the 58% rise for its unit sales. That indicates the company’s average revenue per unit sold is going down steadily as lower-end products account for a bigger portion of its sales.

Again, the company tried to put a positive spin on things by noting that new advanced models that have recently hit the market were also a major factor behind the international growth. Here, we should also note that the company has pointed out before that huge increases in global shipping prices due to the pandemic have created a big challenge for Niu’s global sales.

So, given the less-than-smooth ride for Niu right now, how exactly should investors view this company? At least for the moment, the investment community seems relatively upbeat on Niu, most likely due to its leading position in a market with lots of growth potential. What’s more, the company is at relatively low regulatory risk compared with the many other U.S.-listed Chinese tech firms that have come under fire over the last year.

All three analysts reporting to Yahoo Finance for January so far rate the company a “buy” or “strong buy”, similar to the eight analysts who rated the company in December. The group has an average price target of $38.45 for Niu’s American depositary shares (ADSs), or more than double its latest close of $15.80.

Despite its relatively depressed stock price, Niu is still relatively richly valued compared with the  limited number of its publicly traded peers. It commands a trailing price-to-earnings (P/E) ratio of 40, which is well ahead of Kandi’s 26 and Italy’s Piaggio (PIAG.MI) at 18. On a price-to-sales (P/S) basis Niu and Kandi both have ratios of 2.8, though Piaggio is far lower at 0.6.

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