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Three years ago, buying stock in Nio (NYSE:), the Chinese luxury maker.At the time, the stock was selling at $6 per share.

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I was wrong.

Two years ago, as the Covid-19 pandemic began, China’s government under the NIO stock price. It provided state subsidies and manufacturing through .

Shares rose from under $5 to over $60 by early 2021. Even in November 2020, however, I was warning about Nio . My Investorplace.com colleague Will Ashworth agreed .

Will called the top. As the stock price fell, to avoid it.

Nio opens Mar. 2, 2022 at around $22 per share. That is a market cap of $35.7 billion on expected 2021 sales of $5.2 billion. Electric cars are great; luxury electric cars are great, but is Nio headed back to $60 or back below $6?

Paper Dragon

Despite what you may be reading about China’s enormous power, it is a paper dragon.

China’s economy grew 8.1% in 2021, but only by 2.1% in 2020. It is falling below government projections .

General Secretary Xi Jinping’s movement against tech companies like Alibaba Group Holding (NYSE:) has turned into a fight against wealth itself. Ostentatious displays of wealth are out, even among the middle class. Cruising hasn’t returned. In the gambling mecca of Macau,

Nio’s bailout changed the profile of its buyers. Forget the millennial wanting to pick up girls and enter the party apparatchik Meanwhile, Goldman Sachs (NYSE:) was I warned readers about.

China’s electric car market is growing rapidly. But as it expands, its profile is changing. Luxury sedans are The big sales are in cars like the , which . Nio in its home market.

Exports Won’t Solve It

Nio is being celebrated for its . It will list in both to avoid the sting of anti-China Americans. It even has boosters here at InvestorPlace, and new models.

But Nio will need exports to drive growth. It is . No JAC Motors brand is.

Nio has said it plans a “Norway model.” That means it is going after savvy buyers and focusing on the . Total deliveries to Norway over two years are .

But to achieve success, Nio needs infrastructure. Not just charging infrastructure, but service and especially battery swaps. Such things cost money. Nio still had $7.3 billion in cash and cash equivalents at the end of September, according to its . But it still lost $132 million in the third quarter, 5.8% of sales. The numbers are better than they might be because the Chinese Yuan continues to appreciate, from 6.6 to the dollar a year ago to 6.2 now.

The Bottom Line on NIO Stock

Nio is a niche product in China. It will be a niche product in other markets. Nio still isn’t making money.

Nio is sometimes called the “Chinese Tesla” (NASDAQ:). But Tesla is beating it badly in its home market. Tesla has its own Chinese factory. Nio does not.

Growth can look good from a small base. , which will be reported on Mar. 24. But to achieve that result, it is cutting growth. Sales were $1.53 billion in the third quarter and are expected to be .

When someone brings out an electric car that a middle class family can afford, I will gladly consider its stock. Nio is not that company.

On the date of publication, Dana Blankenhorn held a long position in BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com .

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