What You Need to Know About the “Tesla of China”

Nio Car

For years now, all eyes have been on Tesla (TSLA).

Valued at just $12 billion as recently as 2019, it has since surged to a market capitalization of almost half a trillion dollars. Unsurprisingly, TSLA CEO Elon Musk, is lauded as a “genius.”

But success breeds competition… and a good bit of America’s competition these days seems to be coming from China.

Tesla’s Success Attracts Competition From Asia

Leading the way to a mass-market electric car allowed Tesla to quickly become a darling of Wall Street and for good reason, its revenue in the midst of the pandemic grew 39.16% year over year for the third quarter of 2020.

Tesla’s top line exploded by 45.31% for the second quarter and average yearly sales growth stands at 50.36% compared to 10.53% over a five-year span for the S&P 500.

Elon Musk has ridden the success of Tesla as he achieves the status of the third richest person in the world as his personal net worth rockets to $115 billion. In the past year alone, Musk has seen his net worth grow by $87.8 billion, and a year ago he was worth just $22.4 billion.

Nio Car

The Chinese Tesla?

Nio Travels a Different Road

Nio is a Chinese automobile manufacturer based in Shanghai, and founded in November 2014 by William Li.

After its launch, Nio started to make tracks with investors like Baidu, Sequoia, and Lenovo and in October of 2016 Nio had received an “Autonomous Vehicle Testing Permit” by the California DMV.

The company filed for a $1.8 billion initial public offering on the New York Stock Exchange in September 2018, and in April of 2020, Nio announced $1 billion in new funding from a group of Chinese investors, which gave it breathing room to build on its success.

Nio’s power source is structured differently from Teslas as they employ a method of battery swapping instead of charging.

The major benefit for consumers is that it typically takes about one hour to recharge a Tesla and it takes only 5 minutes to swap out batteries for a Nio. NIO has built 143 battery swap stations across 64 cities in China, and completed over 800,000 battery swaps for its customers as of August 2020.

NIO Continues Making Record Deliveries

Since the company’s inception it has sold 63,343 vehicles of which 31,430 of those vehicles were sold this year and we have nearly two months remaining.

The company is currently pushing its monthly capacity of 5000 vehicles with plans to grow that number to 12,500 with little investment.

At the end of March the stock was at $2.78 a share and at the close of the market on Friday, November 6th, it was at $41.63.

Although Nio lags Tesla in the quantity of vehicles sold, its ability to ramp up production with little investment should maintain its ability to compete regardless of Tesla’s new plant capacity coming online in Shanghai.

Bottom Line

Recently, analysts at Citi Bank went public with their views that Nio’s stock could rise to $46.40 a share, based on several factors.

  1. Nio has a strong backlog of orders.
  2. Strong third and fourth quarter gross processing margins.
  3. Increase in market share.
  4. Battery cost reduction.
  5. Strong tailwinds related to exports.

Investors wishing to board the NIO train should keep in mind TSLA’s own volatile share price movements. This said, it appears the technology behind NIO’s cars are gaining traction and long term, it’s stock will likely follow.

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