Nio (NYSE: NIO), the maker of Chinese electric automobiles in recent times, has been attracting attention across the globe especially with the increasing speculation of the automaker entering the US market. Although the shares eventually wound down, NIO stock recorded as high as 2% growth in its early trading. The stock is also top-trended on Yahoo Finance and other social media platforms towards the end of 2021.
With the continual growth of the sales of Electric Vehicles in the US market, some people are of the opinion that Nio is the Chinese version and competitor of Tesla (NASDAQ: TSLA) in the electric automobile industry. With Nio moving into the US market, it could record a huge financial boost and such a development is likely to increase NIO stock.
Nio’s Initial Public Offering (IPO) on the New York Stock Exchange (NYSE) was launched on the 12th of September 2018 at $6.26 per share.
As at the time of Nio’s launching, Tesla, the electric automobile giant was valued at $58 per share. That was also about the same time that Elon Musk, Tesla’s CEO had just failed his bid to take the company private and was finding it difficult to meet production targets.
Nevertheless, Nio stock recorded an 810% growth to hit $57 per share by January 29th 2021. In this same period, Tesla was at $793 per share, which amounted to a 1,267% growth at the time. Although, Nio fell to $28 per share while Tesla maintained its position above the $1,000 per share mark in the past few months.
On the 8th of December 2021, the electric automobile company unveiled the ET5 sedan which is the fifth EV in its line-up that doesn’t seem to slow down. The ET5 sedan is a smaller version of the ET7 that was made public earlier in the same year. It is also a rival of the Tesla Model 3 across the Asian country.
CEO, William Bin Li confirmed that the ET5, which is set to launch in September 2022 is the company’s most pre-ordered electric vehicle. Analysts also look forward to the electric automobile widening the company’s reach with attractive styling and importantly, at more affordable pricing.
When Nio came into the scene in 2014, the company didn’t have the luxury of vast experience in the manufacturing of vehicles. But the company, which is seldom called china’s Tesla went ahead and recorded huge sales. The company handles the production of its own electric cars. This is unlike Tesla (TSLA) that partners with a state-owned car manufacturer.
The effect of Job Ads on NIO stock
Three days to the end of 2021, which is just a little over a week ago, there were activities of excitement around and about Nio (NYSE: NIO) when the company posted advertisements for US-based roles on LinkedIn. The firms specifically posted vacancies for 46 roles in the United States. A lot of the job requirements focused on the management of Technical Ops- which includes autonomous driving and software development.
Some of the roles posted on the Ad are Audio Systems Architect, Head of Architecture & Design and Head of Power Strategy. A bulk of the roles shall station in San Jose, California.
Although, some of the vacancies were posted a month ago, while others went live days back.
How then does this development concerns investors? A few months back, investors determined Nio entering Norway as a ripple effect of job vacancies posted on LinkedIn. This pattern, therefore, may mean that the Electric vehicle-making company has concluded plans to start selling its automobiles in the United States by posting job ads for US-based roles.
Nio progress in existing markets
Similarly, Nio has been recorded success in its existing Norway and China markets and this is capable of arousing the interest of investors. Part of the success recorded was Nio debuting its ES8 sedan on the 30th of September 2021 in Norway, with plans to launch the ET7, another electric sedan in this new year 2022. Upon settling in Norway, it is expected of the company to penetrate more European markets in stages.
Nio’s sales have also grown rapidly in China, its home country. A part of the successes it recorded in the Asian country was announcing its deliveries to have risen to 10, 878 Electric Vehicles, amounting to 105.6% growth YOY. The Chinese electric automobile maker had its deliveries in the first 11 months of 2021 leapt 120.4% year over year to 80,940 Electric cars.
This is particularly a piece of great news for investors as interest in electric vehicle stocks and Chinese stocks continue to increase. With more focus on the automobile product and the continuous increase in its sales even as governments around the world are looking at substituting it for regular gasoline cars in a bit to reduce carbon emissions and air pollution, investors might be recording success continuously.
Also, as a result of a regulatory crackdown by Beijing on some tech companies in recent times, a lot of investors have intimately followed the US-listed Chinese stock alongside others. This may also have contributed to the high interest of investors in Nio shares.
Although, it recorded an operations loss of $153.9 million in Q3 2021 which is 30% more than what was recorded in Q2 2021. Nio’s research and development (R&D) expenses rose by 101.9% YOY to $185.2 million.
If interest rates continue to soar high, these expenses could be hard on the stock. It is therefore important to pay attention to them because Tesla distributed about 600,000 electric vehicles in 2021, while Toyota alone recorded the sales of over 9 million ICE cars in the year 2020.
Growth and challenges.
In the year 2021 alone, the sales of electric vehicles in China rose by 178% and the Asian country was responsible for 40% of the entire electric vehicles sold in the first half of 2021 globally.
Another sign of growth that the company recorded was an agreement it signed with Jianghuai Automobile Group (JAC) to increase its annual automobile production capacity to 240,000. This also necessitated Nio to start building its second production facility so as to increase production.
Nio’s entry into the European market saw it competing against XPeng in Norway and its CEO, William Bin Li has also hinted that the company is striving to enter the German market too.
The company’s battery swapping technology also gives it an edge over rivals. So far, Chinese drivers have swapped over 5 million batteries at one of the electric automobile maker’s 700 swap stations across china. The company has revealed that a part of its plans for the year 2022 is to increase its stations to 1,300. This would solve the problem of long-range distance as well as charging time concerns that have prevented ICE drivers from acquiring their first-ever electric automobile.
However, with the Bank of America’s prediction that by 2023, the IPOs of electric vehicles will generate $100 billion, Nio would have to fight for market share from every new Rivian or Lucid to aim at a listing.
Similarly, the effect of Chinese politics on Nio’s stock cannot be ignored especially as it is a China-based stock. According to Beijing’s 2020 law on energy subsidies, electric vehicles that depend on battery charging should cost less than ¥300,000 while the ones that use battery swapping tech are at liberty to enjoy subsidies irrespective of the cost. Some are of the opinion that this law is a means of the government supporting the business model of Nio against its international competitors. In another development, the China Passenger Car Association (CPCA) is currently probing the company after Lin Wenquin, a Chinese businessman in August 2021while driving his Nio that was set on autopilot.
With the listing of over 30 china-based companies in the US in the year 2021, there has been increasing concerns and disagreement in the camp of the Communist party over what they believe as homegrown tech companies trying to increase their growth by leveraging the US dollars. As a result, China’s Securities Regulatory Commission (CSRC) has suggested new guidelines that would make international listings more difficult and probe current listings.
Since the delisting of Chinese ride-hailing app Didi from the New York Stock Exchange (NYSE) after less than 6 months in December 2021, authorities have increased their perusal of the Asian country’s companies that wish to break into the Us public market.
With the combination of Nio’s unique technology, high growth prospects and huge marketplace, the Chinese automobile manufacturer risks being underrated in the new year 2022.
Earnings and Basic Examination
On key earnings and basic examination, falls behind. Understandably, the company is a young one and its fast-growing, seeking for profits.
Out of 99, Nio’s stock earns an EPS (Earnings Per Share) rating of 44. It also rates D on SMR with A being Excellent and E, the worst.
The EPS rating places the growth of a company’s earnings vis-à-vis others. While the SMR rating combines the sales growth of the company, its recorded profit margin as well as returns on equity.
On the 10th of November 2021, the Chinese automobile company revealed that it recorded a loss for the third quarter of the year. It also lost per share and its income flew by 117%. The company’s revenue report for the fourth quarter of 2021 was also below expectation as it continues to face production challenges and shortages of chips.
In Q3 2021, the company doubled the sales of electric automobiles, although its fellow Chinese rivals Li Auto and XPeng recorded almost X3 of the sales. Nio’s electric vehicles’ sales bounced back in November 2021. This is after taking a nose-dive of 27.5% downwards in the previous month. The company blamed October’s poor record on the re-equipping of its production lines to accommodate new electric vehicles and issues bothering on the supply of chips.
Even in the middle of tight competition in the automobile industry, Nio is not relenting as it launches new electric vehicles. Top on its agenda for the year 2022 is to deliver three new products to the market. These products include the ET7, which is the company’s first-ever electric sedan which is prided as the most high-tech automobile yet.
The company’s ET7 is expected to provide highly autonomous and extreme long-range driving. The product is expected to be launched before the end of Q1 2022 and similarly on or before the end of 2022 in Europe.
According to FactSet, 21 out of 24 analysts that cover the Nio stock voted in support of buying, 2 voted for hold and 1 voted for sell.
Nio Stock Examination
At the moment, Nio stocks do not have a buy point. Since they hit the height of 66.99 in January 2021, the shares have gone more than half. They have also pushed to over a 50-week low.
Reacting to delisting fears, Nio’s shares as well as other Chinese stocks that were listed in the United States fell. Before then, Beijing and Washington have acted in a way that indicates that Chinese companies could be forced off the US exchange market. Although, Nio is hoping to be listed in Hong Kong.
It also has fellow Chinese automobile start-ups- Li Auto and XPeng to compete with in the electric vehicle market. And of course, there is Tesla (TSLA).
Is Nio Stock a buy?
From a basic angle, Nio’s condition financially is growing after the fears of debt and liquidity. The company has obviously trimmed its losses and delivered significant profits.
With its auto line-up that keeps expanding, its introduction into the European market and innovations around its battery, Nio’s situation can only get better. The supply of batteries that may pose a huge threat to electric vehicles places Nio at an advantage.
Although currently at a new low and lacks a buy point at the moment, there is no denying the fact that the Nio stock is a promising one with high growth potential. However, it is not a buy at the moment, but you can continually lookout for it.