NIO Stock: Is This EV Stock a Good Buy?
Investors are constantly on the lookout for new opportunities to diversify their portfolios. If this is not your first rodeo, you probably already know owning stocks in different companies is a smart move. It can help you grow your savings in the long term and protect them from inflation and taxes. However, investing in the stock market entails its own risks. That’s why you must be careful when choosing where to put your money.
The electric vehicle (EV) sector is catching massive attention from investors all across the globe. One of the companies that has gained momentum these days is the Chinese NIO (NYSE: NIO). Earlier this year, after the company’s CEO announced the construction of a second plant in the industrial city of Hefei, shares of this EV manufacturer became a hot investment.
NIO Stock: What Investors Should Know
When planning to invest in EV shares, you have to ask yourself what’s more profitable in the long run: banking on established automakers that are less dynamic or taking the leap and putting your money in upstarts that could potentially give you bigger gains? Here’s why you should probably place your bets on the latter.
NIO is one of China’s most valuable EV companies today. Earlier this year its stock declined by roughly 11% following a huge sell-off in Chinese stocks. Investors worldwide are a little concerned about the risks of investing in Chinese stocks in general. The investing landscape has been somewhat unpredictable due to some regulatory action taken in recent months.
Unlike other sectors like education, technology and e-commerce — which are also under the authority’s scrutiny –, EV companies like NIO are still up-and-coming businesses. And, although they’re essential in the Chinese efforts to cut on aggressive emissions, they’re still a work in progress.
Though relatively new in business, EV companies face massive global competition. They’re competing against big household names like Tesla and are striving to make it into the international market. That’s why they’re less likely to face as much backlash and strict regulation by the authorities as other industries in the Chinese market.
Why Are NIO Stocks Moving High?
Back in June, NIO’s CEO, Bin Li, confirmed the construction of “Neo Park” — a brand new NIO manufacturing plant — alongside its automaking partner Jianghuai Automobile Group. The factory is expected to put the city of Hefei on the map as a center of EV manufacturing and expertise. This development comes as a part of a bailout deal with the authorities implemented in 2020.
If everything goes according to plan, the vastly anticipated “Neo Park” should begin operations in the third quarter of 2022. This will boost NIO’s production potential from the current 10,000 units to about 20,000. Additionally, NIO has finally completed the approval process to sell its ES8 electric SUV in the EU. No wonder interest in NIO is spiking among stock-hungry electric vehicle investors.
Why Invest in NIO Stock?
NIO currently dominates the Chinese EV market with autonomous vehicles, charging stations and other products. Their sales, unprecedentedly, increase every quarter. Just over the last fiscal year, they experienced a 423% growth and a revenue boost of 133.3% by selling 44,000 EVs. Starting next year, NIO will also begin the highly awaited production of a luxury sedan: the ET7.
The Chinese EV giant has had some supply chain issues in the past. However, the construction of its new manufacturing facility in Hefei is expected to solve these problems in the near future. This is set to create an undervaluation that will thrill savvy investors.
More About the EV Market Panorama
The electrification of transportation is imminent and EV sales are expected to increase dramatically over the next few years. They are likely to jump from the current 1.7 million to roughly 26 million by 2030. These digits are projected to reach about 54 million by 2040 and China alone will be responsible for 13 million EV sales in the next decade.
Should You Invest in NIO Stock?
Deciding where to put in your money is a personal choice that you should make extremely carefully. However, as some may say: “No risk, no gain.” The Chinese EV shares market is still highly volatile. Yet, there’s no denying it has a promising future as this industry develops.
Good To Know
Although NIO is expected to be a highly competitive stock in the future, right now there are more promising stocks around.
NIO Stock FAQHere are the answers to some of the most frequently asked questions about NIO stock.
- How long has NIO been in the market?
- NIO was founded back in 2014 by Bin Li.
- How much revenue does NIO generate?
- The EV company generates about $1.3 billion in revenue, as of the quarter ending on June 24, 2021.
- Who are NIO’s top competitors?
- NIO competes with other EV manufacturing giants locally and globally. The most relevant examples are Tesla, BYD and XPeng.
- Is NIO stock cheap?
- In short, no. Its share price is about $43 today, the company's seen a growth of roughly 800% in the last year and the EV manufacturer is valued at $55 billion.
- How can you buy NIO stock?
- You can buy them either as a limit order or a market order. Market orders allow you to purchase shares at the market price. A limit order puts a restriction on the maximum price you'll pay or the minimum price you'll receive.
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- TheStreet. 2021. "EV Maker NIO and Chinese City of Hefei Agree to Create Industrial Park."
- Forbes. 2021. "Is Nio Stock's 11% Drop A Buying Opportunity?"
- The Verge. 2020. "NIO Inks a $1.4 Billion Bailout as Coronavirus Sinks Sales."
- Greenbiz. 2020. "The Race to Mainstream Electric Vehicles by 2030."
- Barrons. 2021. "EVs Will Rule the World By 2040. Tesla Stock Isn't the Only Winner."