Our focus at Insider Financial is finding winning stock picks for our subscribers. We are not a content farm like our Foolish competitors that write about the hottest stock plays for click and eyeballs. Our goal is to provide actionable insight and most importantly, to find momentum BEFORE it happens. On June 10th, we told our subscribers that if they missed the move in Nikola or Tesla, that’s okay because the big move has yet to happen in NIO Inc. We were right on the money and now many are asking what’s next.
About NIO Inc
First up, before we get into the investment case for NIO stock, here’s a little background info on the company. NIO Inc. is a pioneer in China’s premium smart electric vehicle market. NIO designs jointly manufacture and sell smart and connected premium electric vehicles, driving innovations in next-generation technologies in connectivity, autonomous driving, and artificial intelligence.
NIO began deliveries of the ES8, a 7-seater high-performance premium electric SUV in China in June 2018, and its variant, the six-seater ES8, in March 2019. NIO officially launched the ES6, a 5-seater high-performance premium electric SUV, in December 2018 and began deliveries in June 2019. NIO officially launched the EC6, a 5-seater smart premium electric Coupe SUV, in December 2019 and plans to commence deliveries in 2020.
NIO Inc Deliveries
NIO delivered 3,740 vehicles in June 2020, representing a strong 179.1% growth year-over-year. The deliveries consisted of 2,476 ES6s, the Company’s 5-seater high-performance premium smart electric SUV, and 1,264 ES8s, the Company’s 7-seater high-performance premium smart electric SUV, and its 6-seater variant. NIO delivered 10,331 vehicles in the second quarter of 2020, representing an increase of 190.8% year-over-year and an increase of 169.2% quarter-over-quarter. As of June 30, 2020, cumulative deliveries of the ES8 and the ES6 reached 46,082 vehicles, of which 14,169 were delivered in 2020. William Bin Li, founder, chairman, and chief executive officer of NIO Inc, said:
“In June, we achieved a historical high of monthly deliveries, contributing to our best quarterly performance. We appreciate the continuous support from our growing and loyal user community. We are proud of our team for their strong execution from production to delivery. We remain committed to offering the best premium smart electric vehicles and the best user experience to our users.”
NIO Inc vs Tesla
The biggest market in the world for electric vehicles is in China. It’s why Tesla is so focused on China with its Giga Shanghai factory. However, we don’t think the Chinese government will allow a foreign brand to dominate the domestic market. It would hurt their national brand to see Tesla succeed. That’s why NIO Inc is the much better bet in the long-run. NIO also has backing from the Chinese government, so it’s not only in their national interest but also their financial interest for NIO to beat Tesla in the world’s largest EV market.
Furthermore, the subsidy to purchase EVs under 300,000 yuan does not apply to manufacturers that use swappable batteries. Tesla does not use swappable batteries, while NIO Inc does. Under this new policy, NIO is the biggest beneficiary as they are the only premium EV company with battery swap services. All future premium models (price above 300,000 yuan) developed by NIO that come with swappable batteries are still eligible for the subsidy.
In terms of comparison, Nio Inc sports a valuation of just $11 billion compared to Tesla’s $235 billion market cap. In Q2, Nio delivered 10,331 electric SUVs compared to Tesla delivering 90,650 vehicles in Q2. If you value NIO Inc on a per-car delivery basis with Telsa, it should have a market cap of $26 billion, or a $26 share price.
William Li vs Elon Musk
NIO aspires to be the next-generation car company and a user enterprise. William Li sees electric vehicles as the starting point and the fabric that connects and strengthens communities. He is a customer-centric CEO and understands the Chinese market. Whether you call it a lifestyle brand or anything else, there is no doubt about NIO’s ambition to become a dominant leader in the EV sector. When it comes to who to bet on in China, William Li or Elon Musk, we’d better on their native son over a foreigner like Elon.
While there might be some profit-taking in the short-term, NIO Inc will close the gap with Tesla. NIO Inc is firing on all cylinders as the company and William Li become the Tesla and Elon Musk of China. If things keep going as they are, things might be different in the future. We might be calling Elon Musk and Tesla the William Li and NIO of America.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NYSE:NIO or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.