I was extremely fortunate earlier this year and bought NIO (NYSE:NIO) shares for around $13. I had been watching it for a while, and decided, despite the weakness of the pound, that it was the right time to buy this dollar-denominated stock.
However, I’m still tempted to buy more NIO shares, despite the weak pound. Here are three reasons I think this stock is primed to take off.
Tesla-like growth
NIO’s growth curve is pretty exceptional. In fact there are very few companies that have done anything similar. Tesla is one. NIO’s growth curve resembles that of its bigger American peer, with revenue increasing from $719m in 2018 to $5.6bn in 2021. It’s worth noting that Tesla’s market cap is nearly 30 times higher than NIO’s.
In fact, in each of the last four years, NIO was able to double production, moving from 8,101 in 2018 to 91,429 in 2021. However, it’s also worth noting that NIO will struggle to double production again this year after Chinese Covid-related lockdowns reduced factory output.
NIO delivered 25,059 vehicles in the three months ended June 2022, increasing by 14.4% year over year. The figure is very similar to the first quarter of 2022.
The firm will hope to push production upwards again in the second half of this year as Chinese lockdowns become more business-friendly, and as NIO opens its second factory.
Competition-beating performance
On 4 August, J.D. Power awarded NIO with three major recognitions at its virtual award ceremony. I think this is fairly reflective of the credit the company is getting for its impressive range of EVs.
The company very much operates in the same space as Tesla, offering premium EVs with impressive performance. But one thing I particularly like is NIO’s battery-swapping tech. Owners can simply pull up at a NIO garage, and for a small fee (around $20), have their empty battery changed for a full one. I think this is something that could give NIO the edge as it expands in the European market.
It also pioneers some interesting tech, including a dashboard-mounted Alexa-like device called Nomi. The voice-controlled gadget can open the windows, the boot, and even take a selfie. Not that I’m too bothered by the latter.
More than a car company
NIO realises that people don’t buy a car every day, but they do buy clothes and groceries pretty frequently. That’s why the Shanghai-based firm opened the NIO Life store. It allows customers to buy a whole range of branded products from breakfast cereal, to wine and loungewear.
Clients can even earn store tokens by participating in events or sharing stories.
Risks
While I am confident on NIO’s future, I appreciate there are some challenges and risks. The firm is yet to make a profit and doesn’t anticipate doing so until 2024. The impact of lockdowns might push profitability back further.
Equally, I think there has been some aversion in Europe to buying Tesla’s EVs. Europeans, Brits included, haven’t always thought much of America’s ability to produce top level cars. I do wonder if there will be challenges in getting people to buy premium Chinese cars in lucrative western markets.