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Nio Is an Electric Vehicle Company Catching Breaks, Not Hitting the Brakes

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Lou Carlozo
·4 min read
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Investors in the Chinese electric vehicle maker Nio (NYSE:NIO) might argue that every day is Nio Day. But there is also an event with that name. It took place on Jan. 9. And when it was over, it gave the company’s faithful many more reasons to love their NIO stock.

A Nio (NIO) sign outside of the company's facilities in Shanghai, China.
A Nio (NIO) sign outside of the company's facilities in Shanghai, China.

Source: Andy Feng / Shutterstock.com

On that day, Nio presented some exciting new developments, from a longer-range battery to a production version of its new ET7 electric luxury sedan.

As for the former, good — and the latter, my, my, my. Autonomous driving sensors. An all-glass roof. Zero-to-62 m.p.h. (or 100 kilometers per hour) in a bone-shaking 3.9 seconds. And a claimed range of 620 miles. Sticker price? $69,000 and change. So where can I buy one?

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Well, not in America. Not yet anyway, as the domestic market is Nio’s focus for the time being. But given that NIO stock has jumped by more than 1400% year over year, the Shanghai-based company is in a position to change that if it so chooses. And, if conditions that locked China and the U.S. in a bitter trade war these last few years thaw out. Which could happen…

EVs and All Eyes on the White House

After just a month in office, President Joe Biden has already sent clear signals on the trajectory of his transportation and energy policies. Killing the Keystone XL pipeline and freezing new drilling on federal lands sent two more body blows to the petroleum industry. Rejoining the Paris Accord, and naming John Kerry as Climate Czar and the youthful Pete Buttigieg as Transportation Secretary all signal a fresh start in a greener direction.

Mark my words: EV stocks as a whole, and related green energy investments, will flourish in 2021.

Yet where NIO stock is concerned, another Biden policy orientation comes into play: his trading stance with China. Love or hate ex-President Donald Trump, Biden’s Secretary of State Antony Blinken told NPR on Feb. 16 that he thinks the previous administration got some things right about China. This may allude to its stances on alleged technology theft and espionage concerns centered on the private telecom Huawei, a 5G technology leader, and the social media outlet TikTok.

Yet Blinken also confirmed that Biden’s approach will hit some reset buttons. I read those political tea leaves as steps in the direction of de-escalating the U.S.-China trade war on clearly benign fronts. Where NIO stock is concerned, that could work out as a big plus. By opening up their respective markets to EV imports, China and the U.S. could enjoy a strong mutual benefit.

Worth More Than Detroit’s Biggest

It’s still too soon to tell if and when Nio might enter the U.S. marketplace, and to what extent. But Nio’s cars are smart and sleek enough to make it here — and that was before the company unveiled the ET7. Meanwhile, with its skyrocketing market capitalization — currently $85 billion — Nio is worth more than either Ford Motor (NYSE:F) at $45.9 billion, or General Motors (NYSE:GM) at $75.3 billion.

I’m reassured that Nio has arrived here by fighting to survive. It overcame some rocky roads, thanks to a $1.4 billion Chinese government bailout in February 2020. It then used that breathing space to prepare a sale of new shares, which went without a hitch and raised an additional $3 billion in December. Where other growth-stage companies might’ve scaled back or folded, Nio got bold. It is now a force in the EV world with a host of options before it.

In taking a lukewarm view of NIO stock, some say that Nio’s sales numbers are small. They have a point. Even with a 352% increase in January 2021 deliveries year over year, the company only sold 7,225 cars last month. But that brings Nio to an interesting crossroads: can the company draw on its growing financial firepower to scale up its sales successes?

Why I’d Buy NIO Stock

Wall Street analysts give me even more of a reason to be bullish. Eleven of 19 call NIO stock a buy, with six labeling it a hold and two a sell. This adds up to a consensus price target of $68.58, a good 24% above where shares trade today. That’s great news for anyone who thought the rally was over.

True, Nio’s share price run-up screams of selloff. But I’d see any such move as more an exercise in profit taking than company breaking. Again: We are talking about a Chinese automaker that is worth more than twice as much as Ford, which answers the riddle, “How many Fords can you fit into a Nio?”

What is it those pun-tastic writers say? NIO stock has a lot riding on the future of EVs. And that future is high voltage. In other words, charge!

On the date of publication, Lou Carlozo held a long position in NIO.

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