Put some (but certainly not all) of your eggs in Nio’s basket


I had an eye Nio (NYSE:NIO) for a while now. I first bought a NIO share in June 2020, when it was less than $ 8 per share. I sold it a little over a year later when it was close to $ 50.

Source: xiaorui / Shutterstock.com

Of course, Nio had already reached its peak at the time, but I still gained about 700%. I’m not complaining about that!

recently, I looked again at Niu for an InvestorPlace a column in which I noticed that NIO shares followed their huge gains in 2020 with disappointments in 2021 falling 35%.

As I said in this column, I still think NIO shares for 2022 will be solid. However, it is also fair to point out that Nio, one of the best electric vehicle manufacturers in China, is rapidly losing ground to some key competitors.

The numbers don’t lie

January 1 is Nio published its delivery numbers for December, the fourth quarter, and all of 2021. And they weren’t bad at all:

  • December deliveries increased by 50% to 10,489 compared to the same period last year
  • Deliveries in the fourth quarter increased by 44% year on year to 25,034
  • Year-on-year deliveries increased by 109% year-on-year to 91,429

But let’s look at the numbers of two other major Chinese EV companies.

It’s first XPeng (NYSE:XPEV), which is delivered more vehicles than the Nio in all three time frames:

  • December deliveries increased by 181% year on year to 16,000
  • Deliveries in the fourth quarter increased 222% year on year to 41,751
  • Year-on-year deliveries increased by 263% year on year to 98,155

I was a similar story for Li Auto (NASDAQ:LI), which reported several deliveries during the whole period except the whole year:

  • December deliveries increased by 130% year on year to 14,087
  • Deliveries in the fourth quarter increased by 143.5% year on year to 35,221
  • Year-on-year deliveries increased by 177% year on year to 90,491

Bottom line? XPeng and Li are increasing deliveries much faster than Nio. And their stocks are holding up better, too. While NIO shares have fallen by almost 50% in the last 12 months, Li and XPeng shares have fallen by 16% and 11% respectively.

What makes Nio stand out

I’m not saying any of this to lower NIO stocks. I still think he will be the winner in 2022.

The biggest thing an electric vehicle manufacturer has is its battery model as a service (Baas). BaaS is an alternative to battery charging stations. With the BaaS service, drivers who need to charge their vehicle simply pull up to the battery replacement station. In less than five minutes, they can replace a discharged battery with a fully charged one and get back on track.

Nio is the market leader in BaaS. It is attractive to customers because BaaS technology incurs EV costs up to $ 10,000 cheaper, as Nio says.

Nio has more than 700 battery replacement stations in China and expanding in Europe. He plans to have more than 4,000 such stations worldwide by 2025.

The fact that the Chinese government is offering a subsidy for new energy vehicles for vehicles priced below RMB 300,000 ($ 46,000) also helps boost demand for Ni’s cars. Although Nio vehicles cost more than that, the government made an exception for vehicles that included battery replacement technology like the Nio.

The Chinese Ministry of Finance has announced its intention reduce EV subsidies by 20% this year. However, it may be forced to renew subsidy support again in order to achieve its goal of making EVs account for 20% of car sales in China by 2025.

Bottom Line on NIO shares

Nio is a good company and there are more reasons than not to invest in NIO shares. I stand by my position that Nio will make significant profits in 2022.

But you would make a mistake if you ignore other car manufacturers in the growing Chinese EV market. Do not put all the eggs in one basket.

At the date of publication, Patrick Sanders did not hold (directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019, he was Head of Investment Advisory at US News & World Report. Follow him on Twitter at @ 1patricksanders.


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