NIO STOCK ANALYSIS: The Tesla of China 🚗

Good day for the markets $SPX500 as unemployment rates fall to all time low for the last 50 years. Apple $AAPL is reportedly asking suppliers to increase production because of high demand for the iPhone 11. Skyworks Solutions $SWKS is the best performer in our portfolio today, up by more than 3%. Travelers Companies $TRV and GameStop $GME are having a great day too. The only disappointments come from the $OIL stocks $CXO and $PE as oil prices continues to remain at low levels.

NIO STOCK ANALYSIS: The Tesla of China 🚗

NIO $NIO is called The Tesla of China $TSLA . Nio had its IPO about a year ago and lost more than 80% of its market value since then. Last week, the stock priced crashed by more than 20% on a single day and earlier this week, on a single day, it gained 20%. With so much volatility going on, it is time to have a look at NIO.

Right now, NIO is only selling to the Chinese market which is the largest Electric Vehicle market in the world and also the largest automobile market in the world. Nio also receives subsidies from the Chinese government and many big Chinese tech companies such as Baidu $BIDU , Tencent $0700.HK have invested in Nio. Nio was founded about 5 years ago by William Bin Li, who is concerned the Elon Musk of China. William Bin Li founded another company before BitAuto $BITA and he's still chairman of that company. He sold shares from BitAuto to launch Nio. Nio doesn't make its own cars. They only design the cars and then they cars are made by JAC, which is a state-owned Chinese car company.

Nio only started selling their cars in 2018 by selling 11 000 cars. That's not much compared to the 250k cars Tesla sold last year or the 2.5 million cars that BMW $BMW.DE sold. Nio is losing more money than their revenues. Unless you make a sales, you are not a business, you are just an idea. It is only last year, that Nio became a business. Tesla is also losing money, maybe it's not that bad. Nio, however, claims to be a startup but leases WeWork offices all around the world. HP $HPQ $HPE started in a garage, so did Apple $AAPL and Microsoft $MSFT . These were real startups. Nio, a company losing so much money can afford to lease over $150 million in offices. They are not the Tesla of China but rather the WeWork of China, an overpriced unicorn. Nio is still at a stage where they should be raising capital from venture capitalists and not from the stock market. A Chinese car company, incorporated in the Cayman Islands, which doesn't even make its own cars and only sold 11 000 cars in a year. How crazy that is to see this company being traded on the NYSE?

Let's make the comparison with Tesla. I always tell you that Tesla is a good company and could do great in the future but I don't agree with the valuations. Tesla has a moat through their superchargers. No company can compete with that unless, they also build chargers all around the US. Tesla has intangible assets. Elon Musk himself is an intangible assets. But Nio, nobody knows about this company outside this investing world.

The future of the company is uncertain to me. I don't know how to value this company. I'm not a venture capitalist and I won't put a price on Nio. But I believe that the EV market in China is a good place to invest. Tesla is a much better option. BYD $01211.HK is also another great company in which Warren Buffett $BRK.B invested in 2008. But I'm not so excited about EV right now. Delinquency rates on auto loans are rising. People can't afford to pay for the cars they have right now, why would they buy a new one, especially an electric car? The economy is slowing down. If you really want to make money from EV, invest in suppliers. Skyworks Solutions $SWKS is a supplier of Tesla, Volkswagen $VOW3.DE and BMW. You can invest in Lithium miners since all these cars use Lithium ion batteries or Copper $COPPER miners since these EV need copper wiring. There are so many options. I don't know why people are so focused on Tesla and Nio. When everybody is talking about a company, it is usually too late to invest.

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