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  • Writer's pictureIshfaaq Peerally

Is NIO Stock a Buy?



If you had invested $10 000 in Tesla $TSLA about a year ago, today you would have about $50 000, but investing $10 000 in Nio $NIO (The Tesla of China) is worth $250 000 today. Is Nio the next Tesla? I've seen many people saying that Nio is where Tesla was 5 years ago. If this is true then Nio would still be a good investment.


What makes Tesla so successful?

1. Tesla built a moat with the superchargers. Even if in the future, other car manufacturers can potentially make Electric vehicles, Tesla already has an advantage with the superchargers.

2. Data : data is gold and Tesla owns more data than any other EV company, hence, giving them an edge into making these EV fully autonomous

3. Elon Musk. He's a great salesman and brings some premium to the stock


The market for EV in china is bigger than in the US or Europe. China wants to become a superpower and they need less exposure to oil $OIL . That's why they are helping Tesla and investing in Nio. But making autonomous vehicles is not really the priority for the Chinese market. The priority is cheap Electric Vehicles and the leader there is BYD $01211.hk , a company in which Warren Buffett invested in in 2008. However, there is still a market for Nio among richer people in China.


But Nio is still at a startup phase. They don't even make their own cars. The Nio cars are made by JAC. Nio was only founded by William Li in 2014, and they only had their first sales in 2018. So far this year, Nio only sold 31 000 cars.


Nio is growing at a very fast rate but we don't know if they will be able to maintain this growth as they are losing a lot of money (more than Tesla was when it was this size). Does this justify a valuation of $60 billion? The last time Tesla had a valuation of $60 billion was last year with over 400 000 cars delivered. Nio is only delivering about 50 000 this year.


It is possible that Nio and Tesla will keep growing but there's no certainty in that. The probability that the stock price keeps growing at the same rate is very low.


The best way to profit from EV is to invest in a supplier such as Skyworks Solutions $SWKS or a Copper $COPPER or Lithium, Cobalt miner.


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