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Why Is Everyone Talking About Nio Stock?

Earlier this year, investors started jumping on the electric vehicle (EV) bandwagon and bid up Nio (NYSE: NIO) shares to a valuation of almost $100 billion. Apparently, many of these investors were likely hoping they were buying in on a Chinese version of Tesla (NASDAQ: TSLA).

Tesla already has two EV-focused manufacturing plants operational (including one in Shanghai, China) and two more not far away from start-up. Tesla has already produced more than 625,000 vehicles in 2021, well on its way to substantially exceeding its original guidance of 750,000 for the year (based on 50% year-over-year growth estimates). Tesla's stock price has been regularly hitting new all-time highs in the past month.

Nio customer checking out ES8 electric SUV in Norway. Image source: Nio.

In relation, Nio likely will deliver fewer than 100,000 vehicles in 2021, and its share prices have retreated by more than a third since hitting early 2021 highs.

To its credit, Nio is growing faster than Tesla right now because it's working off its smaller base, with plenty of expansion plans. And that, in a nutshell, is why investors are again talking about Nio stock.

The Nio experience

Tesla's ability to build a loyal following and a valuable brand has been a large part of its success. Nio is similarly developing its brand as it expands vehicle production. The company's "Nio House" is a facility meant to be more a social experience than a vehicle showroom. There were 23 as of April and they include a cafe, a library, conference rooms, living rooms, and even child care facilities. Forums and group lectures are held there and can be related to Nio products and merchandise.

As part of its initial move to Norway, its first market outside China, Nio plans to establish a full Nio ecosystem there. This includes the aforementioned community Nio Houses as well as a service network and its unique battery charging and swap stations. The company says that it expects to establish a series of battery swap stations connecting five major cities and freeways in Norway by the end of 2022. The stations provide a line of subscription revenue for Nio and offer customers fast battery replacements as an alternative to lengthy charging times.

Nio battery swap station and chargers. Image source: Nio.

More than a brand

Of course, it takes more than just a brand to maintain customer loyalty and build a successful company. And Nio plans to build on its product line significantly over the next year. It will introduce three new products in 2022, including its technology-laden ET7 luxury sedan, which will be its first non-SUV model.

The sleek exterior includes autonomous driving sensors, what the company describes as a "crystal-like heartbeat" taillight, and an all-glass roof. The technology goes further to include a digital entry system that extends the flush handle and automatically releases the door's "e-latch" as the driver approaches. The ET7 will also be available with an upgraded 150 kWh battery pack that will provide a range of about 600 miles.

That sedan will be available in both Norway and Germany in addition to China by the end of next year. And the company is expanding its production capacity to grow those vehicle sales. In May 2021, Nio and its manufacturing partner, JAC Motors, announced an agreement extension through May 2024 that will allow JAC to continue manufacturing NIO's current and future vehicles. A new manufacturing plant is under construction in Hefei, China, that will more than double current capacity to as much as 300,000 vehicles annually, the company has said.

It is with this backdrop that investors see potential in Nio to become a successful global player in EV sales. With a valuation of more than $60 billion, however, much success is already factored into the stock price. But that is also partly why investors keep talking about Nio.

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Howard Smith owns shares of NIO Inc. The Motley Fool owns shares of and recommends NIO Inc. and Tesla. The Motley Fool has a disclosure policy.


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