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Is Nio — the Tesla of China — for You?

Electric vehicle maker NIO is off to a fast start in 2019

NIO - Is Nio — the Tesla of China — for You?

Source: Shutterstock

Nio (NYSE:NIO) is one of China’s hopeful carmakers of the future. And yes, it’s true that it’s focused on selling electric vehicles (EVs), so it has gotten the “equivalency treatment” — i.e., the fill-in-the-blank of China — that U.S. investors paint many foreign firms with.

And yes, like Tesla (NASDAQ:TSLA), Nio’s first car is a cutting-edge performance coupe that set the lap record at legendary German race track Nürburgring and the autonomous lap record at Circuit of the Americas in Austin, Texas.

But similarities end there.

Nio launched its IPO in the U.S. last September but it didn’t get much love. The stock slid from its IPO price of $9.90 and has hovered in the $6-$8 range since then. Only now, in 2019 has the stock got some of its pep back, climbing briefly back above $8 with the possibility that it may continue this path.

It now has a $7.7 billion market cap, which basically means there were investors, but few were interested in buying in at or above the IPO price. NIO is still losing money and will be for the foreseeable future. But it now has a seven-passenger SUV in its lineup and a five-passenger version is soon to be released.

But it’s an interesting opportunity in a market that, once unlocked, will have enormous potential. And a homegrown EV carmaker will be given a great deal of favorable attention from the Chinese government, as well as many citizens.

NIO Stock’s Future in a Dynamic Market

Just as the U.S. has big “Made in the USA” fans, China has the same patriotic feelings about its products and industries. Building products to Western standards for as long as China has means it has the ability to produce high-quality products and now it can sell them to its own growing middle class.

One thing to remember is that there are over 300 EV makers in China at this point, and that many of them will not be around long. NIO won’t have its own factory up and running until 2020.

My point is, this is a very young market that is even more dynamic; things will change rapidly in the coming few years.

But one thing that does promise some staying power with NIO is that it has deep-pocketed investors.

The main shareholder and founder is William Li, who got his start as founder of Bitauto Holdings (NASDAQ:BITA), an internet marketing, content and transaction company for the Chinese auto market.

Obiviously, Li’s experience in this sector adds a great deal of weight to Nio’s ambitions.

The second-largest shareholder is Tencent Holdings (OTCMKTS:TCEHY), the company that owns the wildly popular social media platform WeChat and just launched a music service. Its interest is on artificial intelligence side of things. And it also has a stake in TSLA.

And interestingly, the No. 3 investor is U.K. investment management firm Baille Gifford, which is the No. 2 shareholder in TSLA.

Given that ownership and their interest in top EV makers on both sides of the Pacific, NIO has a better than average chance to break through, but it’s still early and there are plenty of hurdles, as we’ve seen in the US EV market.

Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough StocksAccelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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