Beijing is doubling down on its commitment to electric vehicles and considering the size and potential of the Chinese economy. That’s worth taking note. And one of the best ways to bet on the Chinese EV market is with Nio (NYSE:NIO) and NIO stock.

Shanghai-based Nio, which is often called China’s answer to Tesla (NASDAQ:TSLA), manufactures smart, electric, and autonomous vehicles.

Like Tesla, it positions itself as a futuristic automotive company with a heavy emphasis on lifestyle. Nio even has a fashion line which it says is inspired by its Nio EP9 vehicle.

Carrying the analogy further, Nio founder William Ben Li is even called the “Elon Musk of China,” although there’s no indication that Nio’s founder is following Musk’s more eccentric ways.

While there’s no guarantee that designer clothes will help Nio vault past rivals like Tesla, Ford (NYSE:F) or the Warren Buffett-backed BYD Company, NIO is making inroads that cannot be ignored.

China Represents a Huge Opportunity

If you are looking for a growth story, there are few opportunities as compelling as the Chinese EV market.

China is one of the largest and fastest-growing emerging markets in the world. People made a big deal about China’s GDP falling below 7% in 2018 and 2019, but keep in mind that any other country would love growth that robust.

By comparison, GDP growth in the U.S. was 2.9% in 2018 and was 2.3% in 2019. Not surprisingly, experts expect China’s economy to overtake the U.S. sometime this decade.

And China is embracing electric vehicles like no other country. While the global automotive market continues to shrink, sales of electronic vehicles are on the rise.

True, the Chinese EV market took a hit in 2019 when Beijing reduced subsidies, helping send NIO stock down by 37%. But now China seems to be all-in on supporting the industry once again as it seeks to reduce dependence on foreign oil.

Beijing has stated its goal of increasing the share of electric vehicles from 5% to 25%. To do that, it extended new EV subsidies and tax breaks until the 2022 fiscal year. Meanwhile, anyone who buys an internal combustion vehicle in China will pay a 10% tax.

And China also put 2.7 billion yuan into battery charging infrastructure, which should make the decision to buy an electric vehicle a lot more appealing.

Before the pandemic, Nio’s two vehicles, the ES6 and the ES8, were selling well and there was a surge of demand in China for electric vehicles. That trend should return as China comes out of the pandemic.

NIO Stock at a Glance

While it has a market capitalization of more than $3 billion, Nio stock can be had for cheap. Currently priced at less than $4 per share, NIO is a long way from it’s all-time high of $10 set last year.

Year-to-date, Nio is down about 14% as the novel coronavirus pandemic weighed on the stock’s shares.

But the worst seems to be over. Li, in a call with reporters, said the pandemic will affect first-quarter numbers but the company is seeing a rebound in the second quarter. NIO won’t adjust its annual forecast, he said.

On May 6, the company reported that it delivered 3,155 vehicles in April, an increase of 105% from March and an 180% increase year-over-year.

Nio also seems to have solved its cash crunch. The company started 2020 with a cash balance of only $161.7 million, but it is getting an infusion of 7 billion yuan ($1 billion) from investors as part of a plan to establish the company’s China headquarters in Hefei.

The Bottom Line on NIO Stock

It’s impossible to size up NIO without considering the competitors. Tesla’s gigafactory in Shanghai makes 3,000 vehicles per week, just a year after the company broke ground.

Ford China launched its first China EV last year and has plans to introduce 10 new models over the next three years.

And then there’s Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), which owns 25% BYD, a Chinese manufacturer of electric vehicles, solar panels, and rechargeable batteries. BYD and Toyota (NYSE:TM) announced plans to launch a joint venture this month for the EV business in China.

But NIO has a home field advantage that you can’t ignore. Instead of being supported by U.S. and Japanese companies, Nio is headquartered in Shanghai and is a Chinese company. And China always exercises extremely tight control over its markets, which makes it hard for international companies to compete.

For instance, China is expressing support for sales of vehicles with swappable batteries. Nio has pursued the technology, and even offers a free battery-swap service.

Nio is a solid bet for investors wanting to get in on the ground floor of the electric vehicle market in a country that is expected to overtake the U.S. soon.

NIO stock gets a “B” rating in my Portfolio Grader right now.