Nio Stock Is Still a Worthy Long-Term Contender

Favorable competitive and geopolitical tailwinds will drive NIO stock forward

Over the last several years, Chinese companies have disrupted the old guard of business, manufacturing and technology. This ambitiousness contributed greatly to the Chinese economic miracle. However, one segment has eluded the world’s second-biggest economy: passenger cars. However, electric vehicle maker Nio (NYSE:NIO) will likely change this dynamic. As a result, you can trust Nio stock to continue delivering the goods.

a sports car made by Nio
Source: Carrie Fereday / Shutterstock.com

But first, let’s move a few chapters back in the history books. As you know, Japan, then later Korea, helped fortify the Asian automotive industry. Jealously eyeing the lucrative revenue streams, Chinese companies also wanted a piece of the pie. However, their early efforts were laughable at best. According to a 2013 Wall Street Journal article by Rose Yu:

“For years, Chinese auto manufacturers have been notorious for producing clunkers. In 2005, car testers in Germany described Landwind, the sport-utility vehicle from China’s Jiangling Motors as “catastrophic.” Two years later Brilliance Auto Group’s BS6 sedan scored only one point out of five in a prominent European crash test.”

However, over the last few years, the quality and reliability of Chinese combustion-engine vehicles improved. Still, they lagged the brand power of foreign competitors. Yet this weakness is what makes Nio stock so compelling. The underlying company promises to overturn the paradigm.

By focusing on EVs, Nio is inherently working on a more reliable platform. Simply put, EVs have fewer parts, so there is less that could go wrong. Furthermore, China is unencumbered with the politics of EVs — fewer parts means fewer jobs — so the country can march ahead with research and development.

Because of this situation, Nio stock is backed by leadership in both the business and technology fronts. These are the sort of investments I love the most — disruptors that significantly influence the way our world operates.

Nio Stock Enjoys a Perfectly Favorable Environment

Interestingly, at the time the WSJ article above was published, the next steps toward China’s combustion vehicle development involved “raising fuel efficiency and reducing noise.” Obviously, the former metric is not as relevant for the time being due to the oil market’s deflation. But the latter can play a big role for Nio stock.

Ask any of your friends who have made the switch to EVs. One of the first things they’ll remark about is that the cabin is dead quiet. Yes, some driving enthusiasts prefer the snap, crackle and pop of a naturally aspirated American V8 engine, for example. But a growing number of people — especially younger consumers — can do without the noise pollution.

Particularly, several Chinese consumers can’t stand unruly automotive noise. That may sound foreign to us Americans, but remember — we grew up with a car culture. Up until recently, the average Chinese consumer did not. Therefore, the expectations of the Chinese car buyer could be markedly different from the American (or westerner). It’s in this difference where Nio stock can truly thrive.

According to China’s Ministry of Environmental Protection, “Among 308 Chinese cities that measured noise levels last year, about 92 percent were within limits during the daytime, but 74 percent were too loud at night, the report said.”

Another study stated that noise pollution, among other factors, such as extra work shifts and air pollution, contributed to subpar health conditions for the Chinese population. While Nio’s EVs probably won’t be able to do anything about burning the midnight oil, they do contribute to resolving air and noise pollution.

Given so many benefits, it’s reasonable to assume that the Chinese government will further support EV-related initiatives, thereby lifting Nio stock longer term. While other automobile companies laid the ground work for innovation in the EV space, Nio has developed its own niche upon the foundation. That has made it one of the leaders in this disruptive movement. But some stocks have even greater potential to lead technological advancements, and they’re in areas that haven’t yet been tapped.

Geopolitics Could Also Smile on NIO

As if the pandemic wasn’t enough of a problem, geopolitical tensions have threatened many industries in both the U.S. and China. Even worse, the tensions may have escalated to a point where economic incentives are not enough to bring the two sides to the negotiating table.

Yet this unfavorable result could end up helping Nio stock over the next few years. As I mentioned above, even with Chinese combustion vehicle manufacturers closing the quality gap, they couldn’t do much about the branding gap. Chinese consumers still desired international goods, which represented upward mobility.

But because of the worsening geopolitical crisis, that might change. Furthermore, the Chinese government can run patriotic marketing campaigns urging consumers to buy domestic goods.

And that wouldn’t be bad deal for prospective Nio buyers. The company makes gorgeous cars that rival those of Tesla (NASDAQ:TSLA) and other EV makers. Helping out your country would just be a nice bonus.

As appealing as Nio stock might be, I want to quickly bring your attention to another growth play. It’s bound for long-term success that’s perhaps even more impressive, only the space it focuses on is mobile communication.

While tech titans like Apple (NASDAQ:AAPL) and Samsung (OTCMKTS:SSNLF) helped lay the foundation for our hyper-connected society, this company stands to lead a technological revolution that will forever change communication on a global scale.

As InvestorPlace’s chief technology analyst, I’ve worked feverishly with our veteran research team to identify the best stocks to buy. Over the years, InvestorPlace’s research has helped millions get ahead of the curve. Our subscribers have enjoyed massive gains in tech titans like Apple (19,954% gain) and Intel (12,547% gain) … just to name a few.

Now, I’m ready to share with you the stock behind the next big development in communication. The company has already inked deals with mobile phone titans Apple, Samsung and LG. But it’s bound to become its own king with an approach to mobile interaction that we’ve never seen before.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/08/nio-stock-is-stil-a-worthy-long-term-contender/.

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