Recovery of the broader Chinese economy and growing investor confidence has done wonders for Nio (NYSE:NIO) this year. Commonly referred to as the “Tesla (NASDAQ:TSLA) of China,” the electric vehicle (EV) company now has a net worth of more than $50 billion. This puts Nio stock in the same club as General Motors (NYSE:GM) in terms of valuation.
Given the exponential growth of the EV market this year, many investors believe that this is where the future of the auto industry is headed. Nio is proof of this with its stock up 93% this year and 936% to-date. But this is just the start of the company’s growth. Nio’s big plans and ample amounts of cash will help cement its position as leader of the up-and-coming Chinese EV market.
Nio Stock Gets a Bump
Riding on the highs of a successful year, Nio stock saw a bump in its price last week. On Monday the electric vehicle maker reported 5,000 deliveries for the month of October, which is a record monthly increase. Nio delivered 31,430 vehicles this year, a 111% spike from the previous year. Investors rejoiced at the news, pushing Nio’s stock up 14%.
Other electric automakers in China like Xpeng (NYSE:XPEV) and Li Auto (NASDAQ:LI) also reported a record increase in deliveries this month. This is a testament to the growing power of EV companies in China. Although Nio is not the largest automaker in China, its cars provide more upscale value with high-tech features. Many of its customers are willing to pay top-dollar.
Moreover, Nio’s financial position is stronger than ever. In its previous quarter, the company reported a 146.5% increase in revenue and sales for the period. Investors expect this value to grow by 147% in its upcoming quarter. It is likely that Nio will hit this target given that sales in Q3 jumped by 150%.
The company also holds a strong cash position after a series of funding rounds earlier this year. Nio is set to report earnings on Nov. 17, so keep your eyes peeled out for another bump in its stock price.
Batteries Will Fuel Nio’s Growth
An important area of innovation for electric automakers across the world is batteries. For companies like Tesla, expensive batteries are a huge reason for vehicle’s premium value. Lowering the cost of batteries will allow EV makers to target the mainstream market. In recent months, Nio placed a large emphasis on improving its battery capabilities.
A major catalyst for Nio stock surge this year is its new battery system. The company announced that it will release a 100 kilowatt/hr battery. Kilowatt is the term used to measure the energy used by the car for an hour. Traditionally, Nio’s battery power was limited to an 84 kWh battery. A 100 kWh battery provides more mileage and will allow the automaker to compete with EV giants like Tesla.
A second battery innovation by Nio is its Battery as a Service (BaaS) model. This is a subscription plan for batteries. While Tesla has battery charging stations for its cars, Nio’s plan lets you change the batteries. Customers can choose the number of and type of batteries they want in the plan. Gone are the days of refilling your tank at a station, with the BaaS model you can swap out your batteries and get back on the road.
Nio has already built 158 swapping stations across the country and continues to expand this service as more people subscribe to the program. In the era of convenience and speed, Nio’s battery service plays perfectly into customers’ needs. This will be a huge growth driver for Nio stock in the future.
The Bottom Line on Nio Stock
Nio stock has been a roll this year and is poised for greater growth in the months ahead. China’s economy is on a strong path to recovery from the pandemic. As the broader markets continue to grow in the next year, Nio stock will reap the gains. Analysts, meanwhile, hiked up the company’s price target in line with an optimistic Q3 outlook.
Adding to the EV market fuel is China’s plan to ban gasoline-powered cars by 2035. This is in an effort to reduce carbon emissions in the region and will be a boon for electric vehicle companies.
With a lot of upside ahead, Nio stock remains one of investors’ favorite stocks this year.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
