Over the past year, as Nio (NYSE:NIO) stock has powered more than 2,000% higher, most investment analysts and investors — including myself — have looked at the premium Chinese electric vehicle maker as a “China” story, and a “China” story alone.
That is, analysts have expressed abundant optimism about NIO’s ability to leverage its superior cars, unrivaled branding, and unique battery-swapping model to dominate the premium niche of China’s electric vehicle model over the next decade. But that optimism stopped there. To-date, no one has really talked about NIO’s ability to expand internationally, and potentially replicate its China success at a global scale.
Yet, over the past few months, it has become increasingly obvious that NIO has the ability and technical prowess to distribute its top-selling premium e-SUVs all across the world, including in the U.S. and Europe.
If NIO does successfully do that over the next decade, the implications for NIO stock are enormous.
My previous modeling — which assumed NIO dominated the premium electric vehicle market in China alone — produced a long-term price target for NIO stock of $60. But, after accounting for international expansion opportunities and assuming NIO does fairly well in non-China premium EV markets, my modeling now produces a long-term price target for NIO stock all the way up at $150.
Here’s a deeper look.
Why NIO Will Dominate China’s Luxury EV Market
In short, NIO will dominate China’s luxury EV market at scale because the company makes the best electric cars in China, with the most exclusive and desirable branding in the market, and sells those cars at great prices thanks to a unique business model.
There’s no denying the strong performance and aesthetic of NIO’s e-SUVs. These are sleek looking, smartly designed luxury cars with tons of space, attractive interiors, omni-present software integration, and a large sky roof that gives the cars a modern, open-air feel. On a specs basis, NIO’s cars are only rivaled by Tesla (NASDAQ:TSLA) in terms of range (350-plus miles of driving range, significantly better than every other EV in the world except for Tesla’s long-range models, which are comparable) and pick-up (0-to-60 miles per hour time of 4.5 seconds, again miles better than every other EV in the world except for Tesla’s models, which are comparable).
So, when it comes to EVs, NIO and Tesla make the best cars, without any close competition — and the difference between the two is just preference.
Meanwhile, much as Tesla has done stateside, NIO has fostered excellent, exclusive brand equity in China, primarily through the creation of swanky NIO clubhouses for car-owners. In so doing, NIO has cemented itself as the “cool” brand in China’s EV market — and this coolness is fostering such robust demand for the company’s EVs in China that if you want an EV in China and can afford it, you’re probably going to buy a NIO car.
Perhaps most importantly, NIO is selling its premium EVs for anywhere between $50,000 and $80,000. That’s a great price for a high-performance luxury e-SUV like this. For comparison, Tesla’s Model X is selling for over $100,000 in China.
It doesn’t take a rocket scientist to connect these dots. By selling the best premium e-SUVs in the market, under a great brand, and at great prices, NIO will drive to a leadership position in China’s premium EV market over the next decade — which, of course, is great news for NIO stock.
Why NIO Will Sell Cars All Over the Globe
Robert Kennedy once said:
Some men see things as they are, and ask why. I dream of things that never were, and ask why not.
When it comes to NIO, this quote seems particularly relevant. Many analysts and investors will look at NIO, and ask why will NIO be able to sell those cars outside of China? But the better question here is why not?
As we’ve already discussed, NIO’s cars are rivaled by only Tesla’s cars when it comes EV performance, aesthetic and specs. Thus, if NIO does expand internationally and start selling its e-SUVs in Europe and America, those will be right at the top of the “best EVs to buy” lists next to Tesla’s cars. Naturally, from a performance basis alone, NIO’s cars will drum up a lot of interest and demand internationally.
Now, consider that NIO’s cars are cheaper than Tesla’s cars, and that the brand has comparably strong brand equity as Tesla. It’s easy to see why NIO — if the company does choose to expand internationally at some point in the future — could sell a lot of cars outside of China over the next decade.
I think that’s exactly what will happen. NIO will grow by leaps and bounds over the next five years as it dominates the Chinese luxury EV market. The company will then leverage its bigger size to more easily expand internationally in the subsequent five years. Those international expansion efforts should be successful.
Ultimately, by the end of the decade, NIO will be a globally dominant premium EV maker, with a major presence not just in China — but in the U.S. and throughout Europe, too.
The implications of this international expansion for NIO stock are enormous.
Implications for the NIO Stock Price
My previous model for NIO stock produced a $60 long-term price target.
That model assumed that NIO commanded ~8% market share of the Chinese EV market by 2030, leading to around one million deliveries, $40 billion in revenues, and about $3.75 in earnings per share.
It did not factor in any international expansion.
But, as it is becoming increasingly obvious that NIO will expand internationally and experience tremendous success in doing so, I’m updating my model to factor international expansion into the equation.
Broadly, I now believe that NIO can control ~8% o f the Chinese EV market by 2030 and ~4% of the global EV market excluding China, leading to over 1.5 million deliveries, over $60 billion in revenues, and about $7.50 in earnings per share.
Based on a 20X forward price-to-earnings multiple, that implies a long-term price target for NIO stock of $150, which basically means that the key to NIO stock unlocking multi-bagger gains from here lies in the company’s ability to expand into Europe and the U.S.
Bottom Line on NIO Stock
Some may label this price target hike in NIO stock from $60 to $150 as reckless optimism and price-chasing.
It’s simply assuming that a best-in-breed EV maker with distinct and enduring competitive advantages successfully sells its ultra-popular EVs all across the globe, and not just in China.
That’s a very reasonable assumption. And under that very reasonable assumption, I see NIO stock driving to $150 over the next decade.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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