Nio (NYSE:NIO) was one of the ultimate turnaround stories of 2020. In 2019, it seemed nothing would go right for the Chinese EV maker. Quality control issues (including battery fires), product recalls, reduced buyer subsidies, you name it. At one point in 2019, with shares in the $1.50 range and NIO stock had dropped 85% from its high earlier that year.
2020 was a turnaround year for the company and patient investors were rewarded with a 12-month gain of 1,080%. NIO’s slide in 2021 (down nearly 40% since Feb. 9) has some worried about a 2019 repeat.
NIO is an “A-rated” stock in Portfolio Grader. A repeat of 2019 is highly unlikely. The reality is more likely to be a recovery followed by a resumption of growth.
This EV maker has recently passed some significant milestones, its production lines are humming and with the Chinese economy back in a groove, the future looks bright for Nio. At this point, the dip in NIO stock represents a serious opportunity to add an EV stock with high growth potential to your portfolio.
100,000 Cars
If you had any doubts about Nio’s ability to ramp up production, those should be gone at this point. On April 7, the company announced it had hit a huge milestone. Less than three quarters after producing EV number 50,000 Nio announced that EV number 100,000 had rolled off the line. Its first quarter of 2021 deliveries of 20,060 vehicles was up 423% compared to Q1 2020.
Having 100,000 EVs delivered to customers is a big deal. None other than Elon Musk tweeted his congratulations, noting “That is a tough milestone.”
To put that in some perspective, in 2015 Musk’s company delivered 50,580 EVs.
BaaS, First Sedan Announced
Nio’s focus has been on crossovers and SUVs. However, with competition in the EV space heating up in China, the company is expanding its offerings. In January, Nio unveiled the et7 sedan. With a production date of Q1 2022, the et7 gives Nio a larger product range that will appeal to a wider base of potential buyers.
One of Nio’s most intriguing innovations is its BaaS, or Battery as a Service. This has the potential to be a real game-changer. With EVs, range anxiety is always an issue. Charging takes time and in China, residential chargers aren’t always possible. Nio’s BaaS is an ingenious solution. It lets Nio owners swap out a depleted battery for a fresh one instead of having to find a charger, then wait (potentially for several hours) while their EV charges. They can also upgrade to a higher capacity battery if needed.
Even better, by separating the battery from the vehicle, and charging a monthly subscription fee for BaaS, Nio is able to remove the battery from the upfront cost of its EVs. Given that the battery is the single most expensive component in an electric vehicle, this is a significant competitive advantage.
Factors Conspiring to Derail NIO Stock
NIO stock closed at an all-time high of $62.84 on Feb. 9, then went into a slump that has seen it shed nearly 40% of its value.
There have been a wide range of factors involved. They range from the drama over the potential delisting of Chinese stocks (at least three years away), to a broad selloff of tech stocks, to a global shortage of computer chips.
Don’t let any of these scare you off. None is insurmountable, and most issues are short term.
By the way, here’s my list of semiconductor stocks to consider if you want to take advantage of that chip shortage.
Bottom Line on NIO Stock
InvestorPlace contributor Will Ashworth recently wrote: “Buy Nio at $38. Buy some more if it falls further.”
That’s my feeling about NIO stock as well. And it seems to be a common sentiment among investment analysts in general. Among those polled by the Wall Street Journal, Nio has a consensus “overweight” rating.
There may be some more bumps along the road while issues like the global semiconductor shortages are worked out. If NIO stock slips further in the short term as a result, that’s just more incentive for investors to snap up shares.
Looking in the long term, this is an electric car company that has proven products, proven demand and it has all the pieces in place for rapid growth. That’s going to propel NIO stock back onto a long-term growth trajectory.
On the date of publication, Louis Navellier had a long position in NIO. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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