The electric vehicle industry is taking countries by storm. Nio (NYSE:NIO) is a pioneer manufacturer of EVs in China and it is growing rapidly. The company’s stock has been in the limelight for a long time and as the company expands on all fronts, it is time to load up on NIO stock.
The stock was trading close to $3 in June 2019 and in two years, it is trading close to $44. It has shown more than a 300% rise over the past five years. I have always been bullish on NIO stock and had recommended a buy when it was trading at $31.
I continue to remain bullish on NIO for two strong reasons. Let’s take a look at them.
NIO Stock and the Alliance
With growing awareness about the benefits of EVs and support from the government, various countries are moving toward EVs and promoting their usage.
Nio recently entered into a strategic alliance with Jianghual Automobile Group Co. for the joint manufacturing of Nio vehicles. The company currently manufactures Nio vehicles including the EC6, ES6, ES8. In this joint venture, Nio will hold 49% equity. Starting from May 2021 to May 2024, the company will manufacture four Nio models as well as any upcoming models. It will also expand its production capacity to 240,000 annually.
This 3-year deal is a clear sign that the company is expecting to hit big delivery numbers in coming quarters. Nio executives are looking at the big picture and increasing production capacity dramatically.
Any company can only do this if there is a demand for its products. Nio may be able to meet the growing demand by scaling up the production capacity. It is a great sign for investors and will take NIO stock higher. NIO is rallying despite the chip shortage and the company reported strong delivery numbers.
Impressive Delivery Numbers
NIO’s monthly deliveries may have retreated but the company is ready for a turnaround. It recently reported May delivery numbers. The company delivered 6,711 vehicles in the month, which is a 2.1% decline from the previous month. However, it is a 95% increase from the same quarter previous year. This decline is due to the chip shortage faced by the entire industry.
Let’s take a look at the month-wise deliveries:
| Month | Deliveries |
| Jan | 7,225 |
| Feb |
5,578 |
| March | 7,257 |
| April | 7,102 |
| May | 6,711 |
The company expects second-quarter deliveries of around 21,500. This means the June deliveries are expected to hit 7,750. This could mark a huge increase month over month. Until the end of May, the total deliveries recorded 109,514, and this was no small feat.
The company will be able to show higher delivery numbers in the coming quarter considering the increased production capacity and growing demand.
The Bottom Line on NIO stock
NIO is one of the best EV stocks today. With the worst of the chip shortage in the rear view mirror, the company can scale up to new heights. NIO stock has the capacity to hit $50 in the next few weeks.
Morgan Stanley analyst Tim Hsiao has an “overweight” rating for NIO stock with a price target of $64. Further, Citi analyst Jeff Chung upgraded the stock to “buy” with a price target of $58.30. The analyst added that the company will enjoy a strong demand recovery from April in China and the new order volumes in the coming months could be 20% to 30% higher than the average level in the peak season in Q4 2020.
Nio enjoys several advantages in the industry, including the battery as a service, which reduces the overall cost of an EV and makes it attractive for buyers.
In short, NIO stock has strong long-term potential.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
