Nio (NYSE:NIO) saw its shares drop 5% last Tuesday. But investors shouldn’t panic. Even though NIO stock actually slipped for three-straight sessions recently, it’s heading back up today. Now the five-week rally that saw it gain some 50% appears to be back on track.
Of course, there are a few potential reasons for the stumble, including a rise in demand for oil which resulted in many electric vehicle stocks taking a hit. However, the overall picture continues to look rosy for Nio today.
In fact, if you’re looking for an EV stock for your portfolio, NIO stock is a compelling pick. Based in China, this company is pumping out record vehicle deliveries, despite challenges like the global chip shortage. It also has a real competitive advantage over many EV makers with its Battery as a Service (BaaS) approach, which eliminates charger installation issues while also lowering vehicle costs. And finally, Nio is operating in China — the world’s largest car market — as well as beginning to move into the global EV market.
NIO Stock: The European Expansion
China is the world’s largest automobile market, which obviously gives Nio a big advantage. In 2020 — a year when the pandemic resulted in car sale declines around the world — Chinese consumers still bought 20.1 million new cars. In comparison, Americans bought 14.5 million new vehicles.
However, being an EV is another layer to the car-buying equation. While China is, once again, bigger than the States, Europe is where it’s at right now. In 2020, 42% of all EVs sold globally were purchased in European countries, which punch far above their weight in electric car adoption. Why are Europeans snapping up EVs at such a high rate? It comes down to two factors: incentives and gas costs.
European countries have some of the most expensive gasoline prices in the world. In the second quarter of 2020, Americans paid an average of $2.50 per gallon for gasoline. Likewise, Chinese consumers paid an average of $3.23 at the pumps. However, drivers in the U.K. shelled out $5.12, Germans paid $5.53 and drivers in the Netherlands paid an average of $6.64 per gallon. Clearly, it pays to buy an EV with gasoline costs so high.
Then there are the generous government incentives for EVs. Many European Union countries offer tax exemptions and rebates, with some also offering subsidies for drivers who scrap a gas-powered car and replace it with an electric one.
Nio is planning to expand beyond its home market of China, with EV-friendly Europe first up on the list. For May, the company announced plans to start selling EVs in Norway. That’s just the stepping stone. Next up will reportedly be Germany and then the United Kingdom. Of course, taking on traditional German automakers on their home turf will be tough, but Nio is evening the playing field by making the move now. When it comes to electric vehicles, everyone is making a fresh start.
Altogether, when you look at long-term growth catalysts for NIO stock, China is huge but Europe could be even bigger.
Could Nio Come to the States?
With its apparent push into Europe, however, would Nio dare to venture into the United States, home of the world’s most successful EV maker?
Well, so far the company has already said it’s eying the U.S. market. For example, Barron’s reported in February that one Deutsche Bank analyst had discovered a Nio job posting which sought someone to “‘formulate an action plan to enter the US market.’”
Of course, there will be plenty of challenges here, not the least of which is a tense relationship between China and America which has resulted in trade war flareups over the past several years. But don’t discount the possibility — or the effect that such a move would have on NIO stock.
Bottom Line on NIO Stock
Currently, NIO stock rates as a “B” in Portfolio Grader. The investment analyst community has been increasingly bullish about it over the past several months. And it’s no coincidence that the shift corresponds to the rally in NIO shares.
Among the analysts tracked by CNN Business, NIO has been rated a consensus “Buy” since April. On top of this, the number of holdouts rating Nio as a “Hold” has steadily decreased as well, from six in April to three today. Lastly, the analysts’ median 12-month price forecast is currently $57.44, which represents upside of about 16% as of this writing.
To sum it up, NIO stock is moving in the right direction. It’s still well below 2021 highs (it closed near $63 in February) and the company is also actively exploring global expansion opportunities which have the potential to add serious fuel to its long-term growth story.
So, if you’ve been on the fence about this EV maker, just know this: the longer you delay, the more an investment is likely to cost you.
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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