I am bullish on Chinese electric vehicle (EV) maker Nio (NYSE:NIO). That’s a tough stance to take right now. Beijing is stepping up regulatory pressure on domestic companies. Nio stock is just one among several high-profile casualties of these moves. However, the underlying fundamentals of the company remain solid.
In a month where many major car manufacturers reported drastically slowing sales, NIO delivered 10,489 vehicles in December 2021 — representing an impressive 49.7% year-over-year gain. It also notched a very healthy number for the final quarter.
In an effort to stay competitive with other electric carmakers, Nio is speeding up the release of their newest vehicle. The company has confirmed that they plan on delivering three new products by 2022 including its first electric sedan — the ET7 — which will come equipped both with long-range capabilities and autonomous driving technology for enhanced safety during roadways trips.
However, as is the case with many growth stocks, sentiment is turning bearish. Much of that has to do with the issues surrounding the regulatory environment in China and potential supply chain issues due to the semiconductor shortage. However, they’re a Chinese electric car company with an excellent track record of working together. And while investors want more growth, delivery figures continue to increase at a solid clip.
Chinese Stocks Struggle to Find Footing
The Chinese stock market experienced some volatility in 2021. Internet companies have been getting clamped down on by government regulators recently, and it’s not surprising. The Chinese government is known for a more hands-on approach to oversight.
Several sectors of the economy are coming under intense pressure. The Chinese auto markets have been largely escaping the wrath of their regulators. The global economy is in a state of flux, and investors aren’t sure what will happen next. The recent moves in Beijing add to that uncertainty.
Meanwhile, regulators on American shores are also sharpening their knives. Nio’s stock has been in freefall after the U.S Securities and Exchange Commission (SEC) said it will be delisting any Chinese stocks which do not comply with their standards, creating even more uncertainty for investors who are already worried about this company’s future prospects
The Chinese government is not planning on changing its position towards autos anytime soon, which means that car companies can continue doing what they have been doing for the past few years — listing shares of their variable interest entities (VIEs) onto foreign exchanges.
The Chinese government may one day decide that it is no longer the best option for listing stocks on international markets, and this could lead them to change their minds regarding overseas listings through VIE structures.
Investors Want More Growth
NIO’s December deliveries increased by 49.7% compared to last year, as the company delivered 10,489 vehicles in that month alone. In 2021, NIO delivered an impressive total of 91 thousand vehicles. This is a whopping 109% increase from last year’s figure.
NIO’s quarterly deliveries increased 44% year-over-year to 25,034 vehicles in the fourth quarter of 2021. All of these are excellent numbers. And Nio stock popped because of the announcement. However, shares are still trading at a huge discount to their 52-week high.
Among the three U.S.-listed Chinese electric vehicle makers, XPeng came out as the clear-cut winner. The company reported 16,000 deliveries in December and for all of 2020 they delivered 98,155 cars up 263% over the previous year’s numbers. Li has been on a roll this year, delivering 14 thousand units in December alone to reach 90,491 for all of 2021, representing year on year growth of 177%.
In 2021, XPeng delivered more cars than NIO. However, the latter has still managed to outshine its competitors with a total shipment count that sits at 167k vehicles for this year. In comparison, Li Auto has cumulative deliveries of 124,088.
Even more troublingly, Nio’s October shipment of cars to customers was the lowest in months. Supply chain issues and changes made on its manufacturing lines have had a major impact for this Chinese electric vehicle maker — as they continue to scramble through their production problems.
Nio reports that it delivered 3,667 vehicles in October alone — a decrease of more than 65% sequentially. The company said, ” delivery in October was significantly impacted by reduction in production volume as a result of the restructuring and upgrades of manufacturing lines and the preparation of new products.”
The global shortage of microprocessors has hit car manufacturers hard, with Nio being no exception.
Nio Stock Is in for a Great 2022
NT2.0 is a new technology platform that will be introduced in 2022, with three models planned to come out based on it next year alone! With an already extensive range of vehicles available for purchase — including sedans and SUVs alike — this latest update should provide customers plenty more variety when making their choice between what they want at any given time.
Nio’s first electric sedan, the ET7 will be equipped with advanced technology such as ultra-long-range and autonomous driving. The car is set to launch in China by end of Q1 2022 followed closely behind Europe where it’ll make its way sometime before year-end.
Management announced that they expect their monthly deliveries of the ET5 midsize premium sedan to reach 10,000 by 2022. There are plans to release a third model during the second half of next year as well. Nio also said there will be at least three additional NT2.0 model launches in 2023.
It is looking to expand its reach by selling the ES8 in Norway. And it plans on releasing an upcoming model for Germany next year. At Nio Day 2021, the company vowed to expand in Germany and beyond. By 2025 it plans on being a household name in 25 European countries.
Nio Stock Is an Excellent EV Play
A recent report from IHS Markit predicts that global sales of electric vehicles will increase by 70% in 2021. It’s no secret that the automotive industry has been struggling. Sales of traditional cars are down and many companies have started to phase them out in favor of new, greener options such as electric vehicles (EV) or hydrogen fuel cell-powered cars. However, there are plenty of EV options out there. That’s why its difficult to pick the right company for your portfolio.
Nio ticks several boxes for the value investor. It is trading at very attractive premiums versus Tesla (NASDAQ:TSLA), for example. The company operates in the Chinese market, which has a huge middle class. And there is less chance of the EV maker coming under regulatory fire.
Overall, growth stocks are having a tough start to the year. With a labor market close to potentially seeing full employment, the Federal Reserve is looking to curb its bond-buying and hike interest rates to combat inflation. We also see investors returning to traditional investment areas. All of this means, you have several outstanding names trading at a discount. Nio stock is a prime example.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.
