While political analysts saw trouble in Chinese President Xi Jinping’s weekend speech to his Communist Party congress, investors in Nio (NYSE:NIO) saw hope. NIO stock was up nearly 2% in pre-market trading today.
What the optimists heard was Xi supporting Chinese technology. Continued investment is necessary for both private and state-backed companies. Nio is a combination of the two.
What’s Nio With You?
William Li founded Nio in the last decade as a privately-owned Chinese version of Tesla (NASDAQ:TSLA). Cars would be made for a fast-growing upper middle class.
But that dream died with the coronavirus pandemic. Nio needed $1.4 billion from the municipal government of Hefei. This tied it to the city government west of Shanghai and government-controlled JAC Motors. JAC now uses Nio as the upper end of its electric vehicle (EV) line. Many domestic Nio sales are now made to party functionaries.
The change has kept Nio in the running among luxury EV makers traded in the U.S. NIO stock opened Oct. 17 with a market cap of about $22 billion, well ahead of Li Auto (NASDAQ:LI) and XPeng (NYSE:XPEV). Nio delivered over 10,000 cars in August, and it has hopes for export markets in Europe, with fast battery swaps that take no more time than a gas station visit.
Nio sold 82 cars in the key Norway market in April, where EVs now dominate. That doesn’t sound like much, but market leader Volvo, controlled by China’s Geely Automobile (OTCMKTS:GELYF), sold just 721, and its total market is just 5,000 units per month.
What Happens Next for NIO Stock?
On the date of publication, Dana Blankenhorn did not hold (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.