Shares of Chinese electric vehicle (EV) maker Nio (NYSE:NIO) are helping bring some smiles on Wall Street today. Specifically, anticipation is running hot for the company’s venture into smartphones. Although surprising, the move makes sense given the connectivity potential. While NIO stock has been disappointing so far this year, management hopes to use the pivot to change the company’s fortunes.
According to CNBC, Nio released an Android smartphone last week, which is priced from around $900 to $1,000 — approximately $150 cheaper versus a comparable phone from Huawei. In an interview with CNBC, Nio CEO William Li said the company expects at least half of its users to buy the new device.
Further, Li specified that more than half of Nio’s customers are iPhone users. Meanwhile, the remainder “uses flagship Android phones from Huawei and other brands.” Therefore, this represents an opportunity for Nio to take market share while also bolstering its core EV business.
Per the news outlet, “Nio is the first high-end Chinese electric car brand to release its own smartphone.” While orders have already started for the phone, deliveries will begin on Sept. 28.
NIO Stock Aligns With a Burgeoning Trend
The idea of an EV maker manufacturing its own smartphones may seem odd, but it’s part of a burgeoning trend. In China, many EV brands are seeking to integrate in-car entertainment and smartphone connectivity as a key selling point for their vehicles. Thus, Nio is looking to lead this industry development, potentially boding well for NIO stock.
Earlier this month, Swedish EV maker Polestar (NASDAQ:PSNY) told CNBC that it also plans to launch its own smartphone in December. Of course, Polestar counts China as a major market.
According to Mordor Intelligence, the Chinese EV sector is expected to grow from $260.84 billion this year to $575.56 billion by 2028. That represents a compound annual growth rate (CAGR) of over 17%.
Further justifying belief in NIO stock, CNBC also notes that smartphone companies like Apple (NASDAQ:AAPL) and Xiaomi (OTCMKTS:XIACF) are likely developing their own EVs.
For Nio specifically, the new smart device represents an opportunity to make more money per user. CEO William Li said in his interview with CNBC:
“We pay more attention to the value that each user brings to our entire brand, and it is more convenient to connect users. It is also more efficient than before […] What we are pursuing is the car experience and the emotional experience we can provide to our users.”
Interestingly, the new phone is available to all consumers in China for purchase, not just to Nio vehicle owners. Accordingly, the move may also provide an organic marketing lift for Nio’s core EV business.
Why It Matters
While NIO stock may not being living up to expectations so far this year, analysts remain generally optimistic. Right now, experts rate Nio as a consensus moderate buy with an average price target of $14.24 per share, implying 69% upside.
On the date of publication, Josh Enomoto 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.
