Poor earnings at Tesla (NASDAQ:TSLA) are taking down other electric vehicle (EV) stocks today. Nio (NYSE:NIO) stock opened on Oct. 19 at $7.76. The market capitalization of $14 billion is more than $1 billion less than it was at the start of trading on Oct. 18.
Nio is due to report its earnings on Nov. 9. Analysts are expecting a loss of 43 cents per share.
Don’t Call Me Tesla
Nio billed itself as the “Tesla of China,” but that’s an insult after Tesla’s latest results.
Tesla reported an operating margin of just 7.6%, with earnings of 66 cents per share instead of the 73 cents expected. This sent shares down 7% overnight, coinciding with China’s trading day.
Other Chinese EV makers traded in New York, like XPeng (NASDAQ:XPEV) and Li Auto (NASDAQ:LI), also fell overnight, although Li’s fall was less than 3%.
Nio has long copied Tesla’s strategy of only selling direct. But it’s now eyeing creation of a dealer network in Europe to support its lower-priced “Firefly” car, which comes out in 2025.
Europe’s market shapes up as a key test for all EV makers. Regulators have endorsed the switch to EVs but are leery of Chinese subsidies. They could increase tariffs in response.
Tesla’s price cuts bit into margins of its Chinese competitors this year, with manufacturers cutting wages for assembly workers.
Nio has cut prices and will begin charging for its vaunted battery-swap service. But it shipped just 15,641 cars last month and is a long way from profitability.
Nio’s “Innovation Day” on Oct.17 also hinted at new directions for the company, including branded semiconductors and software sold as a service. Nio has also introduced its own smartphone.
What Happens Next for NIO Stock?
Instead of being the Tesla of China, Nio wants to be the Apple (NASDAQ:AAPL) of EVs. What analysts want to see, however, is a black bottom line, something it has yet to deliver.
As of this writing, Dana Blankenhorn held a LONG position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
