Nio's Surge in 2020

Nio had a tough year in 2019 when they had a few problems with their vehicles, it was a costly situation. Their financials were in critical level and desperate for a bailout. At the Q2 of 2020, with the strong backing from Tencent, Nio was able to push through. They earned government bailouts and investments from key investors. Nio went to work and the struggles from the past are long gone. Nio now face a more important problem which is growing their business and taking it to the next level.

2019 was truly the best year to invest in Nio but no one could have predicted the sudden shift. 2020 is the next best year to get in Nio. Why? 2021 is looking very bullish and a few more expansions on the way are coming. It may seem like Nio have done a lot in 2020 but the next important phase is in 2021 and this momentum in the stock price will keep rolling.

The JAC-Nio facility is now producing more cars which means they will be able to lease more batteries as more cars are produced and sold. The facility can be upgraded up to 150k/year capacity with 2 shifts if necessary, according to William Li, the CEO of Nio. I am positive that Nio will be able to sell more cars in 2021. Nio is also planning to enter Europe sometime next year and will be releasing a new model, the ET7. Nio will be focusing on increasing their revenue the entire time of 2021.

Back to our current year, 2020. September deliveries came in at 4708. That is near their maximum capacity range. Due to backlogs, I am expecting the next few months to possibly see around 4600-4900 deliveries per month. This proves that Nio has a strong demand and its share price could push and close around $29-35 by the end of 2020. The resilience of Nio in 2020 has convinced some analysts to turn their heads around and become bullish as well.

Nick Lai from JP Morgan upgraded Nio to Buy with a price target of $40. Soon right after, Jeff Chung from Citigroup also upgraded Nio to Buy with a $33.20 price target. This created a massive surge in the stock price of Nio and it has created many investors excited about the company. Therefore, we might see plenty of support for Nio in the next coming years.

The next important thing to happen is a capital raise which is necessary for the growth of the company. It could be done by a secondary offering. It may or may not happen soon, but to take advantage of this surge will only secure Nio’s future development. Nio will need to keep raising funds for their R&D and it is necessary for Nio to be competitive and as one of the leading Chinese brands among others in China. Nio will follow the lead of Tesla and could possibly have competitive technologies to go head to head against Tesla. Nio is far behind Tesla but I will not underestimate the hard-working Chinese and their unappreciated intelligence.

Some areas in China has mandated the switch to EVs instead of gas vehicles. This means that taxis, ride hailing industries, small commercial vehicles and other service vehicles will be switching to EVs sooner or later. In order to maximize the benefits of these electric vehicles, a battery swap technology is necessary to save time on charging. The sooner the vehicles are dispatched, the sooner people get back to work. As of right now, Nio is the leader of the battery swap technology.

China’s New Energy Vehicle (NEV) mandate in 2018 with the goal of selling 4.6 million EVs by 2020 and banning internal combustion engine vehicles has created the biggest transition in the country. Billions of dollars worth are being put on subsidies towards NEV which extends to 2022 and this has been beneficial to all EV manufacturers in China. This was a threat to GM and Ford’s business models, but this is where Nio, Tesla, BYD and perhaps Xpeng Motors will thrive. From horses to cars and now, we are entering the time of electric vehicles.

Nio has a long way to go and still a small company. If Nio keeps the pace, this can give very rich gains for many investors on the next couple years at least.

This is not an investing advice and take my words with a grain of salt. Do your due diligence and invest accordingly. Only invest in companies you know and trust and not base your decisions from the opinions of others. Thank you for reading and have a nice day.