Why Nio Could Be the Best EV Stock to Own Right Now

Stocks to buy

Among the most prominent EV companies in China, Nio (NYSE:NIO) stock is the leading Chinese EV play. Nio designs manufactures and sells smart electric vehicles in China. The company also provides sales services.

China has achieved a significant milestone as the first major market with EVs capturing a 25% market share.

In contrast, Norway, with its smaller population, can easily absorb second-hand petrol and diesel car sales in the larger European market. However, in China, excess petrol and diesel cars pose a challenge because of its status as the world’s largest car market, accounting for 34% of global car sales with nearly 27 million vehicles sold in 2022.

Let’s take a deeper look at Nio stock as one of the best EV stocks to buy outside of Tesla (NASDAQ:TSLA).

NIO Nio  $7.91

The Chinese EV Market

China has emerged as a dominant player in the global automotive industry. It leveraged its position as the world’s largest car market and becoming a major producer and exporter. China’s early recognition of the EV potential allowed it to make significant investments in an EV ecosystem.

According to Allianz, Chinese EV manufacturers possess a competitive advantage across the entire battery electric vehicle value chain, demonstrating their expertise in nearly every aspect.

China experienced a significant surge in passenger electric vehicle (EV) sales, nearly doubling in 2022 with an 87% year-on-year growth. EVs now represent 25% of all cars sold in China. Notably, the proportion of battery EVs (BEVs) declined, while plug-in hybrid EVs (PHEVs) increased their market share to 24%.

China ranked as the second fastest-growing market in sales, accounting for nearly 59% of global EV sales volume. Japan topped the list with a YoY growth of 119%.

Why Nio

Is Nio stock a smart investment? The company plans to capitalize on the growing market by expanding its product offerings, aiming to double sales in 2023. After successfully overcoming significant operational hurdles, Nio is now poised for further growth.

Nio, a rapidly expanding Chinese EV manufacturer, experienced remarkable growth between 2018 and 2022.

With annual deliveries skyrocketing from 11,348 to 122,486 vehicles, their compound annual growth rate (CAGR) reached an impressive 81%. Similarly, their annual revenue demonstrated a CAGR of 74% during that period.

Nio’s EV sales rebounded strongly in February, signaling a positive turnaround after supply chain issues. The company is confident about doubling sales this year, citing new EV models, a robust charging network, and self-driving technology.

Nio focuses on China’s premium electric vehicle market, with higher-priced EVs compared to Tesla’s lineup. The ET5 competes with Tesla’s Model 3, and Nio’s upcoming models will further challenge the Model Y.

Nio, XPeng, and Li Auto are startup competitors to Tesla in China, while BYD is a major player moving up in the affordable luxury and premium segments.

Recent Nio News

Recently, Nio has invested in a startup called Neo Fusion that focuses on developing fusion technologies. The goal is to commercialize controlled fusion for various applications worldwide within the next two decades.

Neo Fusion, a startup with a registered capital of $723.37 million, is majority-owned by energy companies and the Anhui government.

Nio, along with its investment firm Nio Capital, has made significant investments in Neo Fusion. It bought a 19.9% and 10.1% stake, respectively, according to the company’s registration filing.

Nio’s investment in the power and energy sector highlights the company’s ambitions. Nio believes battery swapping stations offer a faster charging solution and serve as energy storage facilities.

Rounding It Out

Nio has taken steps toward international expansion. It opened stores in Norway and auto showrooms in Germany. These strategic moves will position Nio for potential growth in Europe, a rapidly expanding EV market.

By replicating its success and expanding its Power Swap network, Nio could emerge as a strong competitor to Tesla and traditional automakers venturing into the EV space.

On the date of publication, Chris MacDonald 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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