Is NIO Stock Doomed to Fail?

NIO Stock popped more than 4% on Monday after Tesla announced it landed approval from China to roll out its FSD (full self driving) service.  The news got a lot of attention, and shares of Tesla soared more than 18%.  But what exactly does the deal mean?

For Tesla, it means increased revenue.  After all, there are nearly 2 million Tesla owners in China that could pony up for the company’s FSD feature.  With continued price drops for its cars, having that additional FSD revenue could counter some of what Tesla is losing from its lower-priced models. 

This also opens up Tesla to potential licensing deals. Although there are a number of Chinese EV makers already integrating autonomous driving into their vehicles, if Tesla’s FSD proves to be the best-in-breed technology, some of these Chinese EV manufacturers may look to license Tesla’s FSD system for their own cars.  

It’s too early to know exactly how this will play out.  And I suspect China will pony up a lot of scratch to help its biggest EV manufacturers compete on the autonomous vehicle front, too.  Just as it did for its EV industry, which dominates the global market for electric vehicles.  To be sure, that dominance would not exist if it weren’t for the government pumping billions of dollars into it. 

Take NIO, for instance.  This Chinese EV maker lost $835 million between April and June of 2023.  And back in 2020, when the company almost ran out of cash, a state-owned investment fund ponied up $1 billion to acquire 24% of the company.  That was then followed by the state-owned China Construction Bank that handed the company a $1.6 billion line of credit.

Today NIO stock trades for around $5.50 a share.  A far cry from its high of nearly $62 back in 2021. 

This doesn’t mean NIO is done for.  In fact, with the government’s help, the company continues to survive.

What the Future Holds for NIO Stock

I’ve always been a bit hesitant to invest in Chinese car companies.

I just don’t know how to properly value these Chinese car stocks because their valuations are so closely tied to government support.  Indeed, there’s some level of that in the U.S. too with tax credits.  But it’s nothing compared to that which keeps China’s EV industry alive. 

Some of these stocks have done well, some have not.  But overall, the concern is, “what happens to these stocks if China pulls the plug on its support?”  I used to ask that question quite a bit, but these days, I believe it’s highly unlikely that this will happen anytime soon.  At least not anytime before the end of the decade.

So maybe it’s not a bad idea to start sniffing around for some bargain Chinese EV stocks.  Although I don’t believe NIO stock is one to pursue at the moment.  Its revenue growth is still coming up short compared to its competitors in the China market.  And if it weren’t for a recent $2.2 billion investment from CYVN Holdings, which is controlled by the government of Abu Dhabi, I’m not sure it would have enough cash to get through another year. 

Worth noting, the stock soared 18% following the announcement of that $2.2 billion investment, hitting $9.43 a share.  Those who jumped in for a quick trade did well.  Those who thought this was the beginning of something much bigger are now sitting on double-digit losses.  And I suspect this is the future for those who want to invest in NIO stock. 

Bottom line: it’s risky as hell.  And unless you’re willing to monitor it throughout the day and run some quick trades on it, it’s not worth your time.  So instead of trying to gauge this thing for some day trading lucre, try investing in something far more solid.  Something with much less risk.  And something with far more reward.  

Like this company, for instance, which has developed a revolutionary new battery technology that’s so lucrative, Bill Gates, Jeff Bezos and Michael Bloomberg have all ponied up millions to get an early piece of it.  But this isn’t an electric car battery.  Instead, it’s a utility-scale battery capable of powering entire cities.  

My good friend and colleague Alex Koyfman just put out a new investment note and buy alert for the stock that’s behind this new battery technology.  And you better believe we’re going to milk this thing for everything it’s worth.  So unless you hate money, I’d advise you to join us, and get some of this action for yourself right now.

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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