Sometimes good investment opportunities arise for reasons unrelated to the company itself or even to its industry. Chinese regulators have severely cracked down on certain sectors, including large for-profit tech and education companies. And recently, the fear of default from a major Chinese real estate company has rocked markets around the world.

In China itself, the turmoil has also affected growing companies that make electric vehicles. Chinese electric vehicle manufacturer widely followed Nio (NYSE: NIO) is based on a manufacturing partnership with a public company. With the government’s crackdown on businesses, investors might wonder if it’s not too late to take advantage of this growing industry. But there are several reasons why Nio is just getting started, providing an opportunity for risk-tolerant investors.

The luxury sedan Nio ET7. Image source: Nio.

Have all the gains been made?

Nio stock peaked in early 2021 with its US custodian stocks valued at over $ 60, representing a market cap approaching $ 100 billion. This was about 1,500% gains from January 2020, when the company began consolidating a struggling balance sheet. But stocks have been cut in half from the peak, and with the uncertainty surrounding Chinese stocks listed in the US, some investors might think the stock’s gains are a thing of the past.

While the business is still not profitable, if investors can absorb more macroeconomic risk associated with regulators and potential government intervention, there are bright signs that the business itself is preparing to take off.

In May 2021, Nio renewed a manufacturing agreement with its public partner until 2024, with plans to double its annual capacity to 240,000 vehicles. The company believes that demand is supporting this growth. Nio also has three new products it plans to launch in 2022, including the ET7 luxury electric sedan.

The Chinese market and beyond

The ET7 will be the first sedan offered by Nio, and it is getting closer to mass production. The company recently announced that it has completed an extreme heat test on the sedan, which “verified the stability of the ET7’s thermal management system, the performance of the transmission system, and the battery cooling system under extreme conditions. extreme heat “.

Beyond China, Nio plans to launch the ET7 sedan in Norway next year, where it has already sent its first exported shipment of its flagship ES8 SUV from Shanghai. CEO William Li said, “Our goal is to have ET7 in Germany by the end of 2022,” according to industry online publication InsideEVs. The car was recently presented in Germany with the Nio EVE, a self-driving concept car that she says was the inspiration for the ET7.

And the automaker isn’t just planning to sell vehicles in new markets. The official launch of ES8 in Norway will take place on September 30, with exact pricing and specifications to be announced. Nio Norway chief executive Marius Hayler said the company will next open a Nio home on October 1. There are currently 28 Nio homes in China, which are aimed at developing and supporting the community of its electric vehicle users.

Nio electric vehicle in battery exchange station.

A Nio in a battery exchange station. Image source: Nio.

Innovate for clients and investors

In addition to the ET7, Nio is planning an ET5 sedan as another new product next year. The vehicle, which will be positioned under the ET7, is expected to be announced at the company’s annual Nio Day in 2022, according to the Chinese auto industry website. autohome.

Innovation is not limited to new vehicles either. The company has just announced a new standard range 75 kWh hybrid cell battery to replace its 70 kWh version. The company claims that the new battery, which was developed with patented technologies, has extended runtime in cold temperatures. Due to the technological efficiency, the company will offer the new battery at the same price as the previous 70 kWh version. It is now available for new orders with its 100 kWh battery with longer autonomy.

And both come with the ability to add a battery-as-a-service subscription, which gives the company another source of revenue while differentiating itself from its competition. Nio’s power solutions service offers rechargeable, exchangeable and upgradeable batteries.

Nio is not alone in trying to grow an electric vehicle business in the world’s largest automotive market. And its competitors in China are also expanding their activities outside the country. For investors, the risks of owning Nio include competition, political uncertainty and its status as a still unprofitable company, still valued at nearly $ 60 billion. But for aggressive long-term investors who believe in growing the business and the EV industry, it might not be too late to buy Nio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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