Countries across the world are committing towards a greener future. With a commitment to reduce carbon emission, several countries have started promoting Electric Vehicles (EVs) and China is leading the change. According to Reuters, EV sales in China will make up more than 35% of the new vehicle sales by 2025. Further, the sales of EVs this year are expected to rise to 3 million units as compared to 1.4 million last year. Nio (NYSE: NIO) is a strong EV player and has reported solid year-over-year growth.
Despite the competition and chip shortage, Nio has managed to deliver strong numbers. NIO stock has solid growth potential and the ability to reap returns. The stock hit an all time high of $66 in February this year. However, the stock is trading at a much lower rate today and this dip is a solid chance to buy. NIO stock is exchanging hands for $39 currently and I think the third-quarter results will take the stock to new highs. Let us dig deeper into the investment case of NIO stock.
Battery Swapping Service
Nio stands out in the EV market for its battery swapping service. When you have a Nio car, you do not need to plug the vehicle to recharge. You can simply use the battery as a service and pull into a station to exchange the battery for a fully charged one. This takes less than five minutes and offers convenience to the owners.
Nio is committed to developing new battery stations across China and it already has more than 500 stations. It will also install them in Norway. The company completed more than 4 million battery swaps since 2018 and it plans to have 4,000 stations by 2025. I believe the battery swap stations will become the driving point of growth for the company. It will set the company apart from all other EV makers and will generate revenue for Nio.
Nio has stood strong when it comes to monthly deliveries. It has the potential to expand and meet the demands of the consumers. The delivery numbers are proof that the consumers are loving Nio cars. It delivered 21,896 cars in the second quarter, which is a 112% rise year over year.
The company reported more than 10,000 deliveries in September and the third quarter deliveries stood at 24,439 which is more than the expected numbers. It shows growth in line with the investors’ expectations despite supply chain issues.
The delivery numbers will have an impact on the bottom line and it will show on the third quarter results. Nio will report impressive revenue numbers for the quarter. I also think the company will be profitable sooner than the other EV makers in the industry. It has a solid balance sheet and is expanding its market in Norway, which has the highest penetration of EVs.
The Bottom Line
Nio is in a growth stage and is currently trading at a discount. Considering the potential of the company, there is a chance for the stock to soar in the coming months. The third quarter results and NIO Day, which is scheduled in December will take the stock higher.
Despite the rising competition and chip shortages, the company has managed to report strong delivery numbers. It has also marked its presence in Norway and will continue to expand there. The third quarter results will prove Nio’s worth and investors who are patiently waiting for the stock to soar should keep holding on to it. Nio stock is a long term buy and as the demand for EVs continue to grow, the stock will continue to generate returns.