Investing in Chinese electric vehicle (EV) manufacturers such as Nio (NYSE: NIO) is an intriguing option. Heavy government subsidies have led to rapid advances in battery technology and driving down costs, making for an incredibly competitive EV market in China. In fact, the Chinese market is so far ahead of the US that more than half of new vehicle sales in July were electric vehicles.
The good news for Nio investors is that the company has momentum and is about to shift into high gear. Let’s see what awaits us.
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Nio has quietly put together a few months of strong delivery numbers. Nio has delivered more than 20,000 vehicles for six consecutive months. Nio delivered 20,976 vehicles in October, an increase of 30.5% over the previous year.
But the biggest takeaway from October’s results was Onvo’s early deliveries. Its Nio brand sold 16,657 vehicles in October, while its “family-oriented smart vehicle brand” Onvo delivered 4,319 in its first full month of sales. After launching the mid-size Onvo L60 in September, management noted that production and deliveries would increase steadily.
As of the end of October, Nio had 166 Onvo centers and spaces across 60 cities with plans to expand its network to fuel growth. Nio’s Onvo L60 is a good bet for that growth and could kick the company into high gear. The new electric SUV starts at around $21,200 and is aimed squarely at rivals Tesla‘s Model Y.
Not only will the Onvo L60 help kick Nio’s deliveries into high gear, it’s just a stepping stone to what could be an even bigger hit among consumers. Nio CEO William Li commented: “If you think the L60 is good, then this new model is a much more competitive product.” Currently, the plans are for Onvo to launch a new EV every year, while the new mid-to-large electric SUV will arrive next year.
Nio does not stop at Onvo. It has plans to launch another, more affordable sub-brand called ‘Firefly’ in late 2024. In a Chinese market where EVs represented more than 50% of new vehicle sales in July – and which is hungry for affordable EVs – Nio’s launch of Onvo and Firefly should really kick the company’s deliveries into high gear. We’re seeing evidence of this recently in October’s production and delivery figures.
The good news is that Nio recently announced a cash infusion from a group of investors who provided approximately $1.9 billion to help finance its expansion and growth. The collection of strategic investors will invest approximately $471 million in Nio China, while parent company Nio has agreed to put up approximately $1.43 billion in cash to subscribe to the newly issued Nio China shares.
Although Nio has lost about 44% of its value in 2024 alone, the company is preparing for a much stronger 2025.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Nio about to shift into a higher gear? was originally published by The Motley Fool
