NIO vs Tesla Stock: Which is Best?

Nio vs Tesla Stock: A little less than 1% of the 250 million cars, SUVs, and light-duty trucks in the United States are electric. However, the push for electric vehicles or EVs is just getting started.

According to an industry analysis by IHS Markit, 45% of new car sales are expected to be electric by 2035. This would mean that about half of all cars on the road would be electric by 2050. From an investment standpoint, now might be the time to invest in Electric Vehicle Manufacturers to capitalize on future gains.

Two of the leading producers in the EV space are Tesla and NIO. Here, we will highlight the histories of these two companies, what their future outlooks are, and which company currently has more to offer investors. 

NIO: The Chinese Tesla?

Founded in 2014, NIO is a Chinese multinational automobile manufacturer headquartered in Shanghai, China. The company specializes in designing and developing electric vehicles. NIO, which translates in English to “Blue Sky Coming,” was founded by William Li, Hsien Tong Cheng, and Lihong Qin. Li currently serves as the CEO of NIO.

NIO is often referred to as the Tesla of China with its luxury electric car designs. However, unlike Tesla, NIO does not manufacture its own electric cars. Instead, NIO partners with a state-owned auto manufacturer to provide electric vehicles to consumers throughout China.

The company went public in September 2018, trading on the New York Stock Exchange under the stock ticker NIO. The stock began trading for an IPO price of around $10 per share. It experienced rapid growth in 2020. In January 2020, NIO stock was trading at around $4 per share. By December 2020, the stock was trading at around $50 per share. The stock hit an all-time high in January 2021, trading around $60 per share.

Nio has been on a continued downtrend throughout Q4 2021 and Q1 2022. At last count, NIO stock had a market cap of $36 billion and is trading at around $20 per share. In addition, the stock’s 52-week low is $13.01, and its 52-week high is $55.13.

Tesla 101

Founded in 2003, Tesla, Inc., formerly known as Tesla Motors, Inc., is an American automotive electric vehicle and clean energy company. The company was originally based in San Carlos, California, and is now headquartered in Austin, Texas.

The original founders of Tesla Motors, Inc., Martin Eberhard, and Marc Tarpenning, named the company after the 19th-century inventor Nikola Tesla. Eberhard and Tarpenning created Tesla Motors with the goal to “build a car manufacturer that was also a technology company.”

The trajectory of Tesla Motors was drastically altered in 2004 after Elon Musk invested $6.5 million into the company. During this time, Musk became the Chairman of the Board of Directors and the largest shareholder of Tesla Motors.

In 2008, the company released its first electric car, known as the Roadster, and Musk was named the CEO of the company. In February 2017, Tesla Motors was officially changed to simply Tesla.

Tesla went public in 2010, trading on the NASDAQ under the stock ticker TSLA. The stock began trading for an IPO price of around $17 per share. During its initial public offering, Tesla issued 13.3 million shares. After about ten years on the market, Tesla stock experienced rapid growth in 2020.

In January 2020, TSLA stock was trading for around $130 per share. By December 2020, TSLA stock was trading at around $705 per share.

The share price has continued to rise higher, hitting an all-time high of around $1240 per share in November 2021. Most recently, TSLA stock had a market cap of $1 trillion. In addition, the stock’s 52-week low is $546.98, and its 52-week high is $1,012.71.

Battle of EV Car Manufacturers

There’s no doubt that NIO and Tesla are two companies leading the charge in the electric vehicle space. Both companies are gearing up to make big moves in the upcoming decade, but which company is better from an investment standpoint? 

Executives of both companies have optimistic outlooks for the upcoming quarters. During Tesla’s Q4 Earnings Call, Elon Musk outlined the company’s recent performance and vision for the future.

Musk relayed to shareholders, “..it was a breakthrough year for Tesla and for electric vehicles in general. And while we battled, and everyone did, with supply chain challenges through the year, we managed to grow our volumes by nearly 90% last year. This level of growth didn’t happen by coincidence. It was a result of ingenuity and hard work across multiple teams throughout the company. Additionally, we reached the highest operating margin in the industry in the last widely reported quarter at over 14% GAAP operating margin.”

Musk went on to share, “So — in 2022, supply chain will continue to be the fundamental limiter of output across all factories. So the chip shortage, while better than last year, is still an issue. And, yeah, so that’s — there are multiple supply chain challenges. And last year was difficult to predict, and hopefully, this year will be smooth sailing, but, you know, I’m not sure what you do for an encore to 2021, 2020. Nonetheless, we do expect significant growth in 2022 over 2021, you know, comfortably above 50% growth in 2022.”

NIO executives also relayed similar messages to shareholders during the NIO Q4 Earnings Call. William Li told shareholders, “[Foreign language] In the fourth quarter of 2021, we delivered 25,034 ES8, ES6, and EC6, representing an increase of 44% year over year. 2021 was a year full of challenges for NIO and the global auto industry.”

Li went on to say, “By overcoming the pandemic, semiconductor shortages, supply chain volatilities, and many other difficulties, we have continued to lift the premium smart electric vehicle market in China, with a total delivery of 91,429 new vehicles in 2021, representing a strong increase of 109.1%.

The outlook and performance of 2022 are already looking promising. Li also relayed the message, “In 2022, we plan to open more than 100 NIO sales outlets and over 50 NIO service centers, and authorized service centers. In terms of the charging and swapping networks, we have deployed 866 battery swap stations in 190 cities and completed over 7.6 million swaps in China. So far, we have 711 supercharging stations and 3,786 destination chargers in China. In January 2022, NIO delivered 9,652 vehicles, increasing by 34% year over year.”

We know that executives of both companies are sure their companies will perform well over the next few quarters, but how do investors really feel about these two companies. Well, let’s take a look at Cathie Wood’s recent trades to get a better idea of how professional investors are viewing the two electric car companies right now.

Cathie Wood, the CEO of ARK Invest, is the longtime holder of TSLA. In March 2022, Wood invested in NIO for the first time, purchasing 420,057 shares for about $8.4 million.

In addition, to buying NIO for the first time, Wood also sold a large portion of her TSLA holdings which were valued at around $147.6 million.

However, TSLA stock is still the number one holding in the ARK’s flagship ARK Innovation ETF (ARKK). In addition, Wood confirmed that selling some of her TSLA holdings merely represented profit-taking and that she believes in the company for the long term.

Nio Vs Tesla Stock: Which Is Best?

From a valuation perspective, Nio has upside to $19.82 based on a discounted cash flow forecast analysis, suggesting it is fully valued at this time.

Applying similar analysis to Tesla yields an intrinsic price per share of $819, implying that Tesla is currently overvalued to the tune of approximately 17%. 

The bottom line is when it comes to valuation, Nio is currently the better bet vs Tesla stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.