Nio vs Tesla Stock: In 2018, only 2% of vehicles sold in the United States were electric or some form of electric car hybrid – but don’t let that figure scare you off. Electric vehicles are the future.
Boston Consulting Group is expecting the number of electric vehicles on the road will increase at a rate of almost 24% per annum before taking over 28% of the market by 2030, and continuing to climb.
MarketWatch is even more bullish on the electric cars. They are predicting that EV sales could outpace traditional gas-powered cars as early as 2025. The only questions are when that will happen, which company will lead the charge, and whether you can pick the winner.
The Gambit Of Investing In Electric Cars
Electric vehicles are not an easy sell – yet. Right now, the cost of fuel is much lower than it has been in recent years and the upfront cost for electric cars is higher than their gas guzzling counterparts.
Many consumers do not understand how the vehicles work, where they can charge them, and whether they will last as long as regular cars. One advantage is that electric cars have fewer moving parts and that generally translates to less maintenance, but finding someone to work on them can be a challenge depending on where you live.
Resale value is often less than gas-powered vehicles because the batteries used in electric cars have a shelf life.
Likewise, there is a question of infrastructure. Will electric car owners be able to find places to charge their vehicles? Some areas are working on adding electric car ports, but the technology seems ignored in many other areas.
Plus, there are already millions of gas-powered cars in existence. They number almost 300 million in the United States alone. People aren’t going to scrap them all.
Consumers naturally have concerns over batteries too. The devices that power electric vehicles are becoming cheaper by the day, but they may also be subject to excise taxes and other costs. You have to figure these risks and costs into the equation as well.
Car Manufacturers vs Electric Vehicle Suppliers
This cluster of issues will eventually fall to the wayside, but there really is no clear indication of which electric car company is going to take the lead. Deciding which horse to bet on is not a simple matter.
Some investors like to choose companies that make the batteries used in electric vehicles while others focus on other components.
There manufacturers themselves are another issue altogether. Almost every single car maker in the United States is working on some version of their own. GM, Honda, Hyundai, Mercedes-Benz, Jaguar, Toyota, and Volkswagen are all getting onboard – and they are aggressive.
Each of these companies is planning to have electric vehicles account for at least 20% of their sales by 2025. Which one is best for your portfolio? Let’s look at two electric car manufacturers in greater detail: NIO vs Tesla.
Is NIO Stock a Buy?
Its designs are notable for the number of seats – the NIO ES8 seats seven people – and its smart connectivity. NIO cars support autonomous driving at a Level 2 rating, and they boast AI assistants.
The company focuses on adding value for its customers. It does this through selling a home charging system, using its showrooms as clubhouses, offering on-demand mobile charging, and building a sense of community amongst its customers. Think of NIO as the ultimate automobile club or an ecosystem that keeps consumers coming back.
NIO [NYSE: NIO] is facing some challenges though. China had been offering electric vehicle credits, but the government has started to phase those incentives out.
At the same time, China has opened its doors to other electric vehicle manufacturers so there are plenty of options for the Chinese people. Only the strongest companies are going to survive – and that may not include NIO [NYSE: NIO]. The company recently had a recall that included roughly 5,000 NIO SUVs. They were recalled because of the risk of battery fire.
However, there are reasons to be hopeful. The Chinese market is still vast, and the demand for electric vehicles there is strong. Electric vehicles could make up as much as half the cars on the road in China by 2025. Also, the cost of electric batteries is going down thanks to certain battery makers and NIO has the backing of Tencent.
Should You Invest in Tesla Stock?
While you’ve certainly heard of Elon Musk’s creation, what you may not know is that it is vertically-integrated. Tesla makes and sells electric vehicles as well as a network of charging stations, solar panels for generating energy, and a home battery to store it all.
Tesla’s base model (the Model 3) starts at approximately $30,000. While that price tag only includes the most basic features, base models at Tesla are worlds apart from base models in the gas-powered vehicle world.
Tesla is also innovative. The company is working on a truck and its vehicles can be charged from virtually any electrical outlet. However, Tesla has also had its share of complications, including batteries catching fire. And Elon Musk has been controversial as CEO. Perhaps the most famous stumble was his statement – when the company’s cash flows were a concern to investors – “funding secured” which was proven inaccurate later.
NIO vs Tesla Stock: The Bottom Line
While both NIO and Tesla have strong potential, nothing is guaranteed. Right now, they are forerunners in their respective markets, but competitors are coming. Porsche is hot on the heels of Tesla with its Taycan model that has proven extremely popular among car buffs – so much so inventory has ramped way higher.
Time will show whether these electric car manufacturers can hold on to the market share they have already acquired or if the introduction of electric vehicles from larger, more established companies will ultimately eclipse their efforts.
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.