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Why Nio, EVgo, and XL Fleet Stocks Jumped Today

By Howard Smith – Dec 30, 2021 at 4:30PM

Key Points

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These three stocks have one thing in common, and it tells the story of the market right now.

What happened

One day after the American depositary shares of Chinese EV maker Nio (NIO 6.41%) hit their lowest level in over a year, the shares are jumping today. And the stocks of EV-charging network company EVgo (EVGO 22.09%) and vehicle electrification company XL Fleet (XL 8.93%) are also on the rise. The stocks had moved as follows as of 1:13 p.m. ET:

  • Nio shares up 14.2%
  • EVgo shares up 11.2%
  • XL Fleet shares up 11.7%

So what

The thing is, these stocks have very little in common, other than the glaring fact that they all are in the electric vehicle sector. And that tells the story of today's big moves. Though these businesses have not exactly been moving in the same direction, the stock prices have. They are all down significantly in 2021. XL Fleet shares have dropped 59% year to date, while EVgo and Nio stocks are down 37% and 35%, respectively. But the businesses aren't quite as synchronized. Nio's sales are growing quickly, and it announced some exciting plans for next year, including the introduction of its latest EV that it hopes will challenge the Tesla Model 3

A gold Nio ET5 electric sedan in front of showroom.

Nio's new ET5 electric sedan will challenge Tesla's Model 3 in China. Image source: Nio.

Nio told investors it expects to begin deliveries of the new ET5 in the fourth quarter of 2022. 

Now what

Nio is clearly the largest of these stocks, and likely the closest to profitability. With today's move, Nio has a market capitalization of about $52 billion. Compare that to EVgo's valuation of $2.7 billion and XL Fleet at just over $500 million. There's good reason for that, too. 

In addition to Nio's new ET5 coming late next year, it will begin selling its new, larger luxury sedan in March 2022. And beyond the ET5 and larger ET7, Nio has said it plans a third new offering next year. That may come from a collaboration with the largest automotive company in China, but it has yet to be officially announced. 

Nio is also continuing to move outside of China as it expands the growth it began in Europe in 2021. EVgo and XL Fleet also have plans to grow, but the results are coming much slower than with Nio. XL Fleet, for example, saw its third-quarter revenue nearly cut in half compared to the third quarter of 2020. XL Fleet converts internal combustion-powered vehicles to plug-in hybrid electric power. It also plans to have a fully electrical conversion solution soon. But as auto manufacturers have struggled to keep up with demand amid supply chain constraints this year, the company hasn't been able to drive the growth it had hoped for. 

However, XL Fleet recently announced it has grown its relationship with a utility-scale wind and solar power facilities operator for charging infrastructure to support the fleet vehicles it has already provided. It is also in a pilot program with the Department of Defense that it hopes could grow into a large opportunity. 

So while Nio and EVgo are growing as EV demand and adoption grows, XL Fleet is struggling at this point. That partially explains the vast disparity in the valuations assigned by investors. But for today, they are all being lumped in the same boat as investors are pushing EV sector names higher moving into the final trading day of the year. 

Howard Smith owns EVgo, Inc., NIO Inc., and XL Fleet Corp. and has the following options: short February 2022 $15 puts on XL Fleet Corp. The Motley Fool owns and recommends NIO Inc. and Tesla. The Motley Fool has a disclosure policy.

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