Every investor wants to get into a stock at a more attractive entry price. The recent downturn in higher-growth tech stocks has brought share price levels down in several sectors, including electric vehicles (EVs).
One popular name whose stock has moved down is Chinese EV maker Nio (NIO 3.49%). Shares are sitting around its 52-week low after having fallen more 30% in the last six months, and 50% over the last year. And there are three things investors may not know about Nio that could make it a great time to buy.
Nio's EP9 electric supercar may not be for the masses, but the company has plans for a mass-market brand. Image source: Nio.
Plans for the mass market
While Nio used its EP9 supercar to show off its technologies to auto aficionados, it has so far only been selling several electric SUV models to the general public. As of Dec. 31, 2021, Nio has delivered over 167,000 of those EVs. Now the company has also introduced its first sedans that are planned to begin production this year.
Nio will begin confirming orders for the luxury ET7 sedan this week, and plans to begin deliveries by the end of March. It will then look to expand its sedan offerings with plans to begin shipping the midsize ET5 in September. But that's not all the company has in the works.
Back in August 2021, during the company's second-quarter conference call for investors, Nio founder, chairman, and CEO William Li discussed having a sister Nio brand for the mass market. "We would like to do something different and offer different products for the mass market," Li said. "Basically, our thinking is that we would like to launch a product that can have a competitive pricing compared with Tesla's products but have much better products and services."
Li went on to compare his vision to being akin to the relationship seen with Lexus and Toyota or Audi and Volkswagen. Nio may be working on a partnership with BYD, China's largest automaker, to fulfill Li's plan, reported industry follower CnEVPost. The report noted local media seeing Nio staff frequently visiting BYD headquarters, which could indicate the direction Nio is going to take to create a sub-brand.
Two other signs of expansion
Nio delivered 91,429 vehicles in 2021, more than twice as many as the prior year. The company, along with its state-owned manufacturing partner, has been working to double current production capacity to at least 240,000 vehicles annually, and there are signs that work is progressing well.
The new facility won't begin production until later in the year, but CnEVPost reports that Nio is already listing job postings for workers. Nio is seeking to staff positions in manufacturing, logistics and operations, quality management, and electric drive systems, according to the publication.
And the company expects some of that added capacity to be going to markets outside of China. It already established its business in Norway last year, and Nio now plans to expand into Germany, the Netherlands, Sweden, and Denmark in 2022. But it appears that it isn't going to stop there. While Nio already has a small U.S. presence, it has signed a lease for a new headquarters in San Jose, California, according to EV sector news site Electrek. The 200,000-square-foot facility is more than twice as large as its prior space in the U.S. That coincides with recent job postings in San Jose, and signals Nio's intention to grow its U.S. presence.
With capacity expansion imminent, and Nio growing its geographic footprint in both Europe and the U.S., investors who are considering an investment should look at the recent decline in the share price as a potentially good opportunity to obtain a position. If the company executes its growth plans, the stock could likely bounce back. Nio still belongs in a speculative portion of a portfolio, however. Even good execution may not be enough to justify its high valuation, and it could take years, if ever, for the business to grow into that.
