Nio Makes Moves to Launch in the US
Just months after it was confirmed that Nio had inked a ten-year lease agreement with a building complex in San Jose, California, it was reported that Nio is posting jobs related to manufacturing through its American division.
Nio has been busy this year, and also recently announced that it would be increasing its retail presence in Norway. After selling its 500th vehicle in the Scandinavian market, Nio is also committing to building a handful of new battery swap stations there. Nio’s battery swap technology is one of its key competitive advantages, and so far has managed to set the EV Maker apart from many of its competitors.
Nio’s push into the American market is critical because it allows the company to produce vehicles on US soil. Not only is this more cost efficient but it allows them to avoid some tax and tariff issues after shipping it over from China. If Nio establishes a production hub in the US it also provides a distribution network to Europe where it is planning to expand into several new markets by the end of the year.
Can Nio Challenge Tesla?
This is always the question when it comes to the US EV market. Can the company challenge Tesla’s ($170.18|4.97%) dominance? In the first quarter of this year, 70% of US electric vehicles were made by Tesla. Its models were the top 3 and four of the top five models registered in the US. That is a dominant market share if there ever was one.
Now there has always been the rhetoric that legacy automakers like General Motors (NYSE:GM) or Ford (NYSE:F) would be able to chip away at Tesla’s market. Many investors also banked on startups like Lucid (NASDAQ:LCID) or Rivian (NASDAQ:RIVN), but thus far that hasn’t happened either.
Nio represents the first established, full EV brand that is coming into the market to challenge Tesla. Ford and GM have had to make major investments in production to switch their fleets over to electric. Even then, it won’t be until the end of the decade, or longer, before every model is an electric one. Nio enters with EV experience, a well-oiled production process, and innovative technology.
Is Nio or Tesla A Better Investment?
To be clear, these are my two favorite plays in the electric vehicle industry so my suggestion is that both have a place in your portfolio. Of course it’s difficult to argue with the incumbent American leader in Tesla. The stock has struggled as of late, but the opening of the Berlin and Austin GigaFactories should help to keep its production figures in check. I love Nio. I think its management team is top notch and the technology it brings is unique and innovative. But it is also a capital intensive technology that requires Nio to build and maintain battery swap stations, in addition to its normal charging infrastructure. If I were to choose one, I would still choose Tesla to buy and hold forever.
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