Tesla Vs. NIO: Which stock should you buy?

Consider this, you have money in hand and you want to invest it. You have two choices: Tesla and NIO. Which one would you choose based on today’s news and reports? Would it be Tesla or NIO?

Make no mistake, Tesla and NIO are great companies. While Tesla has a market cap of almost $500 billion, NIO, on the other hand, is a market cap company of over $60 billion.

One trades for just under $500 USD (Tesla) and the others for just under $50 (NIO).

One is a large, proven technology company (Tesla), while the other is still in its infancy and less than ten years old (NIO).

Now which one would you choose Tesla or NIO?

Oh, I forgot, one is an American company, while NIO is Chinese. Are you still confused and can’t decide? Let me help you.

While Tesla has recorded five consecutive quarters of profits and is selling 500,000 cars by the end of this year, NIO is selling only 50,000 cars, and that too in China alone.

Let’s cut to the chase here.

Tesla Vs. NIO

Before we continue, let’s take a quick look at the market charts here.

Tesla: (5-year chart)

NIO: (1 year chart)

Nio Stock

While Tesla currently trades at $500 per share, it has seen a real recovery this year alone.

With NIO, it’s the same thing too, the stock which was trading in single digits a few months ago is now almost close to the $50 mark.

Amazing, right? You bet.

You know what’s even better, both companies have recovered tremendously since their IPOs and they’re not done yet.

Why should you buy Tesla over NIO?

Tesla will be added to the S&P 500 on December 21. This is huge news. As of today, Tesla’s outstanding shares stand at over 900 million shares with a market capitalization of over 400 billion.

Here is my take on why you should choose Tesla over NIO:

Elon Mush – The CEO and Founder of Tesla (The Boring Company) and EspaceX. First of all, he is a go-getter, a visionary and the first to even believe in the manufacturing of electric vehicles on a large scale. While the whole world was against him and his dreams of scaling the product, a handful of people still supported him. Fast forward, just look at Tesla today, its millionaires created for believers and stock split (5:1 in July)
Tesla’s product line is robust – Tesla is not just an automaker. It’s a technology company. There is no other company in the world that does what Tesla does, you have Tesla Insurance, Auto-Pilot, Robo-Taxis, Tesla Solar, Tesla Service, Tesla Apps and an incredible line of electric vehicle products – Model S, X, Y, Cybertruck, Roadster, etc. So when you buy a stock of Tesla, you are buying part of the overall portfolio. Isn’t that amazing?
Tesla has already proven this to the world: Tesla was recently added to the S&P 500 (a few days ago) and has consistently delivered profitable quarters with excellent gross profit margins of almost 27%.
Tesla builds everything from scratch – they don’t outsource anything to anyone except batteries from Panasonic. Everything else is built in-house and efficient.
Tesla Gigafactories in Production – Tesla has a number of Gigafactories that are still being prepared for production in 2021. (currently in development or construction, see the Investor Relations page for details). Once these factories are ready, it is only a matter of time before the number of vehicles increases again. With the Shanghai factory, Tesla was able to deliver vehicles in 10 months from scratch. Now this is commendable. Additionally, with each new factory, Tesla tries to further reduce costs as it learns more about increasing efficiency.
Tesla’s battery business is huge, almost non-existent. It’s only just beginning. (Million mile battery)
Tesla’s solar business is just getting started. (Again, this is going to be HUGE!)
Tesla has not yet produced the Model Y in a Chinese factory in Shanghai.
Tesla is a brand and more than just a car company that people love, just like Apple. Tesla will always remain the big daddy of the world of electric vehicles. They are still the first to do things in the electric vehicle space and will continue to do so by exploring new markets.

If you are a Tesla fan or interested in/own Tesla stock, I highly recommend following Rob Maurer from Tesla Daily YouTube Channel or his podcasts. He is very authentic and accurate in the information he provides.

Tesla

Why should you buy NIO over Tesla?

Some reasons why you should probably buy NIO over Tesla:

China, China and China – China has more than a billion inhabitants and wants to go electric by 2025 (20% of new cars sold), which is equivalent to 6 million cars on the road. Even though there are hundreds of electric vehicle companies in China such as XPENG, BYD and NIO, NIO is the only electric vehicle automaker that is gradually approaching profitability and has a gross profit margin of 14%, which is incredible. (Loss of 14 cents per share in third quarter recently).
NIO features unique swappable battery technology. What this does is once your car is discharged, you simply go to one of the swappable battery stations and you will be out within 3 minutes with a new battery. Currently, NIO has over 150 replaceable battery stations and plans to expand to more locations in 2021. Amazing, right?
NIO is loved by the Chinese people and the government. (NIO is supported by the Hefei government, NIO China entity)
NIO is a luxury brand in China with several NIO houses and NIO power. This is very similar to the Apple Store experience in the United States, which is a cult in itself.
NIO offers two sedans to compete with Tesla’s Model 3. The Model 3 is currently Tesla’s best-selling car in China. NIO has not yet entered the sedan market. So there’s huge potential there. NIO currently sells the ES8, ES6 and EC6 which are premium SUVs.
NIO, which is only a few years old, is already becoming profitable and the number of vehicles in the fourth quarter is expected to be between 16,500 and 17,000 (an increase from 12,500 in the third quarter, according to the November 17, 2020 report). The more they sell, the better the operating margins will be at scale. Starting January 2021, NIO plans to increase production to 7,500 cars per month or 90,000 vehicles per year.
NIO is made for China, think NOMINIO’s AI personal assistant, just like Apple’s Siri, is innovative and fantastic for local people.
Chinese government subsidies to companies like NIO with swappable batteries will further increase sales, thereby reducing costs, as will BAAS (Battery as a service).
NIO also plans to enter Europe, its first business outside China in the second quarter of 2021.
NIO has already launched BAAS (battery as a service) and is working on a 150 kW battery. The first of its kind. Now, BAAS is a subscription-based model that will reduce upfront vehicle costs and provide recurring revenue for NIO’s revenue.
The Chinese electric vehicle market is huge and NIO is already in it. Remember, being first matters. Just like Tesla, NIO does not advertise, sales increase thanks to referrals and product quality. NIO is already winning in China.
NIO follows which is similar to Apple. They design the product and provide the technology, but do not own any factories. They outsource manufacturing to JAC in China, which builds the cars. What is interesting to note is that NIO is thus able to increase its operating profits by double digits. As production ramps up, operating margins will easily climb to 20%. Currently it is 14%.
NIO is working on its own AutoPilot software with Intel Mobileye.

If you are a fan of NIO and want to follow the company, for real NIO related updates you can watch Financial Courtside YouTube channel.

Nio

My thoughts on which one you should buy – Tesla or NIO

Look, it’s an individual choice. I’m not here for recommendations. I can only share my knowledge.

While the Chinese economy is booming more than ever. I believe we are just beginning the era of electric vehicles. There is still plenty of room to grow.

Starting in 2021, Tesla will scale up operations to deliver more than 1.2 million cars worldwide (Berlin, Texas and Shanghai – for Model Y). NIO aims to reach the 150,000 car mark by the end of next year. NIO can easily reach the 150,000 mark in China alone.

I’m not sure NIO will succeed outside of China, especially in Europe. Whereas with Tesla, this is not the case. Tesla is already a well-known brand and the world’s No. 1 automaker by market capitalization. Tesla’s market capitalization is higher than that of Toyota and BMW.

The penetration of the Tesla brand into the global market is rather easier than that of NIO. But what’s interesting is that NIO doesn’t need Europe or America to increase production. The Chinese market alone is enough for NIO to break the record and grow steadily. NIO is a local hero and that too in China where it counts.

NIO also faces immense competition from automakers XPENG, BYD and Li, as well as hundreds of others. It is therefore not a guaranteed success either. Although XPENG is backed by Alibaba, their cars are extremely popular in China as well.

One thing to note here is that while Tesla is currently leading vehicle sales in China with the increase in battery charging stations, it will be interesting to watch the space here with NIO’s swap technology.

Ultimately, I really think both EV companies will do extremely well in the future.

Besides Tesla and NIO, there are many other local players in China, including XPENG, BYD, etc. The Chinese market is full of electric car manufacturers. But NIO has the cash and balance sheet advantage.

Last words

While I am particularly bullish on Tesla and NIO. I’m going to give Tesla a slight edge here.

Tesla is much more than just a car manufacturer.

Tesla is a proudly American technology company (more than just cars) and if you’re willing to hold the shares for the next 10 years, they’ll easily be 10 times where they are today.

Tesla is a safer bet than NIO. I can attest to that.

But if you want, you can probably invest in both companies depending on your preferences.

Thanks for reading! Let me know your thoughts and comments below.