We recently compiled a list of the 11 Best EV Stocks To Buy For The Long Term. In this article, we are going to take a look at where NIO Inc. (NYSE:NIO) stands against the other EV stocks to buy for the long term.
The Challenges of EV Adoption and the Promise of Solid-State Batteries
On August 30, Mark Fields, former Ford CEO and President joined CNBC’s ‘Squawk Box’ to discuss the challenges facing electric vehicle (EV) adoption. Fields pointed out that early enthusiasm for EVs was driven by automakers and government regulations, but mass adoption is proving more difficult. Consumers are hesitant due to several factors including the high cost of EVs, the lack of visible and convenient charging infrastructure, and the slow charging times compared to gas refueling.
Fields suggested that automakers need to offer more affordable EVs and expand hybrid offerings while working towards breakthroughs in battery technology, especially solid-state batteries. These batteries could eventually reduce charging times to match the convenience of filling up at a gas station.
Fields commended his former company’s strategy as it involves focusing on hybrid models to ease consumers into EV technology without the range anxiety that comes with current models. He noted that automakers are also facing financial challenges in the EV space, as shown by his former company’s recent writedowns.
He emphasized that while automakers are working on delivering low-cost EVs, the real game-changer will be the development of solid-state batteries, which could significantly improve charging times and consumer convenience.
Exploring Three Scenarios for the Future of EVs
Despite the challenges, the EV industry seems inevitable and is poised to grow over the next few decades. We discussed the International Energy Agency’s (IEA) EV outlook in our article about the best EV stocks according to short sellers. Here is an excerpt from it:
“The IEA’s Global EV Outlook 2024 examined the potential paths to electrifying road transport by 2035. The report presents three scenarios: the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS), and the Net Zero Emissions by 2050 Scenario (NZE). The STEPS considers current policies and market trends, the APS assumes that all government pledges will be fully implemented on time, and the NZE outlines a pathway to achieve net zero CO2 emissions by 2050.
The projections show that the global EV fleet could grow significantly by 2035. Under the STEPS, the number of EVs is expected to increase from less than 45 million in 2023 to 525 million by 2035. In the APS, this number could reach 585 million, while the NZE Scenario projects a more ambitious growth to 790 million EVs by 2035.
The report also discussed the growth of electric light-duty vehicles (LDVs), buses, and two/three-wheelers (2/3Ws). LDVs, which include passenger cars and light commercial vehicles, are expected to remain the largest segment of the EV market. Electric buses and 2/3Ws are also projected to see significant growth, especially in regions like China and India, where policy support is strong. However, achieving full electrification of these segments will require continued policy support and technological advancements.”
Moreover, governments worldwide are pushing for increased EV production due to environmental concerns, with the U.S. making significant moves in this direction. On July 11, the Department of Energy (DOE) announced $1.7 billion in grants to support the conversion of 11 auto manufacturing plants in eight states to produce electric vehicles and their components. This is part of President Biden’s “Investing in America” initiative, which is aimed at protecting union jobs and giving a boost to EV manufacturing.
The program is funded by the Inflation Reduction Act and will preserve over 15,000 union jobs and create nearly 3,000 new ones, which will support the production of EV components like batteries and electric motorcycle parts.
Our Methodology
For this article, we used screeners and ETFs to identify 22 EV manufacturers with a market cap of above $50 million and narrowed our list to 11 stocks with the highest average analyst price target upside, as of September 11. We took analyst comments mostly from The Fly and TipRanks. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fleet of eco-friendly electric cars, a symbol of the company’s commitment to sustainability.
NIO Inc. (NYSE:NIO)
Average Analyst Price Target Upside as of September 11: 12.70%
Number of Hedge Fund Holders: 20
NIO Inc. (NYSE:NIO) is a Chinese multinational automobile manufacturer headquartered in Shanghai that specializes in designing and developing EVs. The company was founded in 2014 and has grown significantly in both domestic and international markets. The company’s notable vehicles include ET7, ET5, ES8/EL8, ES7/EL7, and EC7 along with some others.
The company is also known for its battery-swapping technology. It has installed over 2,552 battery swap stations in China, which positions it as a unique player in the EV industry.
With its presence in markets such as China, Norway, and Germany, the company continues to scale operations. It has also launched its new electric car brand, ONVO, which targets the mainstream market. In May, ONVO launched its first vehicle, L60, which is a smart electric mid-size family SUV. The company plans to start its deliveries in the third quarter of 2024.
In addition to its focus on EVs, NIO (NYSE:NIO) has expanded into semi-autonomous and autonomous vehicle technologies, which further improves its role in the mobility space. It is also a prominent name in the EV charging infrastructure market with nearly 4,000 Power Charger Stations and 23,256 chargers. It is also linked to more than 1.6 million third-party chargers. Additionally, the company has completed over 51 million battery swaps to date. It is also one of our best EV charging stocks.
NIO (NYSE:NIO) has been covered by 37 analysts with an average price target of $6.31, which represents an upside of 12.70%, as of the September 11 market close.
TipRanks reported that on the same day, Citi analyst Jeff Chung maintained a Buy rating on NIO (NYSE:NIO) with a $7 price target. The analyst’s outlook is based on recent strategies by the company to boost consumer interest, including increased incentives for car purchases without hurting its finances much.
It includes developments like the 50% increase in charging and battery swap services. At the same time, it is slightly cutting back on direct cash discounts, which means customers get more valuable services instead of just price reductions.
In the second quarter, 20 hedge funds held stakes worth $82.117 million in NIO (NYSE:NIO). Point72 Asset Management is the most significant shareholder of the company and has a position worth $26.89 million, as of June 30. It ranks at 11 on our list of best EV stocks to buy for the long term.
Overall NIO ranks 11th on our list of the best EV stocks to buy for the long term. While we acknowledge the potential of NIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.